UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________
FORM 8-K
_______________________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 3, 2020
_______________________________________________________________
(Exact name of registrant as specified in its charter)
_______________________________________________________________
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of principal executive offices, including zip code)
(650 ) 357-9100
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On June 3, 2020, Guidewire Software, Inc. (the "Company") issued a press release announcing unaudited financial results for the fiscal quarter ended April 30, 2020. A copy of the press release is attached as Exhibit 99.1.
In accordance with General Instruction B.2 on Form 8-K, certain of the information in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished under Item 2.02 and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 ("Exchange Act") or otherwise subject to the liability of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Retirement of Chief Sales Officer
On June 3, 2020, the Company announced that Steve Sherry, the Company’s Chief Sales Officer, notified the Company of his intent to retire from the Company, transitioning out of his current position following the Company’s fiscal year ending July 31, 2020. Mr. Sherry will continue with the Company as SVP, Strategic Accounts into the Company’s next fiscal year, to ensure a complete and seamless transition with his successor, after which he plans to retire. His retirement is not the result of any disagreement or conflict with the Company. The Company also announced that Mr. Frank O’Dowd will take on the role of Chief Sales Officer upon Mr. Sherry’s transition. Mr. O’Dowd will join the Company on June 15, 2020 after serving in sales at Oracle Corporation for over 20 years.
Appointment of Jeff Cooper as Chief Financial Officer
Effective June 3, 2020, the Board of Directors of the Company appointed Jeff Cooper as Chief Financial Officer. Mr. Cooper had previously served as interim Chief Financial Officer since March 2, 2020 and, prior to that, served as the Company’s Vice President of Finance since 2017. Prior to joining the Company, Mr. Cooper served as Chief Financial Officer of GoodData, a cloud-based data and analytics platform company, from 2016 to 2017. From 2013 to 2016, Mr. Cooper served as Vice President, Finance for Rally Software, a publicly traded cloud-based application lifecycle management software company. Prior to that, Mr. Cooper was a Vice President focusing on the software industry in the investment banking division of Deutsche Bank Securities. Mr. Cooper holds a B.A. in Political Science from Princeton University and an M.B.A. degree from the London Business School.
There are no arrangements or understandings between Mr. Cooper and any other persons in connection with his appointment. There are no family relationships between Mr. Cooper and any director or executive officer of the Company, and Mr. Cooper is not a party to any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
In connection with the appointment of Mr. Cooper as Chief Financial Officer, the Compensation Committee of the Board of Directors of the Company expects to increase Mr. Cooper’s compensation. The Company also will enter into its standard form of Executive Agreement, incorporated by reference hereto as Exhibit 10.1, with Mr. Cooper.
Appointment of Priscilla Hung as President, COO
Effective June 3, 2020, the Board of Directors of the Company appointed Priscilla Hung as President. Ms. Hung also serves as the Company’s Chief Operating Officer, a position she has held since June 2017. She also served the Company as Chief Administrative Officer from September 2014 to June 2017, Senior Vice President of Operations & Corporate Development from September 2012 to September 2014, Vice President of Operations from 2010 to 2012, and Vice President of Corporate Development & Alliances from 2005 to 2010. Prior to joining Guidewire, from 2000 to 2005, Ms. Hung held several management positions at Ariba Inc., including Director of Operations and Director of Global Channels and Alliances. Ms. Hung holds an M.Eng. Degree in Industrial Engineering and Operations Research from Cornell University.
There are no arrangements or understandings between Ms. Hung and any other persons in connection with her appointment. There are no family relationships between Ms. Hung and any director or executive officer of the Company, and Ms. Hung is not a party to any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description of Exhibits | |||||||
| Form of Executive Agreement | ||||||||
| Press release dated June 3, 2020 titled "Guidewire Software Announces Third Quarter Fiscal Year 2020 Financial Results, Updates to Leadership Team" | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
*Incorporated by reference from Exhibit 10.6 to the Company's Form 10-Q Dated March 5, 2020.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: June 3, 2020
| GUIDEWIRE SOFTWARE, INC. | |||||
| By: | /s/ JEFF COOPER | ||||
| Jeff Cooper | |||||
| Chief Financial Officer | |||||
Exhibit 99.1
Guidewire Software Announces Third Quarter Fiscal Year 2020 Financial Results,
Updates to Leadership Team
SAN MATEO, Calif., June 3, 2020 - 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 April 30, 2020.
