Guidewire Software Announces Second Quarter Fiscal 2013 Financial Results

  Guidewire Software Announces Second Quarter Fiscal 2013 Financial Results

Business Wire

FOSTER CITY, Calif. -- February 26, 2013

Guidewire Software, Inc. (NYSE: GWRE), a provider of core system software to
property and casualty insurers, today announced its financial results for the
fiscal quarter ended January31, 2013.

“Solid broad based bookings in the first half of the year led to revenue in
the second quarter that was above the high end of our guidance range, and this
outperformance was further accentuated by several customers who made payments
earlier than their third quarter due dates,” said Marcus Ryu, Chief Executive
Officer of Guidewire Software. “Moreover, with strong customer adoption,
including key up-sells of existing customers, several major go-lives, and
continued investments in our sales and services organizations, we also
continued to make steady progress in our ambition to make PolicyCenter and our
full InsuranceSuite the pre-eminent offerings in the market."

Second Quarter Fiscal 2013 Financial Highlights

Revenue

  *Total revenue for the second quarter of fiscal 2013 was $72.2 million, an
    increase of 31% from the comparable period in fiscal 2012.
  *Total license revenue, including term and perpetual licenses, for the
    second quarter of fiscal 2013 was $30.8 million, an increase of 20% from
    the comparable period in fiscal 2012. Recurring term license revenue was
    $29.5 million, a 49% increase from a year ago and revenue from perpetual
    licenses was $1.3 million compared with $5.9 million a year ago.
    Maintenance revenue was $9.2 million, up 35% from the comparable period in
    fiscal 2012, and services revenue was $32.2 million, up 43% from the
    comparable period in fiscal 2012.
  *Rolling four-quarter recurring term license and maintenance revenue was
    $127.0 million, an increase of 32% from the comparable period in fiscal
    2012.

Profitability

  *GAAP operating income was $5.1 million for the second quarter of fiscal
    2013, compared to operating income of $5.4 million in the comparable
    period in fiscal 2012.
  *Non-GAAP operating income was $15.5 million for the second quarter of
    fiscal 2013, compared to $11.6 million in the comparable period in fiscal
    2012.
  *Adjusted EBITDA was $16.4 million for the second quarter of fiscal 2013,
    compared to $12.3 million in the comparable period in fiscal 2012.
  *GAAP net income was $5.5 million for the second quarter of fiscal 2013,
    compared to $3.7 million for the comparable period in fiscal 2012. GAAP
    net income per share was $0.09, based on diluted weighted average shares
    outstanding of 61.7 million, compared to a GAAP net income per share of
    $0.06 for the comparable period in fiscal 2012, based on diluted weighted
    average shares outstanding of 25.6 million.
  *Non-GAAP net income was $12.9 million for the second quarter of fiscal
    2013, compared to $7.8 million in the comparable period in fiscal 2012.
    Non-GAAP net income per diluted share was $0.21, based on diluted weighted
    average shares outstanding of 61.7 million, compared to $0.16 for the
    second quarter of fiscal 2012, based on pro forma diluted weighted average
    shares outstanding of 48.8 million.

Balance Sheet

  *The Company had $203.2 million in cash, cash equivalents and investments
    at January31, 2013, compared to $185.5 million at October31, 2012.
    During the second quarter, the company purchased a net $101.8 million in
    short-term and long-term investments. Cash flow from operations provided
    $19.4 million in the second quarter, an increase from $14.8 million
    provided by cash flow from operations in the comparable period in fiscal
    2012.

Conference Call Information

What:        Guidewire Software second quarter fiscal 2013 financial results
               conference call
When:          Tuesday, February 26, 2013
Time:          2:00 p.m. PT (5:00 p.m. ET)
Live Call:     (888) 617-5714, domestic
               (719) 325-2320, international
Replay:        (877) 870-5176, passcode 7384740, domestic
               (858) 384-5517, passcode 7384740, international
Webcast:       http://ir.guidewire.com (live and replay)

The webcast will be archived on Guidewire's website for a period of three
months.

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures:
Non-GAAP operating income, Adjusted EBITDA, Non-GAAP net income and Non-GAAP
net income per share.

Guidewire believes that these non-GAAP measures of financial results 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 analyses, for
purposes of determining executive and senior management incentive compensation
and for budgeting and planning purposes. These measures are used in monthly
financial reports prepared for management and in monthly and quarterly
financial reports presented to the Company's board of directors. 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. In order to compensate for
these limitations, management presents non-GAAP financial measures in
connection with GAAP results. 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 this press release, and not to rely on any single
financial measure to evaluate the Company's business.

