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Mar 13, 2012 at 4:05 PM EDT

Guidewire Software Announces Second Quarter Fiscal 2012 Financial Results

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SAN MATEO, Calif.--(BUSINESS WIRE)--Mar. 13, 2012-- Guidewire Software, Inc. (NYSE: GWRE), a provider of core system software to property and casualty insurers, today announced its financial results for the quarter ended January 31, 2012.

“We are pleased with the company’s performance during the second quarter of fiscal 2012, which contributed to revenue and profitability that were above our expectations. We continue to see momentum across all three of our main application offerings, including sales to both new and existing customers,” said Marcus Ryu, Chief Executive Officer of Guidewire Software. “We believe we are still in the early stages of property and casualty insurers replacing their decades-old software, and Guidewire is well positioned to respond to this growing demand with our integrated software suite of next-generation policy, billing and claims applications.”

Second Quarter Fiscal 2012 Financial Highlights

Revenue

  • Total revenue for the second fiscal quarter ended January 31, 2012 was $55.1 million, an increase of 30% from the comparable period in fiscal 2011.
  • License revenue for the second quarter of fiscal 2012 was $25.7 million, up 29% from the year ago period, maintenance revenue was $6.8 million, up 31% from the year ago period, and services revenue was $22.6 million, up 32% from the year ago period.
  • Trailing 12-month total revenue at the end of the second fiscal quarter was $202.9 million, up 26% on a year-over-year basis.

Profitability

  • GAAP operating income was $5.4 million for the second quarter of fiscal 2012, consistent with the comparable period in fiscal 2011.
  • Non-GAAP operating income was $11.6 million for the second quarter of fiscal 2012, an increase of 69% from the comparable period in fiscal 2011.
  • Adjusted EBITDA was $12.3 million for the second quarter of fiscal 2012, an increase of 69% from the comparable period in fiscal 2011.
  • GAAP net income was $3.7 million for the second quarter of fiscal 2012, compared to net income of $5.4 million for the comparable period in fiscal 2011. GAAP net income per share was $0.06, based on diluted weighted average shares outstanding of 25.6 million, compared to $0.11 for the comparable period in fiscal 2011, based on diluted weighted average shares outstanding of 16.4 million.
  • Non-GAAP net income was $7.8 million for the second quarter of fiscal 2012, an increase of 13% from the comparable period in fiscal 2011. Non-GAAP net income per diluted share was $0.16, based on diluted weighted average shares outstanding of 48.8 million, compared to $0.17 for the second quarter of fiscal 2011, based on diluted weighted average shares outstanding of 41.7 million.

Balance Sheet

  • The company had $169.6 million in cash and cash equivalents at January 31, 2012, an increase from $31.2 million at October 31, 2011. The increase in cash was primarily due to our successful initial public offering, which raised $119.3 million in net proceeds, after underwriting discounts and expenses, through the sale of 10.2 million shares of our common stock.

Conference Call Information

     
What:   Guidewire Software second quarter fiscal 2012 financial results conference call
When:   Tuesday, March 13, 2012
Time:   2:00 p.m. PT (5:00 p.m. ET)
Live Call:   (877) 795-3599, domestic
    (719) 325-4764, international
Replay:   (877) 870-5176, passcode 9436685, domestic
    (858) 384-5517, passcode 9436685, international
Webcast:  

http://ir.guidewire.com (live and replay)
     

The webcast will be archived on Guidewire’s website for a period of three months.

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures: Non-GAAP operating income, Adjusted EBITDA, 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 analyses, for purposes of determining executive and senior management incentive compensation and for budgeting and planning purposes. These measures are used in monthly financial reports prepared for management and in monthly and quarterly financial reports presented to the company’s board of directors. 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 judgments 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.