“We delivered strong financial results in the third quarter highlighted by 105% year-over-year growth in subscription revenue that, along with total revenue and profitability, exceeded our guidance ranges," said Mike Rosenbaum, chief executive officer, Guidewire Software. "I am very proud of how our team and community have responded to the headwinds caused by COVID-19. During our third quarter, we made significant progress on our Guidewire Cloud Platform release, closed a new InsuranceSuite Cloud deal with Aviva Italia, and added three new Cyence customers."
Third Quarter Fiscal Year 2020 Financial Highlights
Revenue
•Total revenue for the third quarter of fiscal year 2020 was $168.2 million, an increase of 3% from the same quarter in fiscal year 2019. License and subscription revenue was $93.2 million, an increase of 22%; services revenue was $54.3 million, a decrease of 17%; and maintenance revenue was $20.7 million, which remained relatively flat.
•Annual recurring revenue, or ARR, was $483 million as of April 30, 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.
Profitability
•GAAP loss from operations was $25.6 million for the third quarter of fiscal year 2020, compared with $15.8 million for the comparable period in fiscal year 2019.
•Non-GAAP income from operations was $5.8 million for the third quarter of fiscal year 2020, compared with $12.6 million for the comparable period in fiscal year 2019.
•GAAP net loss was $31.0 million for the third 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 $0.37, based on diluted weighted average shares outstanding of 83.0 million, compared with less than $0.01 for the comparable period in fiscal year 2019, based on diluted weighted average shares outstanding of 81.6 million.
•Non-GAAP net income was $7.7 million for the third quarter of fiscal year 2020, compared with $15.2 million for the comparable period in fiscal year 2019. Non-GAAP net income per share was $0.09, based on diluted weighted average shares outstanding of 83.5 million, compared with $0.18 for the comparable period in fiscal year 2019, based on diluted weighted average shares outstanding of 82.6 million.
Liquidity
•The Company had $1.3 billion in cash, cash equivalents, and investments at April 30, 2020, the same as at July 31, 2019. The Company generated $5.9 million in cash from operations and had negative free cash flow of $16.3 million during the nine months ended April 30, 2020.
Business Outlook
Guidewire is issuing the following outlook for the fourth quarter of fiscal year 2020 and fiscal year 2020 based on current expectations:
| (in $ millions) | Fourth Quarter Fiscal Year 2020 | Fiscal Year 2020 | ||||||||||||||||||||||||
| Revenue | 204.9 | - | 212.9 | 703.5 | - | 711.5 | ||||||||||||||||||||
| License and subscription | 138.4 | - | 146.4 | 419.0 | - | 427.0 | ||||||||||||||||||||
| Maintenance | 20.2 | - | 21.2 | 83.0 | - | 84.0 | ||||||||||||||||||||
| Services | 42.7 | - | 48.7 | 198.0 | - | 204.0 | ||||||||||||||||||||
| GAAP income (loss) from operations | 4.2 | - | 12.2 | (64.8) | - | (56.8) | ||||||||||||||||||||
| Non-GAAP income (loss) from operations | 36.7 | - | 44.7 | 65.0 | - | 73.0 | ||||||||||||||||||||
| GAAP net income (loss) | (2.4) | - | (5.6) | (70.9) | - | (63.2) | ||||||||||||||||||||
| GAAP net income (loss) per share | (0.03) | - | (0.07) | (0.86) | - | (0.76) | ||||||||||||||||||||
| Non-GAAP net income (loss) | 33.8 | - | 40.3 | 70.0 | - | 76.7 | ||||||||||||||||||||
| Non-GAAP net income (loss) per share | 0.41 | - | 0.49 | 0.84 | - | 0.92 | ||||||||||||||||||||
ARR growth on a constant currency basis is now expected to be between 9% and 11% in fiscal year 2020 compared to our previous range of 11% to 12%.