Reconciliation tables of the most comparable GAAP financial measures to the
non-GAAP financial measures used in this press release are included with the
financial tables at the end of this release.

About Guidewire Software

Guidewire Software is a provider of core system software to the global
Property/Casualty (general) insurance industry. Designed to be flexible and
scalable, Guidewire solutions give insurers the capability to deliver
excellent service, increase market share and lower operating costs. Guidewire
InsuranceSuite™, consisting of Guidewire PolicyCenter®, Guidewire ClaimCenter®
and Guidewire BillingCenter® spans the key functional areas in insurance -
underwriting and policy administration, claims management, and billing.
Guidewire is headquartered in Foster City, California, with offices in
Beijing, Dublin, Hong Kong, London, Munich, Paris, Sydney, Tokyo, Toronto and
Warsaw. For more information, please visit www.guidewire.com.

NOTE: Guidewire, Guidewire Software, Guidewire ClaimCenter, Guidewire
PolicyCenter, Guidewire BillingCenter, Guidewire InsuranceSuite, Deliver
Insurance Your Way, and the Guidewire logo are trademarks or registered
trademarks of Guidewire Software, Inc.

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 market
positioning, future adoption of our products 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 Form 10-K 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 revenues; our services revenues produce lower gross
margins than our license and maintenance revenues; 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.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
                                                               
                                               January 31,     July 31,
                                               2013            2012
                                                               
Assets
Current assets:
Cash and cash equivalents                      $ 101,465       $ 205,718
Restricted cash, current portion                 206             3,726
Short-term investments                           64,384          -
Accounts receivable                              41,779          32,313
Deferred tax asset, current portion              15,430          13,442
Prepaid expenses and other current assets       6,598         7,266   
Total current assets                             229,862         262,465
                                                               
Long-term investments                            37,394          -
Property and equipment, net                      11,608          11,924
Deferred tax asset, net of current portion       9,313           9,313
Other assets                                    511           545     
Total assets                                   $ 288,688      $ 284,247 
                                                               
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                               $ 6,384         $ 9,781
Accrued employee compensation                    18,808          26,502
Deferred revenues, current portion               43,043          52,947
Other current liabilities                       5,848         3,957   
Total current liabilities                        74,083          93,187
Deferred revenues, net of current portion        2,014           2,569
Other liabilities                               5,555         4,529   
Total liabilities                                81,652          100,285
                                                               
Stockholders’ Equity
Common stock                                     6               5
Additional paid-in capital                       224,730         207,624
Accumulated other comprehensive loss             (477    )       (496    )
Accumulated deficit                             (17,223 )      (23,171 )
Total stockholders’ equity                      207,036       183,962 
Total liabilities and stockholders’ equity     $ 288,688      $ 284,247 

                                                                   
GUIDEWIRE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands except share and per share amounts)
                                                                            
                   Three Months Ended January 31,        Six Months Ended January 31,
                    2013             2012             2013             2012       
Revenues :
License            $ 30,752           $ 25,729           $ 51,564           $ 46,544
Maintenance          9,210              6,805              18,580             13,911
Services            32,226           22,563           65,345           47,022     
Total revenues      72,188           55,097           135,489          107,477    
                                                                            
Cost of
revenues: ^(1)
License              130                234                297                533
Maintenance          1,787              1,197              3,351              2,463
Services            29,471           19,310           55,297           37,235     
Total cost of       31,388           20,741           58,945           40,231     
revenues
                                                                            
Gross profit :
License              30,622             25,495             51,267             46,011
Maintenance          7,423              5,608              15,229             11,448
Services            2,755            3,253            10,048           9,787      
Total gross         40,800           34,356           76,544           67,246     
profit
                                                                            
Operating
expenses: ^(1)
Research and         15,885             12,162             30,649             23,121
development
Sales and            12,389             9,198              24,765             16,559
marketing
General and         7,445            7,639            16,111           14,077     
administrative
Total
operating           35,719           28,999           71,525           53,757     
expenses
Income from          5,081              5,357              5,019              13,489
operations
Interest             132                73                 222                113
income, net
Other income        23               (319       )      164              (635       )
(expense), net
Income before
provision for        5,236              5,111              5,405              12,967
(benefit from)
income taxes
Provision for
(benefit from)      (265       )      1,420            (543       )      4,464      
Income taxes
Net income         $ 5,501           $ 3,691           $ 5,948           $ 8,503      
                                                                            
                                                                            
Net income per
share:
Basic              $ 0.10            $ 0.07            $ 0.11            $ 0.17       
Diluted            $ 0.09            $ 0.06            $ 0.10            $ 0.15       
                                                                            
