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Guidewire Software Announces Fourth Quarter and Fiscal 2013 Financial Results



  Guidewire Software Announces Fourth Quarter and Fiscal 2013 Financial
  Results

Business Wire

FOSTER CITY, Calif. -- September 3, 2013

Guidewire Software, Inc. (NYSE: GWRE), a provider of software products for
property and casualty insurers, today announced its financial results for the
fiscal quarter and fiscal year ended July 31, 2013.

“Revenue and profitability exceeded our expectations in the fourth quarter,
contributing to full year revenue growth of 30% and trailing twelve month
recurring revenue growth of 44%,” said Marcus Ryu, Chief Executive Officer of
Guidewire Software. “Investments in sales, delivery and new products helped us
to advance our market leadership position in fiscal 2013 by expanding our
customer base, including several key Tier 1 wins and our 50^th PolicyCenter
customer. We also achieved more multi-product and Suite transactions than last
year and achieved the milestone of bringing our 100^th customer into live
production.”

Ryu added, “We believe it is still early days in the global P/C insurance
industry's generational transition from decades-old legacy systems to
flexible, upgradeable platforms for their core operations. We plan to continue
to invest in expanding both our product and sale capabilities in fiscal 2014
to capitalize on this significant opportunity."

Fourth Quarter Fiscal 2013 Financial Highlights

Revenue

  * Total revenue for the fourth quarter of fiscal 2013 was $96.9 million, an
    increase of 43% from the comparable period in fiscal 2012.
  * Total license revenue, including term and perpetual licenses, for the
    fourth quarter of fiscal 2013 was $49.1 million, an increase of 70% from
    the comparable period in fiscal 2012. Recurring term license revenue was
    $44.9 million, a 64% increase from a year ago and revenue from perpetual
    licenses was $4.2 million compared with $1.6 million a year ago.
    Maintenance revenue was $9.9 million, up 26% from the comparable period in
    fiscal 2012, and services revenue was $38.0 million, up 23% from the
    comparable period in fiscal 2012.
  * Rolling four-quarter recurring term license and maintenance revenue was
    $150.4 million, an increase of 44% from the comparable period in fiscal
    2012.

Profitability

  * GAAP operating income was $16.2 million for the fourth quarter of fiscal
    2013, compared to $5.3 million in the comparable period in fiscal 2012.
  * Non-GAAP operating income was $26.5 million for the fourth quarter of
    fiscal 2013, compared to $9.6 million in the comparable period in fiscal
    2012.
  * Adjusted EBITDA was $27.8 million for the fourth quarter of fiscal 2013,
    compared to $10.4 million in the comparable period in fiscal 2012.
  * GAAP net income was $12.1 million for the fourth quarter of fiscal 2013,
    compared to $3.5 million for the comparable period in fiscal 2012. GAAP
    earnings per share was $0.19, based on diluted weighted average shares
    outstanding of 62.5 million, compared to $0.06 for the comparable period
    in fiscal 2012, based on diluted weighted average shares outstanding of
    61.2 million.
  * Non-GAAP net income was $15.6 million for the fourth quarter of fiscal
    2013, compared to $6.4 million in the comparable period in fiscal 2012.
    Non-GAAP net income per diluted share was $0.25, based on diluted weighted
    average shares outstanding of 62.5 million, compared to $0.10 for the
    fourth quarter of fiscal 2012, based on diluted weighted average shares
    outstanding of 61.2 million.

Fiscal 2013 Financial Highlights

Revenue

  * Total revenue for the fiscal year ended July 31, 2013 was $300.6 million,
    an increase of 30% from fiscal 2012.
  * License revenue for fiscal 2013 was $123.6 million, an increase of 27%
    from fiscal 2012. Recurring term license revenue was $112.9 million, a 51%
    increase from a year ago and revenue from perpetual licenses was $10.7
    million compared with $22.3 million a year ago. Maintenance revenue was
    $37.6 million, an increase of 27% from the year ago period, and services
    revenue was $139.5 million, an increase of 32% from the year ago period.
  * In fiscal 2013, 57% of total revenue was in the United States, and 43% was
    generated outside the United States.

