Guidewire Software Announces Fourth Quarter and Fiscal Year 2017 Financial Results

FOSTER CITY, Calif.--(BUSINESS WIRE)--Sep. 6, 2017-- Guidewire Software, Inc. (NYSE: GWRE), a provider of software products for property and casualty (P&C) insurers, today announced its financial results for the fiscal fourth quarter and fiscal year ended July 31, 2017.

“Revenue and profitability exceeded our guidance for the fourth quarter and fiscal 2017,” said Marcus Ryu, chief executive officer, Guidewire Software. “We look back on a year of significant progress toward our goal of industry leadership, with new core system mandates from major insurers in the United States and Europe, momentum for our data management and digital engagement solutions, acquisitions broadening our platform, and multiple cloud-based deployments of our two core system offerings.”

Ryu continued, “We see P&C insurers of all sizes responding with urgency to changing end market behavior, non-traditional competitors, and new analytical approaches to risk modeling and insurance product design. We see a wealth of opportunities to invest productively to serve the global industry as it progresses toward a more digital and automated future.”

Fiscal 2017 Financial Highlights

Revenue

• License and other revenue for fiscal year 2017 was $271.5 million, an increase of 24% from fiscal year 2016. Maintenance revenue was $68.6 million, an increase of 15% and services revenue was $174.2 million, an increase of 20%. Total revenue for fiscal year 2017 was $514.3 million, an increase of 21% from fiscal year 2016.
• Rolling four-quarter recurring term license and other and maintenance revenue was $327.0 million, an increase of 22% compared to fiscal year 2016.

Profitability

• GAAP income from operations was $26.6 million for fiscal year 2017, compared with $16.4 million for fiscal year 2016.
• Non-GAAP income from operations was $110.5 million for fiscal year 2017, compared with $84.9 million for fiscal year 2016.
• GAAP net income was $21.2 million for fiscal year 2017, compared with $15.0 million for fiscal year 2016. GAAP earnings per diluted share was $0.28 for fiscal year 2017, based on diluted weighted average shares outstanding of 75.3 million, compared to $0.20 earnings per diluted share for fiscal year 2016, based on diluted weighted average shares outstanding of 73.8 million.
• Non-GAAP net income was $78.8 million for fiscal year 2017, compared to $62.0 million for fiscal year 2016. Non-GAAP earnings per diluted share was $1.05 for fiscal year 2017, based on diluted weighted average shares outstanding of 75.3 million, compared to $0.84 earnings per diluted share for fiscal year 2016, based on diluted weighted average shares outstanding of 73.8 million.

Fourth Quarter Fiscal Year 2017 Financial Highlights

Revenue

• License and other revenue for the fourth quarter of fiscal 2017 was $109.7 million, an increase of 24% from the fourth quarter of fiscal 2016. Maintenance revenue was $18.7 million, an increase of 10% and services revenue was $52.7 million, an increase of 47%. Total revenue was $181.1 million, an increase of 28% from the same quarter in fiscal 2016.

Profitability

• GAAP income from operations was $41.0 million for the fourth quarter of fiscal 2017, compared with $23.5 million in the comparable period in fiscal 2016.
• Non-GAAP income from operations was $64.0 million for the fourth quarter of fiscal 2017, compared with $42.7 million in the comparable period in fiscal 2016.
• GAAP net income was $26.9 million for the fourth quarter of fiscal 2017, compared with $16.1 million for the comparable period in fiscal 2016. GAAP earnings per diluted share was $0.36 for the fourth quarter of fiscal 2017, based on diluted weighted average shares outstanding of 75.8 million, compared with $0.22 earnings per diluted share for the comparable period in fiscal 2016, based on diluted weighted average shares outstanding of 74.2 million.
• Non-GAAP net income was $44.8 million for the fourth quarter of fiscal 2017, compared with $28.7 million in the comparable period in fiscal 2016. Non-GAAP earnings per diluted share was $0.59 for the fourth quarter of fiscal 2017, based on diluted weighted average shares outstanding of 75.8 million, compared with $0.39 earnings per diluted share in the comparable period in fiscal 2016, based on diluted weighted average shares outstanding of 74.2 million.

Balance Sheet

• The Company had $687.8 million in cash, cash equivalents and investments at July 31, 2017, compared to $735.8 million at July 31, 2016. The decrease in cash, cash equivalents and investments was primarily due to $154.1 million cash used for the acquisition of ISCS and $33.5 million used for the acquisition of FirstBest. The Company generated $137.2 million cash flow from operations in fiscal year 2017, compared to cash flow from operations of $99.9 million in fiscal year 2016.

Business Outlook

Guidewire is issuing the following outlook for the first quarter and fiscal year 2018, based on current expectations:

Non-GAAP operating income and non-GAAP net income exclude stock-based compensation expense and amortization of intangible assets. The GAAP and non-GAAP estimated annual tax rates used to compute net income and EPS exclude discrete items such as tax benefits related to share-based compensation.

Conference Call Information

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, 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.

About Guidewire Software
Guidewire delivers the software that Property and Casualty (P&C) insurers need to adapt and succeed in a time of rapid industry change. We combine three elements - core operations, data and analytics, and digital engagement - into a technology platform that enhances insurers’ ability to engage and empower their customers and employees. More than 300 P&C insurers around the world have selected Guidewire products. For more information, please visit www.guidewire.com. Follow us on twitter: @Guidewire_PandC.

NOTE: Guidewire, Guidewire Software, Guidewire ClaimCenter, Guidewire PolicyCenter, and Guidewire BillingCenter are registered trademarks of Guidewire Software, Inc. in the United States and/or other countries.

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.

(1) Amounts include stock-based compensation expense, see table below.

(1) Adjustments relate to amortization of acquired intangibles and stock-based compensation recognized during the period for GAAP purposes.
(2) Adjustment reflects the tax benefit resulting from all non-GAAP adjustments.
(3) Due to the occurrence of a net loss on a GAAP basis, potentially dilutive securities were excluded from the calculation of GAAP earnings per share, as they would have an anti-dilutive effect. However, as net income was earned on a Non-GAAP basis, these shares have a dilutive effect on Non-GAAP earnings per share and are included here.

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Source: Guidewire Software, Inc.

Media Contact:
Guidewire Software, Inc.
Diana Stott, 650-356-4941
dstott@guidewire.com
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Investor Contact:
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