Shares used in
computing net
income per
share:
Basic               55,868,308       18,433,369       55,341,176       16,499,660 
Diluted             61,706,457       25,610,201       61,452,245       23,387,583 
                                                                            
(1) Amounts include stock-based compensation expense, as follows:
                   Three Months Ended January 31,        Six Months Ended January 31,
                    2013             2012             2013             2012       
                                                                            
Cost of
maintenance        $ 340              $ 113              $ 601              $ 185
revenues
Cost of
services             3,439              1,055              6,055              1,741
revenues
Research and         2,446              1,258              4,488              2,103
development
Sales and            1,942              527                3,593              1,024
marketing
General and         2,207            3,339            5,421            4,551      
administrative
                   $ 10,374          $ 6,292           $ 20,158          $ 9,604      

                                                                
GUIDEWIRE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
                                                                         
                       Three Months Ended January       Six Months Ended January 31,
                       31,
                        2013           2012          2013           2012    
Cash flows from
operating
activities:
Net income             $ 5,501          $ 3,691         $ 5,948          $ 8,503
Adjustments to
reconcile net
income to net cash
used in operating
activities:
Depreciation and         945              685             2,045            1,364
amortization
Stock-based              10,374           6,292           20,158           9,604
compensation
Excess tax benefit
related to the
exercise of stock
options and              (72      )       -               (186     )       -
vesting
of restricted
stock
Deferred tax             (1,086   )       1,022           (2,003   )       3,841
assets
Other noncash
items affecting          83               -               83               -
net income
Changes in
operating assets
and liabilities:
Accounts                 (3,667   )       (3,816  )       (9,514   )       (11,565 )
receivable
Prepaid expenses         (308     )       (2,072  )       708              (529    )
and other assets
Accounts payable         (103     )       (249    )       724              395
Accrued employee         4,113            5,785           (7,491   )       (3,215  )
compensation
Other liabilities        2,172            1,610           3,101            (8,756  )
Deferred revenues       1,436          1,869         (10,464  )      (11,910 )
Net cash provided
by (used in)            19,388         14,817        3,109          (12,268 )
operating
activities
                                                                         
Cash flows from
investing
activities:
Purchases of
available-for-sale       (115,729 )       -               (115,729 )       -
securities
Sales of
available-for-sale       13,889           -               13,889           -
securities
Purchase of
property and             (1,046   )       (510    )       (5,856   )       (1,000  )
equipment
Decrease in             1,915          -             3,520          -       
restricted cash
Net cash used in
investing               (100,971 )      (510    )      (104,176 )      (1,000  )
activities
                                                                         
Cash flows from
financing
activities:
Proceeds from
issuance of common
stock upon               2,468            2,095           5,631            2,497
exercise of stock
options
Taxes remitted on        (5,033   )       -               (9,197   )       -
RSU awards vested
Proceeds from
issuance of common
stock in
connection with
public                   -                123,046         -                123,046
offerings, net of
underwriting
discounts and
commission
Costs paid in
connection with          -                (716    )       -                (1,689  )
initial public
offering
Excess tax benefit
related to the
exercise of stock
options and             72             -             186            -       
vesting
of restricted
stock
Net cash provided
by (used in)            (2,493   )      124,425       (3,380   )      123,854 
financing
activities
                                                                         
Effect of foreign
exchange rate
changes on cash         69             (270    )      194            (578    )
and cash
equivalents
Net increase
(decrease) in cash       (84,007  )       138,462         (104,253 )       110,008
and cash
equivalents
                                                                         
Cash and cash
equivalents -           185,472        31,171        205,718        59,625  
Beginning of
period
Cash and cash
equivalents - End      $ 101,465       $ 169,633      $ 101,465       $ 169,633 
of period

                                                                    
GUIDEWIRE SOFTWARE, INC.
Reconciliation of GAAP to Non-GAAP Operating Results
(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 operating results for the periods indicated below:
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Gross profit
reconciliation:
GAAP gross          $ 40,800           $ 34,356           $ 76,544           $ 67,246
profit
Stock-based          3,779            1,168            6,656            1,926      
compensation
Non-GAAP gross      $ 44,579          $ 35,524          $ 83,200          $ 69,172     
profit
                                                                             
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Gross margin
reconciliation
- maintenance:
GAAP gross
margin -              80.6       %       82.4       %       82.0       %       82.3       %
maintenance
Stock-based
compensation -       3.7        %      1.7        %      3.2        %      1.3        %
maintenance
Non-GAAP gross
margin -             84.3       %      84.1       %      85.2       %      83.6       %
maintenance
                                                                             