Profitability

  * GAAP operating income was $16.8 million for fiscal 2013, compared to $23.6
    million in fiscal 2012.
  * Non-GAAP operating income was $55.6 million for fiscal 2013, an increase
    of 33% from fiscal 2012.
  * Adjusted EBITDA was $60.1 million for fiscal 2013, an increase of 34% from
    fiscal 2012.
  * GAAP net income was $15.4 million for fiscal 2013, compared to $15.2
    million for fiscal 2012. GAAP earnings per diluted share was $0.25, based
    on diluted weighted average shares outstanding of 61.9 million, compared
    to $0.25 in fiscal 2012, based on diluted weighted average shares
    outstanding of 41.5 million.
  * Non-GAAP net income was $38.5 million in fiscal 2013, an increase of 42%
    from fiscal 2012. Non-GAAP earnings per diluted share was $0.62, based on
    diluted weighted average shares outstanding of 61.9 million, compared to
    $0.50 in fiscal 2012, based on pro forma diluted weighted average shares
    outstanding of 53.8 million.

Balance Sheet

  * The Company had $207.7 million in cash, cash equivalents and investments
    at July 31, 2013, compared to $203.6 million at April 30, 2013. The
    Company generated $24.4 million in cash flow from operations in the fourth
    quarter, compared to $19.1 million in the comparable period in fiscal
    2012. The Company generated $32.5 million in cash flow from operations in
    fiscal 2013, compared to $17.1 million in the comparable period in fiscal
    2012.

Conference Call Information

What:            Guidewire Software fourth quarter fiscal 2013 financial
                 results conference call
When:            Tuesday, September 3, 2013
Time:            2:00 p.m. PT (5:00 p.m. ET)
Live Call:       (877) 852-6575, domestic
                 (719) 325-4816, international
Replay:          (877) 870-5176, passcode 3709788, domestic
                 (858) 384-5517, passcode 3709788, 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
earnings 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. 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 software products for Property/Casualty
insurers. Designed to be flexible and scalable, Guidewire products enable
insurers to deliver excellent service, increase market share and lower
operating costs. Guidewire products include Guidewire InsuranceSuite™,
consisting of Guidewire PolicyCenter®, Guidewire ClaimCenter® and Guidewire
BillingCenter® which span the core functional areas in insurance; Guidewire
Live^SM, a cloud-based network connecting peer insurers, core system data and
expert tools through instant on apps; Guidewire DataHub™ and Guidewire
InfoCenter™ which help insurers address their data management and business
intelligence challenges. 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, Guidewire
DataHub, Guidewire InfoCenter, Guidewire Live, Live Inside, Before & After,
Claim Canvas, ViewPoint, Guidewire PartnerConnect, Guidewire SolutionConnect,
Deliver Insurance Your Way, and the Guidewire logo are trademarks, service
marks, or registered trademarks of Guidewire Software, Inc. in the United
States and/or other countries.

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 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 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. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
                                                                  
                                                 July 31,        July 31,
                                                 2013            2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                        $ 79,767        $ 205,718
Short-term investments                           76,932          —
Restricted cash, current                         167             3,726
Accounts receivable                              40,885          32,313
Deferred tax assets, current                     2,897           13,442
Prepaid expenses and other current assets        9,445           7,266      
Total current assets                             210,093         262,465
Long-term investments                            51,040          —
Property and equipment, net                      12,914          11,924
Intangible assets, net                           6,879           —
Deferred tax assets, noncurrent                  21,091          9,313
Goodwill                                         9,048           —
Other assets                                     1,205           545        
TOTAL ASSETS                                     $ 312,270       $ 284,247  
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable                                 $ 6,517         $ 9,781
Accrued employee compensation                    26,302          26,502
Deferred revenues, current                       37,351          52,947
Other current liabilities                        4,614           3,957      
Total current liabilities                        74,784          93,187
Deferred revenues, noncurrent                    3,845           2,569
Other liabilities                                5,212           4,529      
Total liabilities                                83,841          100,285
STOCKHOLDERS’ EQUITY:
Common stock                                     6               5
Additional paid-in capital                       237,769         207,624
Accumulated other comprehensive loss             (1,558    )     (496      )
Accumulated deficit                              (7,788    )     (23,171   )
Total stockholders’ equity                       228,429         183,962    
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY       $ 312,270       $ 284,247  
                                                                            

 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands except share and per share data)
                                                                           
