“We achieved revenue and profitability above the high end of our guidance range for the second quarter, reflecting strong demand for both core system replacement and our newer products in the data management and digital engagement domains,” said
Marcus Ryu, chief executive officer,\_Guidewire Software. “We believe the appeal that all the products in our portfolio have to a diverse set of insurers globally validates our strategy of industry focus and investment in product expansion.”
Ryu continued, “Our products have become even more appealing as they enable significant changes in P&C insurance strategies in response to data driven decisioning and end-market digital preferences. We intend to extend our product leadership to further service the industry and support our continued growth in the years ahead.”
Second Quarter Fiscal 2016 Financial Highlights
Revenue
License revenue for the second quarter of fiscal 2016 was $53.4 million, an increase of 22% from the second quarter of fiscal 2015. Maintenance revenue was $14.3 million, an increase of 17% and services revenue was $34.5 million, an increase of 3%. Total revenue was $102.1 million, an increase of 14% from the same quarter in fiscal 2015.
License revenue for the six months ended January 31, 2016 was $85.7 million, an increase of 18% from the comparable period of fiscal 2015. Maintenance revenue was $28.3 million, an increase of 15% and services revenue was $70.4 million, a decrease of 2%. Total revenue was $184.4 million, an increase of 9% from the same period in fiscal 2015.
Rolling four-quarter recurring term license and maintenance revenue was $238.3 million, an increase of 16% compared to the same period in fiscal 2015.
Profitability
GAAP operating income was $7.7 million for the second quarter of fiscal 2016, compared with $3.3 million in the comparable period in fiscal 2015.
Non-GAAP operating income was $24.6 million for the second quarter of fiscal 2016, compared with $17.2 million in the comparable period in fiscal 2015.
GAAP net income was $0.9 million for the second quarter of fiscal 2016, compared with $4.0 million for the comparable period in fiscal 2015. GAAP net income per share was $0.01, based on diluted weighted average shares outstanding of 73.4 million, compared with $0.06 per share for the comparable period in fiscal 2015, based on diluted weighted average shares outstanding of 72.1 million.
Non-GAAP net income was $17.8 million for the second quarter of fiscal 2016, compared with $12.5 million in the comparable period in fiscal 2015. Non-GAAP net income per diluted share was $0.24, based on diluted weighted average shares outstanding of 73.4 million, compared with $0.17 in the comparable period in fiscal 2015, based on diluted weighted average shares outstanding of 72.1 million.
Balance Sheet
The Company had $700.8 million in cash, cash equivalents and investments at January 31, 2016, compared with $677.8 million at July 31, 2015. The Company generated $37.9 million cash inflow from operations in the second quarter of fiscal 2016, compared with cash flow from operations of $9.6 million in the comparable period in fiscal 2015.
Business Outlook
Guidewire is issuing the following outlook for the third quarter and fiscal 2016, 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, Non-GAAP net income, Non-GAAP net income per share and Non-GAAP tax provision. These Non-GAAP financial measures exclude stock-based compensation and amortization of intangibles, and the tax effect of these adjustments for 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 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. 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.
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 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.
