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, 2020.
“Our second quarter was highlighted by two Tier 1 insurers selecting InsuranceSuite Cloud and one new customer selecting InsuranceNow," saidMike Rosenbaum, chief executive officer, Guidewire Software. "Total revenue and profitability exceeded our outlook in the quarter, and we continue to see a clear shift to cloud-based core systems. However, the growing interest in cloud-based systems is dampening self-managed demand, impacting our full year outlook. Ultimately, this trend is a positive validation of our cloud strategy and reinforces our confidence in serving the more than $2 trillion P&C industry."
Second Quarter Fiscal Year 2020 Financial Highlights
Total revenue for the second quarter of fiscal year 2020 was $173.5 million, an increase of 3% from the same quarter in fiscal year 2019. License and subscription revenue was $105.0 million, an increase of 21%; services revenue was $47.4 million, a decrease of 22%; and maintenance revenue was $21.1 million, which remained relatively flat.
Annual recurring revenue, or ARR, was $474 million as of January 31, 2020, up from $460 million as of July 31, 2019. Quarterly ARR results for fiscal year 2020 are based on actual currency rates at the end of fiscal year 2019, held constant throughout the year.
GAAP loss from operations was $18.0 million for the second quarter of fiscal year 2020, compared with $6.3 million for the comparable period in fiscal year 2019.
Non-GAAP income from operations was $15.4 million for the second quarter of fiscal year 2020, compared with $25.4 million for the comparable period in fiscal year 2019.
GAAP net loss was $19.9 million for the second quarter of fiscal year 2020, compared with less than $0.1 million for the comparable period in fiscal year 2019. GAAP net loss per share was $0.24, based on diluted weighted average shares outstanding of 82.7 million, compared with less than $0.01 for the comparable period in fiscal year 2019, based on diluted weighted average shares outstanding of 81.2 million.
Non-GAAP net income was $17.6 million for the second quarter of fiscal year 2020, compared with $27.3 million for the comparable period in fiscal year 2019. Non-GAAP net income per share was $0.21, based on diluted weighted average shares outstanding of 83.6 million, compared with $0.33 for the comparable period in fiscal year 2019, based on diluted weighted average shares outstanding of 82.7 million.
The Company had $1.3 billion in cash, cash equivalents, and investments at January 31, 2020, the same as at July 31, 2019. The Company generated $1.3 million in cash from operations and had negative free cash flow of $12.1 million during the six months ended January 31, 2020.
Guidewire is issuing the following outlook for the third fiscal quarter and revised outlook for fiscal year 2020 based on current expectations:
(in $ millions)
Third Quarter Fiscal Year 2020
Fiscal Year 2020
License and subscription
GAAP income (loss) from operations
Non-GAAP income (loss) from operations
GAAP net income (loss)
GAAP net income (loss) per share
Non-GAAP net income (loss)
Non-GAAP net income (loss) per share
ARR growth on a constant currency basis is now expected to be between 11% and 12% in fiscal year 2020 compared to our previous range of 14% to 16%.
Conference Call Information
The webcast will be archived on Guidewire’s website (www.guidewire.com) for a period of three months.
Non-GAAP Financial Measures and Other Metrics
This press release contains the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP income tax provision (benefit), non-GAAP net income (loss) per share, and free cash flow. Non-GAAP gross profit and non-GAAP income (loss) from operations exclude 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. Free cash flow, which consists of net cash flow provided by (used in) operating activities less cash used for purchases of property and equipment and capitalized software development costs, enables us to analyze our financial performance without the effects of certain non-cash items such as depreciation, amortization, and stock-based compensation expenses. Annual recurring revenue ("ARR") is used to identify the annualized recurring value of active customer contracts at the end of a reporting period. ARR includes the annualized recurring value of term licenses, subscription agreements, maintenance contracts, and hosting contracts. All components of the licensing and usage arrangements that are not expected to recur (primarily perpetual licenses and services) are excluded.
Guidewire believes that these non-GAAP financial measures and other metrics 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 and other metrics 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 and other metrics 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 and other metrics 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.