                     Three Months Ended July 31,         Year Ended July 31,
                     2013             2012               2013             2012
Revenues:
License              $  49,078        $  28,930          $  123,560       $  97,136
Maintenance          9,871            7,858              37,561           29,538
Services             37,961           30,801             139,528          105,387     
Total revenues       96,910           67,589             300,649          232,061     
Cost of
revenues: ^(1)
License              484              79                 920              762
Maintenance          2,183            1,515              7,613            5,288
Services             34,139           25,612             123,210          85,360      
Total cost of        36,806           27,206             131,743          91,410      
revenues
Gross profit:
License              48,594           28,851             122,640          96,374
Maintenance          7,688            6,343              29,948           24,250
Services             3,822            5,189              16,318           20,027      
Total gross          60,104           40,383             168,906          140,651     
profit
Operating
expenses: ^(1)
Research and         18,843           14,355             66,346           50,462
development
Sales and            16,621           13,286             53,301           38,254
marketing
General and          8,452            7,474              32,414           28,336      
administrative
Total
operating            43,916           35,115             152,061          117,052     
expenses
Income from          16,188           5,268              16,845           23,599
operations
Interest             139              88                 498              308
income, net
Other expense,       (27        )     (257       )       (131       )     (728       )
net
Income before
provision for        16,300           5,099              17,212           23,179
income taxes
Provision for        4,195            1,551              1,829            7,979       
income taxes
Net income           $  12,105        $  3,548           $  15,383        $  15,200   
Earnings per
share:
Basic                $  0.21          $  0.07            $  0.27          $  0.29     
Diluted              $  0.19          $  0.06            $  0.25          $  0.25     
Shares used in
computing
earnings per
share:
Basic                57,646,262       53,965,083         56,331,018       34,774,983  
Diluted              62,492,753       61,172,597         61,943,087       41,509,185  
                                                                                      

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

                                                      
                      Three Months Ended July          Year Ended July 31,
                      31,
                      2013             2012            2013           2012
Stock-based
compensation
expenses:
Cost of
maintenance           $  303           $ 108           $ 1,217        $ 379
revenues
Cost of
services              3,288            1,093           12,493         3,741
revenues
Research and          2,587            820             9,131          3,759
development
Marketing and         1,701            1,007           5,970          2,936
sales
General and           2,090            1,352           9,588          7,443
administrative
Total
stock-based           $  9,969         $ 4,380         $ 38,399       $ 18,258
compensation
expenses
                                                                         

 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
                                                                             
                            Three Months Ended July          Year Ended July 31,
                            31,
                            2013           2012              2013           2012
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income                  $ 12,105       $ 3,548           $ 15,383       $ 15,200
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and            1,639          770               4,821          2,917
amortization
Stock-based                 9,969          4,380             38,399         18,258
compensation
Excess tax benefit
from exercise of            (2,263   )     (486      )       (2,586   )     (486      )
stock options and
vesting of RSUs
Deferred taxes              3,523          (255      )       (1,256   )     5,362
Other noncash items         282            —                 554            —
affecting net income
Changes in operating
assets and
liabilities:
Accounts receivable         7,471          3,072             (8,478   )     (9,325    )
Prepaid expenses and        (3,093   )     (937      )       (2,690   )     (2,442    )
other assets
Accounts payable            (345     )     1,583             355            1,059
Accrued employee            5,213          8,274             164            8,246
compensation
Other liabilities           (30      )     4,754             1,929          (3,907    )
Deferred revenues           (10,036  )     (5,593    )       (14,048  )     (17,788   )
Net cash provided by        24,435         19,110            32,547         17,094     
operating activities
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of
available-for-sale          (41,522  )     —                 (212,035 )     —
securities
Sales and maturities
of available-for-sale       26,311         —                 83,567         —
securities
Purchase of property        (2,167   )     (3,501    )       (9,228   )     (5,619    )
and equipment
Acquisition, net of         (14,749  )     —                 (14,749  )     —
cash acquired
Decrease in                 12             —                 3,532          2,323      
restricted cash
Net cash used in            (32,115  )     (3,501    )       (148,913 )     (3,296    )
investing activities
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from
issuance of common          1,159          1,391             9,123          5,067
stock upon exercise
of stock options
Taxes remitted on RSU       (5,635   )     (12,430   )       (20,330  )     (12,430   )
awards vested
Proceeds from
issuance of common
stock in connection
with public                 —              —                 —              143,386
offerings, net of
underwriting
discounts and
commission
Costs paid in
connection with             —              (920      )       —              (3,502    )
public offerings
Excess tax benefit
from exercise of            2,263          486               2,586          486        
stock options and
vesting of RSUs
Net cash provided by
(used in) financing         (2,213   )     (11,473   )       (8,621   )     133,007    
activities
Effect of foreign
exchange rate changes       (870     )     (268      )       (964     )     (712      )
on cash and cash
equivalents
NET INCREASE
(DECREASE) IN CASH          (10,763  )     3,868             (125,951 )     146,093
AND CASH EQUIVALENTS
CASH AND CASH
EQUIVALENTS—Beginning       90,530         201,850           205,718        59,625     
of period
CASH AND CASH
EQUIVALENTS—End of          $ 79,767       $ 205,718         $ 79,767       $ 205,718  
period
                                                                                       