About Guidewire Software

Guidewire Software is a provider of core system software to the global Property/Casualty insurance industry. Designed to be flexible and scalable, Guidewire solutions give insurers the capability to deliver excellent service, increase market share and lower operating costs. Guidewire InsuranceSuite™, consisting of Guidewire PolicyCenter®, Guidewire ClaimCenter® and Guidewire BillingCenter® spans the key functional areas in insurance – underwriting and policy administration, claims management, and billing. Guidewire is headquartered in San Mateo, California, with offices in Beijing, Dublin, Hong Kong, London, Munich, Paris, Sydney, Tokyo, and Toronto. For more information, please visit www.guidewire.com.

NOTE: Guidewire, Guidewire Software, Guidewire ClaimCenter, Guidewire PolicyCenter, Guidewire BillingCenter, Guidewire InsuranceSuite, Deliver Insurance Your Way, and the Guidewire logo are trademarks or registered trademarks of Guidewire Software, Inc.

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. 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, Guidewire specific comments, and other risks detailed in Guidewire’s most recent S-1/A 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; increased demands on employees and costs associated with operating as a public company; 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.

 
GUIDEWIRE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
                 
    July 31,   January 31,
    2011   2012
                 
Assets                
Current assets:                
Cash and cash equivalents   $ 59,625     $ 169,633  
Restricted cash, current portion     2,230       3,834  
Accounts receivable     23,278       34,602  
Deferred tax asset, current portion     6,044       2,203  
Other current assets     3,665       4,960  
Total current assets     94,842       215,232  
                 
Property and equipment, net     4,455       4,264  
Restricted cash, net of current portion     3,820       2,215  
Deferred tax asset, net of current portion     22,073       22,073  
Other assets     1,350       1,068  
Total assets   $ 126,540     $ 244,852  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
Accounts payable   $ 4,317     $ 5,905  
Accrued employee compensation     18,112       14,763  
Deferred revenues, current portion     48,482       46,396  
Litigation provision obligation     10,000       -  
Other current liabilities     1,390       3,781  
Total current liabilities     82,301       70,845  
Deferred revenues, net of current portion     25,313       14,992  
Other liabilities     774       241  
Total liabilities     108,388       86,078  
                 
Stockholders’ Equity                
Convertible preferred stock     36,500       -  
Common stock     1       5  
Additional paid-in capital     20,231       189,036  
Accumulated other comprehensive loss     (209 )     (399 )
Accumulated deficit     (38,371 )     (29,868 )
Total stockholders’ equity     18,152       158,774  
Total liabilities and stockholders’ equity   $ 126,540     $ 244,852  
 
GUIDEWIRE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands except share and per share amounts)
                             
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
Revenues :                            
License $ 20,000     $ 25,729     $ 30,153   $ 46,544  
Maintenance   5,210       6,805       9,820     13,911  
Services   17,127       22,563       37,034     47,022  
Total revenues   42,337       55,097       77,007     107,477  
                             
Cost of revenues:                            
License   131       234       332     533  
Maintenance   1,014       1,197       1,900     2,463  
Services   15,276       19,310       29,381     37,235  
Total cost of revenues (1)   16,421       20,741       31,613     40,231  
                             
Gross profit :                            
License   19,869       25,495       29,821     46,011  
Maintenance   4,196       5,608       7,920     11,448  
Services   1,851       3,253       7,653     9,787  
Total gross profit   25,916       34,356       45,394     67,246  
                             
Operating expenses: (1)                            
Research and development   8,212       12,162       15,731     23,121  
Sales and marketing   7,056       9,198       12,602     16,559  
General and administrative   5,204       7,639       9,832     14,077  
Total operating expenses   20,472       28,999       38,165     53,757  
Income from operations   5,444       5,357       7,229     13,489  
Interest income, net   75       73       112     113  
Other income (expense), net   (9 )     (319 )     184     (635 )
Income before provision for income taxes   5,510       5,111       7,525     12,967  
Provision for Income taxes   74       1,420       199     4,464  
Net income $ 5,436     $ 3,691     $ 7,326   $ 8,503  
                             
                             
Net income per share:                            
Basic $ 0.12     $ 0.07     $ 0.15   $ 0.19  
Diluted $ 0.11     $ 0.06     $ 0.14   $ 0.15  
                             
