Guidewire Software, Inc. (NYSE: GWRE), a provider of software products to Property and Casualty (“P&C”) insurers, today announced its financial results for the fourth fiscal quarter and year ended July 31, 2018.
“Driven by a record number of transactions at new and existing customers in both domestic and international markets, revenue and net income were above our guidance ranges for the fourth quarter and fiscal year 2018,” saidMarcus Ryu, chief executive officer, Guidewire Software. “As insurers strive for differentiation through automation, digital engagement, predictive analytics, and integration to insurtech partners, they increasingly seek cloud solutions that reduce IT complexity and risk. We enter fiscal 2019 well situated to continue Guidewire InsurancePlatform’s progress toward becoming the platform of choice for the $2 trillion P&C insurance industry.”
Fiscal Year 2018 Financial Highlights
Revenue
Total revenue for fiscal year 2018 was $661.1 million, an increase of 29% from fiscal year 2017. License and other revenue for fiscal year 2018 was $315.8 million, an increase of 16% from fiscal year 2017. Services revenue was $268.0 million, an increase of 54%, and maintenance revenue was $77.3 million, an increase of 13%.
Rolling four-quarter recurring revenue was $381.3 million for the period ended July 31, 2018, an increase of 17% compared to the same metric for the period ended July 31, 2017. With our transition to more subscription-based contracts and our upcoming adoption of the new revenue standard, this metric becomes less indicative of our revenue trends and will not be disclosed in future quarters.
Profitability
GAAP loss from operations was $7.3 million for fiscal year 2018, compared with income of $26.6 million in fiscal year 2017.
Non-GAAP income from operations was $109.7 million for fiscal year 2018, compared with $110.5 million for fiscal year 2017.
GAAP net loss was $19.7 million for fiscal year 2018, compared with net income of $21.2 million for fiscal year 2017. GAAP net loss per share was $0.25 for fiscal year 2018, based on diluted weighted average shares outstanding of 77.7 million, compared to $0.28 net income per share for fiscal year 2017, based on diluted weighted average shares outstanding of 75.3 million.
Non-GAAP net income was $90.9 million for fiscal year 2018, compared to $78.8 million for fiscal year 2017. Non-GAAP net income per share was $1.14 for fiscal year 2018, based on diluted weighted average shares outstanding of 77.7 million, compared to $1.05 for fiscal year 2017, based on diluted weighted average shares outstanding of 75.3 million.
Fourth Fiscal Quarter 2018 Financial Highlights
Revenue
Total revenue for the fourth quarter of fiscal year 2018 was $248.6 million, an increase of 37% from the same quarter in fiscal year 2017. License and other revenue was $151.1 million, an increase of 38%; services revenue was $77.0 million, an increase of 46%; and maintenance revenue was $20.5 million, an increase of 10%.
Profitability
GAAP income from operations was $55.2 million for the fourth quarter of fiscal year 2018, compared with $41.0 million in the comparable period in fiscal year 2017.
Non-GAAP income from operations was $83.7 million for the fourth quarter of fiscal year 2018, compared with $64.0 million in the comparable period in fiscal year 2017.
GAAP net income was $83.4 million for the fourth quarter of fiscal year 2018, compared with $26.9 million for the comparable period in fiscal year 2017. GAAP net income per share was $1.02, based on diluted weighted average shares outstanding of 82.2 million, compared with $0.36 for the comparable period in fiscal year 2017, based on diluted weighted average shares outstanding of 75.8 million.
Non-GAAP net income was $66.3 million for the fourth quarter of fiscal year 2018, compared with $44.8 million in the comparable period in fiscal year 2017. Non-GAAP net income per share was $0.81, based on diluted weighted average shares outstanding of 82.2 million, compared with $0.59 in the comparable period in fiscal year 2017, based on diluted weighted average shares outstanding of 75.8 million.
Liquidity
The Company had $1.3 billion in cash, cash equivalents and investments at July 31, 2018, compared with $687.8 million at July 31, 2017. The increase was primarily due to total net proceeds of $608.2 million related to the public offering of our common stock and convertible notes and $140.5 million in cash generated from operations, partially offset by the use of $130.1 million of cash in connection with our acquisition of Cyence.
Business Outlook
Guidewire is issuing the following outlook for the first fiscal quarter and fiscal year 2019 based on current expectations:
Conference Call Information
Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: Non-GAAP operating income (loss), Non-GAAP net income (loss), Non-GAAP income tax provision (benefit), and Non-GAAP net income (loss) per share. Non-GAAP operating income (loss) excludes 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 and the related tax effects of the non-GAAP adjustments. The estimated annual tax rates used in the business outlook to compute GAAP and Non-GAAP net income exclude discrete items such as forecasted tax benefits related to stock-based compensation and are impacted by the passage of the Tax Cuts and Jobs Act.
Guidewire believes that these non-GAAP financial measures 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 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 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. 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.
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, market positioning 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 revenue; our services revenue produce lower gross margins than our license and maintenance revenue; 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.