Leadership Announcements
The Company today announced that chief sales officer Steve Sherry plans to retire next fiscal year and that Frank O’Dowd has been named his successor. Additionally, the Company announced the permanent appointment of Jeff Cooper to the chief financial officer role, after serving in an interim capacity, as well as the promotion of Priscilla Hung to president, chief operating officer.
After nearly 15 years as a sales leader at Guidewire, which was preceded by an extraordinary career in enterprise software, Steve Sherry has decided to retire. “Guidewire is incredibly indebted to Steve for the contribution and leadership he provided during his tenure at Guidewire. He is an incredible sales leader and has built a truly first class sales division here at Guidewire.” said Mr. Rosenbaum. The Company today announced Mr. Sherry’s successor, Frank O’Dowd, who joins Guidewire from Oracle, where he was most recently group vice president and a member of the sales team for over 21 years. “While Steve’s retirement is bittersweet, we are incredibly excited to welcome Frank O’Dowd to the leadership team here at Guidewire,” said Mr. Rosenbaum. Mr. O’Dowd will join Guidewire on June 15, working with Mr. Sherry and the sales team through the end of the fiscal year, before taking over the leadership role. Mr. Sherry will continue with the Company as senior vice president, strategic accounts into the Company’s next fiscal year, to ensure a complete and seamless transition, after which he plans to retire.
After conducting an extensive and thorough search, Guidewire determined that Jeff Cooper was the best individual to lead the finance organization, resulting in the Board of Directors appointing him permanently to the chief financial officer role, after his service in an interim capacity. “Jeff’s command of the very detailed and complex cloud business model transition, combined with the trust he has engendered and the leadership shown during this interim period, clearly demonstrated Jeff is the right chief financial officer for Guidewire,” said Mr. Rosenbaum.
Guidewire also announced that Priscilla Hung, who has been with Guidewire since 2005, including serving as chief operating officer since June 2017, has been promoted to president, chief operating officer. “Priscilla has been a key leader of the organization, embodying the grit, determination, and resilience of our culture. I’m excited to continue to partner with her as we drive the next chapter for Guidewire, Guidewire Cloud and our partner ecosystem,” said Mr. Rosenbaum. “Through most of Guidewire's history, Priscilla has been an essential leader, driving many of our most important initiatives and finding a way to succeed for our customers. The Board and I look forward to her continued leadership in her new role,” said Marcus Ryu, chairman of the board.
Conference Call Information
What: Guidewire Software Third Quarter Fiscal Year 2020 Financial Results Conference Call
When: Wednesday, June 3, 2020
Time: 2:00 p.m. PT (5:00 p.m. ET)
Live Call: (877) 705-6003, Domestic
(201) 493-6725, International
Replay: (844) 512-2921, Passcode 13704201, Domestic
(412) 317-6671, Passcode 13704201, 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 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, changes in fair value of our strategic investments, and the related tax effects of the non-GAAP adjustments. Free cash flow 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. These Non-GAAP measures enable us to analyze our financial performance without the effects of certain non-cash items such as depreciation, amortization, stock-based compensation, and changes in fair value of strategic investments.
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 agreements based on customer contracts, which may not be the same as the timing and amount of revenue recognized. 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.
About Guidewire Software
Guidewire delivers the industry platform that P&C insurers rely upon to adapt and succeed in a time of accelerating change. We provide the software, services, and partner ecosystem to enable our customers to run, differentiate, and grow their business. As of the end of our fiscal year 2019, we were privileged to serve more than 380 companies in 34 countries. For more information, please visit www.guidewire.com and follow us on twitter: @Guidewire_PandC.
NOTE: For information about Guidewire’s trademarks, visit https://www.guidewire.com/legal-notices.