Shares used in computing net income per share:                            
Basic   14,048,030       18,433,369       13,960,587     16,499,660  
Diluted   16,357,081       25,610,201       16,202,034     23,387,583  
                             
(1) Amounts include stock-based compensation expense, as follows:
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
                             
Cost of revenues $ 330     $ 1,168     $ 636   $ 1,926  
Research and development   322       1,258       570     2,103  
Sales and marketing   208       527       343     1,024  
General and administrative   600       3,339       934     4,551  
  $ 1,460     $ 6,292     $ 2,483   $ 9,604  
 
GUIDEWIRE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
                                   
      Three Months Ended January 31,   Six Months Ended January 31,
      2011   2012   2011   2012
Cash flows from operating activities:                                  
Net income     $ 5,436     $ 3,691     $ 7,326     $ 8,503  

Adjustments to reconcile net income to net cash provided by

  (used in) operating activities:

                                  
Depreciation and amortization       379       685       621       1,364  
Stock-based compensation       1,460       6,292       2,483       9,604  
Deferred tax assets       -       1,022       -       3,841  
Changes in operating assets and liabilities:                                  
Accounts receivable       2,118       (3,816 )     (5,082 )     (11,565 )
Prepaid expenses and other assets       93       (2,072 )     (777 )     (529 )
Accounts payable       203       (249 )     62       395  
Accrued employee compensation       2,860       5,785       (6,332 )     (3,215 )
Other liabilities       (246 )     1,610       (414 )     (8,756 )
Deferred revenues       1,726       1,869       3,043       (11,910 )
Net cash provided by (used in) operating activities       14,029       14,817       930       (12,268 )
                                   
Cash flows from investing activities:                                  
Purchase of property and equipment       (925 )     (510 )     (1,512 )     (1,000 )
Increase in restricted cash       (1,605 )     -       (1,605 )     -  
Net cash used in investing activities       (2,530 )     (510 )     (3,117 )     (1,000 )
                                   
Cash flows from financing activities:                                  
Proceeds from issuance of common stock upon exercise of stock options       54       2,095       281       2,497  

Proceeds from issuance of common stock in connection with initial

  public offering, net of underwriting discounts and commission

       -       123,046       -       123,046  
Costs paid in connection with initial public offering       -       (716 )     -       (1,689 )
Net cash provided by financing activities       54       124,425       281       123,854  
                                   
Effect of foreign exchange rate changes on cash and cash equivalents       119       (270 )     889       (578 )
Net increase (decrease) in cash and cash equivalents       11,672       138,462       (1,017 )     110,008  
                                   
Cash and cash equivalents at beginning of the period       24,722       31,171       37,411       59,625  
Cash and cash equivalents at end of the period     $ 36,394     $ 169,633     $ 36,394     $ 169,633  
 
GUIDEWIRE SOFTWARE, INC.
Reconciliation of GAAP to Non-GAAP Operating Results
(unaudited, in thousands except share and per share data)
                               
The following tables reconcile the specific items excluded from GAAP in the
calculation of non-GAAP operating results for the periods indicated below:
       
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
Gross profit reconciliation:                              
GAAP gross profit $ 25,916     $ 34,356     $ 45,394     $ 67,246  
Stock-based compensation   330       1,168       636       1,926  
Non-GAAP gross profit $ 26,246     $ 35,524     $ 46,030     $ 69,172  
                               
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
Gross margin reconciliation:                              
GAAP gross margin   61 %     62 %     59 %     63 %
Stock-based compensation   1 %     2 %     1 %     2 %
Non-GAAP gross margin   62 %     64 %     60 %     65 %
                               
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
Operating expense reconciliation:                              
Total GAAP operating expenses   20,472       28,999       38,165       53,757  
Less Stock-based compensation   (1,130 )     (5,124 )     (1,847 )     (7,678 )
Total non-GAAP operating expenses $ 19,342     $ 23,875     $ 36,318     $ 46,079  
                               
