Guidewire Software, Inc. (NYSE: GWRE), provider of the industry platform Property and Casualty (“P&C”) insurers rely upon, today announced its financial results for the fiscal quarter ended January 31, 2019.
“We exceeded our guidance ranges for revenue and profitability in the second quarter,” said Marcus Ryu, chief executive officer, Guidewire Software. “During the quarter, we extended our overall market momentum and demonstrated particular success with our cloud and digital initiatives, completing another InsuranceSuite Cloud deal and signing significant new business for digital enablement. We continue to invest in Guidewire Insurance Platform to service the growing demand we see for cloud-based core systems and to strengthen our role as a trusted partner for enabling digital transformation in the $2 trillion global P&C industry.”
As of the first quarter of fiscal 2019, Guidewire began reporting results under Accounting Standards Codification Topic 606, Revenue Recognition (“ASC 606”), using the modified retrospective method. Financial results for reporting periods prior to fiscal year 2019 are presented as previously disclosed in conformity with then existing guidance.
Second Quarter Fiscal 2019 Financial Highlights
Revenue
Total revenue for the second quarter of fiscal year 2019 was $169.3 million, an increase of 3% from the same quarter in fiscal year 2018. License and subscription revenue was $87.1 million, an increase of 3%; services revenue was $60.9 million, an increase of 1%; and maintenance revenue was $21.3 million, an increase of 11%.
Profitability
GAAP loss from operations was $5.5 million for the second quarter of fiscal year 2019, compared with a $0.7 million loss in the comparable period in fiscal year 2018.
Non-GAAP income from operations was $26.1 million for the second quarter of fiscal year 2019, compared with a $32.0 million non-GAAP income in the comparable period in fiscal year 2018.
GAAP net income was $0.8 million for the second quarter of fiscal year 2019, compared with a $45.6 million loss for the comparable period in fiscal year 2018, which was adversely impacted by the effects of the provisions of The Tax and Jobs Act passed in December 2017. GAAP net income per share was $0.01, based on diluted weighted average shares outstanding of 82.2 million, compared with a $0.59 net loss per share for the comparable period in fiscal year 2018, based on diluted weighted average shares outstanding of 76.9 million.
Non-GAAP net income was $27.9 million for the second quarter of fiscal year 2019, compared with $25.5 million non-GAAP net income in the comparable period in fiscal year 2018. Non-GAAP net income per share was $0.34, based on diluted weighted average shares outstanding of 82.2 million, compared with a $0.33 net income per share in the comparable period in fiscal year 2018, based on diluted weighted average shares outstanding of 76.9 million.
Liquidity
The Company had $1.24 billion in cash, cash equivalents, and investments at January 31, 2019, compared with $1.26 billion at July 31, 2018. The Company used $13.0 million in cash from operations during the six months ended January 31, 2019.
Business Outlook
Guidewire is issuing the following outlook for the third fiscal quarter and fiscal year of 2019 based on current expectations:
(in $ millions, except per share outlook) Third Quarter Fiscal 2019
Revenue 152.5 - 156.5 725.0 - 732.0 License and subscription revenue 68.0 - 72.0 381.0 - 389.0 Maintenance revenue 19.5 - 20.5 82.0 - 84.0 Services revenue 63.0 - 66.0 257.0 - 265.0 GAAP operating loss (31.1) - (27.1) (13.6) - (7.6) Non-GAAP operating income — - 4.0 112.0 - 118.0 GAAP net income (loss) (9.7) - (8.4) 4.5 - 6.5 GAAP net income (loss) per share (0.12) - (0.10) 0.06 - 0.08 Non-GAAP net income 4.1 - 7.5 110.8 - 115.8 Non-GAAP net income per share 0.05 - 0.09 1.35 - 1.41 Conference Call Information
What: Guidewire Software Second Quarter Fiscal 2019 Financial Results Conference Call When: Wednesday, March 6, 2019 Time: 2:00 p.m. PT (5:00 p.m. ET) Live Call: (866) 548-4713, Domestic (323) 794-2093, International Replay: (844) 512-2921, Passcode 1442591, Domestic (412) 317-6671, Passcode 1442591, International Webcast: http://ir.guidewire.com/ (live and replay)
The webcast will be archived on Guidewire’s website (www.guidewire.com) for a period of three months.
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.
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.