 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Operating Results
(unaudited, in thousands)
                                                                                               
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 July 31,
                 2013                                            2012
                 GAAP           Adjustments     Non-GAAP         GAAP           Adjustments     Non-GAAP
Total            $ 96,910       $  —            $ 96,910         $ 67,589       $   —           $ 67,589
revenues
                                                                                                 
Total cost
of               36,806         (3,912    )     32,894           27,206         (1,201    )     26,005
revenues
(1)
                                                                                                 
Total
gross            60,104         3,912           64,016           40,383         1,201           41,584
profit
                                                                                                 
Total
operating        43,916         (6,378    )     37,538           35,115         (3,179    )     31,936
expenses
(1)
Income
from             16,188         10,290          26,478           5,268          4,380           9,648
operations
                                                                                                 
Income
before
provision        16,300         10,290          26,590           5,099          4,380           9,479
for income
taxes
Provision
for income       4,195          6,837           11,032           1,551          1,533           3,084
taxes (2)
Net income       $ 12,105       $  3,453        $ 15,558         $ 3,548        $   2,847       $ 6,395
                                                                                                   

(1) Adjustments relate to amortization of acquired intangibles and stock-based
compensation recognized during the period for GAAP purposes.

(2) Adjustment reflects the tax benefit resulting from all non-GAAP
adjustments.

                
                 Year Ended July 31,
                 2013                                              2012
                 GAAP            Adjustments     Non-GAAP          GAAP            Adjustments     Non-GAAP
Total            $ 300,649       $  —            $ 300,649         $ 232,061       $  —            $ 232,061
revenues
                                                                                                    
Total cost
of               131,743         (14,031   )     117,712           91,410          (4,120    )     87,290
revenues
(1)
                                                                                                   —
Total
gross            168,906         14,031          182,937           140,651         4,120           144,771
profit
                                                                                                    
Total
operating        152,061         (24,689   )     127,372           117,052         (14,138   )     102,914
expenses
(1)
Income
from             16,845          38,720          55,565            23,599          18,258          41,857
operations
                                                                                                    
Income
before
provision        17,212          38,720          55,932            23,179          18,258          41,437
for income
taxes
Provision
for income       1,829           15,650          17,479            7,979           6,390           14,369
taxes (2)
Net income       $ 15,383        $  23,070       $ 38,453          $ 15,200        $  11,868       $ 27,068
                                                                                                      

(1) Adjustments relate to amortization of acquired intangibles and stock-based
compensation recognized during the period for GAAP purposes.

(2) Adjustment reflects the tax benefit resulting from all non-GAAP
adjustments.

 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
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 July         Year Ended July 31,
                      31,
                      2013           2012             2013           2012
Earnings per
share
reconciliation:
GAAP earnings
per share -           $ 0.19         $ 0.06           $ 0.25         $ 0.25
Diluted
Amortization of
intangibles
acquired in           0.01           —                0.01           —
business
combinations
Stock-based           0.16           0.07             0.62           0.43
compensation
Less tax
benefit of non        (0.11    )     (0.03    )       (0.26    )     (0.15    )
GAAP items
Pro forma
conversion of         —              —                —              (0.03    )
preferred
shares
Non-GAAP
earnings per          $ 0.25         $ 0.10           $ 0.62         $ 0.50    
share - Diluted
                                                                      
                      Three Months Ended July         Year Ended July 31,
                      31,
                      2013           2012             2013           2012
Shares used in
computing
non-GAAP per
share amounts:
Weighted
average shares        62,492,753     61,172,597       61,943,087     41,509,185
- Diluted
Pro forma
conversion of         —              —                —              12,332,443
preferred
shares
Pro forma
weighted              62,492,753     61,172,597       61,943,087     53,841,628
average shares
- Diluted
                                                       
                      Three Months Ended July         Year Ended July 31,
                      31,
                      2013           2012             2013           2012
Adjusted EBITDA
reconciliation:
GAAP net income       $ 12,105       $ 3,548          $ 15,383       $ 15,200
Non-GAAP
adjustments:
Provision for         4,195          1,551            1,829          7,979
income taxes
Other expense,        27             257              131            728
net
Interest              (139     )     (88      )       (498     )     (308     )
income, net
Depreciation
and                   1,639          770              4,821          2,917
amortization
Stock-based           9,969          4,380            38,399         18,258    
compensation
Adjusted EBITDA       $ 27,796       $ 10,418         $ 60,065       $ 44,774  
                                                                               

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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