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Gross margin
reconciliation
- services:
GAAP gross
margin -              8.5        %       14.4       %       15.4       %       20.8       %
services
Stock-based
compensation -       10.7       %      4.7        %      9.2        %      3.7        %
services
Non-GAAP gross
margin -             19.2       %      19.1       %      24.6       %      24.5       %
services
                                                                             
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Gross margin
reconciliation
- total:
GAAP gross            56.5       %       62.4       %       56.5       %       62.6       %
margin
Stock-based          5.3        %      2.1        %      4.9        %      1.8        %
compensation
Non-GAAP gross       61.8       %      64.5       %      61.4       %      64.4       %
margin
                                                                             
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Operating
expense
reconciliation:
Total GAAP
operating           $ 35,719           $ 28,999             71,525             53,757
expenses
Less
Stock-based          (6,595     )      (5,124     )      (13,502    )      (7,678     )
compensation
Total non-GAAP
operating           $ 29,124          $ 23,875          $ 58,023          $ 46,079     
expenses
                                                                             
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Operating
income
reconciliation:
GAAP operating      $ 5,081            $ 5,357            $ 5,019            $ 13,489
income
Stock-based          10,374           6,292            20,158           9,604      
compensation
Non-GAAP
operating           $ 15,455          $ 11,649          $ 25,177          $ 23,093     
income
                                                                             
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Pre-tax income
reconciliation:
GAAP pre-tax        $ 5,236            $ 5,111            $ 5,405            $ 12,967
income
Stock-based          10,374           6,292            20,158           9,604      
compensation
Non-GAAP            $ 15,610          $ 11,403          $ 25,563          $ 22,571     
pre-tax income
                                                                             
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Net income
reconciliation:
GAAP net income     $ 5,501            $ 3,691            $ 5,948            $ 8,503
Stock-based           10,374             6,292              20,158             9,604
compensation
Less tax
benefit of           (2,988     )      (2,202     )      (5,806     )      (3,361     )
non-GAAP items
Non-GAAP net        $ 12,887          $ 7,781           $ 20,300          $ 14,746     
income
                                                                             
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Computation of
net income per
share:
GAAP net income     $ 5,501            $ 3,691            $ 5,948            $ 8,503
Non-cumulative
dividends to          -                  (751       )       -                  (1,574     )
preferred
stockholders
Undistributed
earnings
allocated to          -                  (1,642     )       -                  (4,122     )
preferred

stockholders
Net income,           5,501              1,298              5,948              2,807
Basic
Adjustments to
net income for
dilutive
options               -                  241                -                  593
and
restricted
stock options
Net income,         $ 5,501           $ 1,539           $ 5,948           $ 3,400      
Diluted
                                                                             
GAAP net income
per share -         $ 0.10            $ 0.07            $ 0.11            $ 0.17       
Basic
GAAP net income
per share -         $ 0.09            $ 0.06            $ 0.10            $ 0.15       
Diluted
                                                                             
Weighted
average shares       55,868,308       18,433,369       55,341,176       16,499,660 
- Basic
Weighted
average shares       61,706,457       25,610,201       61,452,245       23,387,583 
- Diluted
                                                                             
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Net income per
share
reconciliation:
GAAP net income
per share -         $ 0.09             $ 0.06             $ 0.10             $ 0.15
Diluted
Stock-based           0.17               0.13               0.33               0.20
compensation
Less tax
benefit of non        (0.05      )       (0.05      )       (0.10      )       (0.07      )
GAAP items
Pro forma
conversion of        -                0.02             -                0.03       
preferred
shares
Non-GAAP net
income per          $ 0.21            $ 0.16            $ 0.33            $ 0.31       
share - Diluted
                                                                                          
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Shares used in
computing
non-GAAP per
share amounts:
Weighted
average shares        61,706,457         25,610,201         61,452,245         23,387,583
- Diluted
Pro forma
conversion of        -                23,152,702       -                24,255,211 
preferred
shares
Pro forma
weighted             61,706,457       48,762,903       61,452,245       47,642,794 
average shares
- Diluted
                                                                             
                    Three Months Ended January 31,        Six Months Ended January 31,
                     2013             2012             2013             2012       
Adjusted EBITDA
reconciliation:
GAAP net income     $ 5,501            $ 3,691            $ 5,948            $ 8,503
Non-GAAP
adjustments:
Provision for
(benefit from)        (265       )       1,420              (543       )       4,464
income taxes
Other (income)        (23        )       319                (164       )       635
expense, net
Interest              (132       )       (73        )       (222       )       (113       )
income, net
Depreciation
and                   945                685                2,045              1,364
amortization
Stock-based          10,374           6,292            20,158           9,604      
compensation
Adjusted EBITDA     $ 16,400          $ 12,334          $ 27,222          $ 24,457     

Contact:

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