Guidewire Software, Inc. (NYSE: GWRE), a provider of software products to Property and Casualty insurers, today announced its financial results for the fiscal quarter ended January 31, 2017.
“Revenue and profitability exceeded our guidance for the second quarter,” saidMarcus Ryu, chief executive officer, Guidewire Software. “Customer demand was healthy this quarter and our performance further benefited from a few license wins closing earlier than anticipated.”
Ryu continued, “Our recently completed acquisition of ISCS enlarges our total addressable market with an all-in-one core option which we have renamed InsuranceNow. Similar to our recently acquired solutions for Underwriting Management and Predictive Analytics, we will offer InsuranceNow as a cloud-based solution, continuing our strategy of delivering a growing portion of our platform as cloud services.”
Second Quarter Fiscal 2017 Financial Highlights
Revenue
License and other revenue for the second quarter of fiscal 2017 was $64.1 million, an increase of 20% from the second quarter of fiscal 2016. Maintenance revenue was $16.6 million, an increase of 16% and services revenue was $35.0 million, an increase of 1%. Total revenue was $115.6 million, an increase of 13% from the same quarter in fiscal 2016.
License and other revenue for the six months ended January 31, 2017 was $102.8 million, an increase of 20% from the comparable period in fiscal 2016. Maintenance revenue was $33.1 million, an increase of 17% and services revenue was $73.8 million, an increase of 5%. Total revenue was $209.7 million, an increase of 14% from the same period in fiscal 2016.
Rolling four-quarter recurring term license and maintenance revenue was $285.3 million as of January 31, 2017, an increase of 20% compared to the same metric as of January 31, 2016.
Profitability
GAAP operating income was $8.2 million for the second quarter of fiscal 2017, compared with $7.7 million in the comparable period in fiscal 2016.
Non-GAAP operating income was $28.4 million for the second quarter of fiscal 2017, compared with $24.6 million in the comparable period in fiscal 2016.
GAAP net income was $4.0 million for the second quarter of fiscal 2017, compared with net income of $0.9 million for the comparable period in fiscal 2016. GAAP net income per share was $0.05, based on diluted weighted average shares outstanding of 74.8 million, compared with net income of $0.01 per share for the comparable period in fiscal 2016, based on diluted weighted average shares outstanding of 73.4 million.
Non-GAAP net income was $20.6 million for the second quarter of fiscal 2017, compared with $17.8 million in the comparable period in fiscal 2016. Non-GAAP net income per diluted share was $0.28, based on diluted weighted average shares outstanding of 74.8 million, compared with $0.24 in the comparable period in fiscal 2016, based on diluted weighted average shares outstanding of 73.4 million.
Balance Sheet
The Company had $728.9 million in cash, cash equivalents and investments at January 31, 2017, compared with $735.8 million at July 31, 2016. The Company generated $42.6 million cash from operations in the second quarter of fiscal 2017, compared with cash flow from operations of $37.9 million in the comparable period in fiscal 2016.
Business Outlook
Guidewire is issuing the following outlook for the third quarter and fiscal 2017, based on current expectations:
Fiscal 2017
Fiscal 2017
Revenue 102.0 – 106.0 491.0 – 499.0 License and other revenue 43.0 – 45.0 256.0 – 262.0 Maintenance revenue 16.0 – 17.0 66.0 – 68.0 Services revenue 42.0 – 45.0 166.0 – 172.0 GAAP operating income (28.1 ) – (24.1 ) (14.6 ) – (6.6 ) Non-GAAP operating income (6.0 ) – (2.0 ) 70.0 – 78.0 GAAP net income (22.8 ) – (19.6 ) (9.0 ) – (3.1 ) GAAP net income per share (0.31 ) – (0.26 ) (0.12 ) – (0.04 ) Non-GAAP net income (3.7 ) – (1.2 ) 50.1 – 55.6 Non-GAAP net income per share (0.05 ) – (0.02 ) 0.67 – 0.74 Guidewire continues to target term license revenue growth of 20% or higher for the current fiscal year. Non-GAAP operating income and non-GAAP net income exclude stock-based compensation expense and amortization of intangible assets.
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. 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.