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 and future leadership announcements. 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: quarterly and annual operating results may fluctuate more than expected; the impact of the COVID-19 pandemic on our employees and our business and the businesses of our customers, system integrator ("SI") partners, and vendors; 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 revenue; our ability to successfully manage any changes to our business model, including the transition of our products to cloud offerings and the costs related to cloud operations; our services revenue produces lower gross margins than our license and maintenance revenue; our products or cloud-based services may experience data security breaches; we face intense competition in our market; assertions by third parties that we violate their intellectual property rights could substantially harm our business; changes in accounting guidance, such as revenue recognition, which have and may cause us to experience greater volatility in our quarterly and annual results; our product development and sales cycles are lengthy and may be affected by factors outside of our control; weakened global economic conditions may adversely affect the P&C insurance industry including the rate of information technology spending; general political or destabilizing events, including war, conflict or acts of terrorism; our ability to sell our products is highly dependent on the quality of our professional services and SI partners; the risk of losing key employees; changes in foreign exchange rates; 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.
Media Contact:
Diana Stott
Guidewire Software, Inc.
(650) 356-4941
dstott@guidewire.com
Investor Contact:
Garo Toomajanian
ICR, LLC
(650) 357-5282
ir@guidewire.com
| GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES | |||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
| (unaudited, in thousands) | |||||||||||
| April 30, 2020 | July 31, 2019 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 293,815 | $ | 254,101 | |||||||
| Short-term investments | 740,386 | 870,136 | |||||||||
| Accounts receivable, net | 79,587 | 138,443 | |||||||||
| Unbilled accounts receivable, net | 68,913 | 36,728 | |||||||||
| Prepaid expenses and other current assets | 41,598 | 35,566 | |||||||||
| Total current assets | 1,224,299 | 1,334,974 | |||||||||
| Long-term investments | 291,760 | 213,524 | |||||||||
| Unbilled accounts receivable, net | 21,930 | 9,375 | |||||||||
| Property and equipment, net | 65,461 | 65,809 | |||||||||
| Operating lease assets | 85,902 | — | |||||||||
| Intangible assets, net | 46,031 | 66,542 | |||||||||
| Goodwill | 340,877 | 340,877 | |||||||||
| Deferred tax assets, net | 100,925 | 90,308 | |||||||||
| Other assets | 31,683 | 45,554 | |||||||||
| TOTAL ASSETS | $ | 2,208,868 | $ | 2,166,963 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Accounts payable | $ | 18,348 | $ | 34,255 | |||||||
| Accrued employee compensation | 47,493 | 73,365 | |||||||||
| Deferred revenue, net | 89,087 | 108,304 | |||||||||
| Other current liabilities | 21,789 | 16,348 | |||||||||
| Total current liabilities | 176,717 | 232,272 | |||||||||
| Lease liabilities | 99,110 | — | |||||||||
| Convertible senior notes, net | 326,920 | 317,322 | |||||||||
| Deferred revenue, net | 17,009 | 23,527 | |||||||||
| Other liabilities | 3,099 | 19,641 | |||||||||
| Total liabilities | 622,855 | 592,762 | |||||||||
| STOCKHOLDERS’ EQUITY: | |||||||||||
| Common stock | 8 | 8 | |||||||||
| Additional paid-in capital | 1,471,340 | 1,391,904 | |||||||||
| Accumulated other comprehensive income (loss) | (9,516) | (7,758) | |||||||||