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
Operating income reconciliation:                              
GAAP operating income $ 5,444     $ 5,357     $ 7,229     $ 13,489  
Stock-based compensation   1,460       6,292       2,483       9,604  
Non-GAAP operating income $ 6,904     $ 11,649     $ 9,712     $ 23,093  
                               
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
Pre-tax income reconciliation:                              
GAAP pre-tax income $ 5,510     $ 5,111     $ 7,525     $ 12,967  
Stock-based compensation   1,460       6,292       2,483       9,604  
Non-GAAP pre-tax income $ 6,970     $ 11,403     $ 10,008     $ 22,571  
                               
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
Net income reconciliation:                              
GAAP net income $ 5,436     $ 3,691     $ 7,326     $ 8,503  
Stock-based compensation   1,460       6,292       2,483       9,604  
Less tax benefit of non-GAAP items   -       (2,202 )     -       (3,361 )
Non-GAAP net income $ 6,896     $ 7,781     $ 9,809     $ 14,746  
                               
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
Computation of net income per share:                              
GAAP net income $ 5,436     $ 3,691     $ 7,326     $ 8,503  
Non-cumulative dividends to preferred                              
stockholders   (823 )     (751 )     (1,645 )     (1,574 )
Undistributed earnings allocated to preferred                              
stockholders   (2,968 )     (1,637 )     (3,655 )     (3,858 )
Net income, Basic   1,645       1,303       2,026       3,071  
Adjustments to net income for dilutive options                              
and restricted stock options   164       239       196       545  
Net income, Diluted $ 1,809     $ 1,542     $ 2,222     $ 3,616  
                               
GAAP net income per share - Basic $ 0.12     $ 0.07     $ 0.15     $ 0.19  
GAAP net income per share - Diluted $ 0.11     $ 0.06     $ 0.14     $ 0.15  
                               
Weighted average shares - Basic   14,048,030       18,433,369       13,960,587       16,499,660  
Weighted average shares - Diluted   16,357,081       25,610,201       16,202,034       23,387,583  
       
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
Net income per share reconciliation:                              
GAAP net income per share - Diluted $ 0.11     $ 0.06     $ 0.14     $ 0.15  
Stock-based compensation $ 0.03     $ 0.13     $ 0.06     $ 0.20  
Less tax benefit of non GAAP items   -     $ (0.05 )     -     $ (0.07 )
Pro forma conversion of preferred shares $ 0.03     $ 0.02     $ 0.04     $ 0.03  
Non-GAAP net income per share - Diluted $ 0.17     $ 0.16     $ 0.24     $ 0.31  
       
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
Shares used in computing non-GAAP per share amounts:                              
Weighted average shares - Diluted   16,357,081       25,610,201       16,202,034       23,387,583  
Pro forma conversion of preferred shares   25,357,721       23,152,702       25,357,721       24,255,211  
Pro forma weighted average shares - Diluted   41,714,802       48,762,903       41,559,755       47,642,794  
                               
  Three Months Ended January 31,   Six Months Ended January 31,
  2011   2012   2011   2012
Adjusted EBITDA reconciliation:                              
GAAP net income $ 5,436     $ 3,691     $ 7,326     $ 8,503  
Non-GAAP adjustments:                              
Provision for income taxes   74       1,420       199       4,464  
Other (income) expense, net   9       319       (184 )     635  
Interest income, net   (75 )     (73 )     (112 )     (113 )
Depreciation and amortization   379       685       621       1,364  
Stock-based compensation   1,460       6,292       2,483       9,604  

Adjusted EBITDA

 $ 7,283     $ 12,334     $ 10,333     $ 24,457  

 

Source: Guidewire Software, Inc.

Media Contact:
Guidewire Software, Inc.
Diana Stott, 650-356-4941
dstott@guidewire.com
or
Investor Contact:
ICR, LLC
Garo Toomajanian, 650-357-5282
ir@guidewire.com

 

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