| Retained earnings | 124,181 | 190,047 | |||||||||
| Total stockholders’ equity | 1,586,013 | 1,574,201 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,208,868 | $ | 2,166,963 | |||||||
| GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
| (unaudited, in thousands except share and per share data) | |||||||||||||||||||||||
| Three Months Ended April 30, | Nine Months Ended April 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| License and subscription | $ | 93,182 | $ | 76,218 | $ | 280,559 | $ | 257,611 | |||||||||||||||
| Maintenance | 20,694 | 21,335 | 62,781 | 63,602 | |||||||||||||||||||
| Services | 54,289 | 65,314 | 155,293 | 190,443 | |||||||||||||||||||
| Total revenue | 168,165 | 162,867 | 498,633 | 511,656 | |||||||||||||||||||
Cost of revenue(1): | |||||||||||||||||||||||
| License and subscription | 28,713 | 15,781 | 79,541 | 43,850 | |||||||||||||||||||
| Maintenance | 4,375 | 3,924 | 12,153 | 11,746 | |||||||||||||||||||
| Services | 52,664 | 60,573 | 158,510 | 185,970 | |||||||||||||||||||
| Total cost of revenue | 85,752 | 80,278 | 250,204 | 241,566 | |||||||||||||||||||
| Gross profit: | |||||||||||||||||||||||
| License and subscription | 64,469 | 60,437 | 201,018 | 213,761 | |||||||||||||||||||
| Maintenance | 16,319 | 17,411 | 50,628 | 51,856 | |||||||||||||||||||
| Services | 1,625 | 4,741 | (3,217) | 4,473 | |||||||||||||||||||
| Total gross profit | 82,413 | 82,589 | 248,429 | 270,090 | |||||||||||||||||||
Operating expenses(1): | |||||||||||||||||||||||
| Research and development | 51,893 | 47,102 | 148,343 | 139,069 | |||||||||||||||||||
| Sales and marketing | 35,235 | 33,301 | 105,590 | 96,793 | |||||||||||||||||||
| General and administrative | 20,885 | 17,953 | 62,723 | 53,839 | |||||||||||||||||||
| Total operating expenses | 108,013 | 98,356 | 316,656 | 289,701 | |||||||||||||||||||
| Income (loss) from operations | (25,600) | (15,767) | (68,227) | (19,611) | |||||||||||||||||||
| Interest income | 6,072 | 7,748 | 20,666 | 22,152 | |||||||||||||||||||
| Interest expense | (4,505) | (4,327) | (13,396) | (12,858) | |||||||||||||||||||
| Other income (expense), net | (12,356) | (617) | (12,789) | (958) | |||||||||||||||||||
| Income (loss) before provision for (benefit from) income taxes | (36,389) | (12,963) | (73,746) | (11,275) | |||||||||||||||||||
| Provision for (benefit from) income taxes | (5,351) | (4,382) | (7,773) | (9,002) | |||||||||||||||||||
| Net income (loss) | $ | (31,038) | $ | (8,581) | $ | (65,973) | $ | (2,273) | |||||||||||||||
| Net income (loss) per share: | |||||||||||||||||||||||
| Basic | $ | (0.37) | $ | (0.11) | $ | (0.80) | $ | (0.03) | |||||||||||||||
| Diluted | $ | (0.37) | $ | (0.11) | $ | (0.80) | $ | (0.03) | |||||||||||||||
| Shares used in computing net income (loss) per share: | |||||||||||||||||||||||
| Basic | 83,024,291 | 81,606,088 | 82,701,267 | 81,252,993 | |||||||||||||||||||
| Diluted | 83,024,291 | 81,606,088 | 82,701,267 | 81,252,993 | |||||||||||||||||||
(1)Amounts include stock-based compensation expense as follows:
| Three Months Ended April 30, | Nine Months Ended April 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| (unaudited, in thousands) | |||||||||||||||||||||||
| Stock-based compensation expense: | |||||||||||||||||||||||
| Cost of license and subscription revenue | $ | 1,694 | $ | 589 | $ | 4,674 | $ | 1,458 | |||||||||||||||
| Cost of maintenance revenue | 469 | 274 | 1,376 | 1,366 | |||||||||||||||||||
| Cost of services revenue | 4,862 | 5,721 | 15,663 | 17,899 | |||||||||||||||||||
| Research and development | 6,500 | 4,919 | 19,349 | 17,765 | |||||||||||||||||||
| Sales and marketing | 4,990 | 4,731 | 16,143 | 14,426 | |||||||||||||||||||
| General and administrative | 6,266 | 4,816 | 18,870 | 15,843 | |||||||||||||||||||
| Total stock-based compensation expense | $ | 24,781 | $ | 21,050 | $ | 76,075 | $ | 68,757 | |||||||||||||||
| GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||
| (unaudited, in thousands) | |||||||||||||||||||||||
| Three Months Ended April 30, | Nine Months Ended April 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||||||||
| Net income (loss) | $ | (31,038) | $ | (8,581) | $ | (65,973) | $ | (2,273) | |||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||||||||||||||
| Depreciation and amortization | 10,611 | 9,699 | 32,255 | 29,140 | |||||||||||||||||||
| Amortization of debt discount and issuance costs | 3,244 | 3,069 | 9,598 | 9,082 | |||||||||||||||||||
| Stock-based compensation | 24,781 | 21,050 | 76,075 | 68,757 | |||||||||||||||||||
| Charges to bad debt and revenue reserves | (688) | 127 | 190 | 479 | |||||||||||||||||||
| Deferred income tax | (6,685) | (5,074) | (11,046) | (11,836) | |||||||||||||||||||
| Accretion of discount on available-for-sale securities, net | (354) | (1,880) | (2,366) | (5,696) | |||||||||||||||||||
| Changes in fair value of strategic investment | 10,672 | — | 10,672 | — | |||||||||||||||||||
| Other non-cash items affecting net income (loss) | 129 | — | 701 | 575 | |||||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||||||
| Accounts receivable | 21,921 | 10,355 | 58,180 | 14,769 | |||||||||||||||||||
| Unbilled accounts receivable | (27,722) | (13,668) | (44,740) | (43,858) | |||||||||||||||||||
| Prepaid expenses and other assets | (1,010) | (4,947) | (4,537) | (5,832) | |||||||||||||||||||
| Operating lease assets | 2,618 | — | 7,111 | — | |||||||||||||||||||
| Accounts payable | (1,648) | 3,339 | (5,680) | (11,136) | |||||||||||||||||||
| Accrued employee compensation | 3,508 | 10,197 | (25,286) | (5,065) | |||||||||||||||||||
| Deferred revenue | (2,152) | (2,149) | (25,735) | (29,639) | |||||||||||||||||||
| Lease liabilities | (2,875) | — | (2,634) | — | |||||||||||||||||||
| Other liabilities | 1,259 | 4,674 | (878) | 5,785 | |||||||||||||||||||
| Net cash provided by (used in) operating activities | 4,571 | 26,211 | 5,907 | 13,252 | |||||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||||||||
| Purchases of available-for-sale securities | (247,909) | (315,109) | (849,312) | (778,011) | |||||||||||||||||||
| Sales and maturities of available-for-sale securities | 328,210 | 316,519 | 904,959 | 727,102 | |||||||||||||||||||
| Purchases of property and equipment | (7,712) | (17,740) | (18,966) | (28,746) | |||||||||||||||||||
| Capitalized software development costs | (1,063) | (1,139) | (3,273) | (2,302) | |||||||||||||||||||
| Net cash provided by (used in) investing activities | 71,526 | (17,469) | 33,408 | (81,957) | |||||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||||||||
| Proceeds from issuance of common stock upon exercise of stock options | 1,838 | 748 | 3,077 | 1,851 | |||||||||||||||||||
| Net cash provided by (used in) financing activities | 1,838 | 748 | 3,077 | 1,851 | |||||||||||||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (2,583) | (790) | (2,678) | (1,417) | |||||||||||||||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 75,352 | 8,700 | 39,714 | (68,271) | |||||||||||||||||||
| CASH AND CASH EQUIVALENTS—Beginning of period | 218,463 | 360,169 | 254,101 | 437,140 | |||||||||||||||||||
| CASH AND CASH EQUIVALENTS—End of period | $ | 293,815 | $ | 368,869 | $ | 293,815 | $ | 368,869 | |||||||||||||||
| GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||||||||||
| (unaudited, in thousands) | |||||||||||||||||||||||
| The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP financial measures for the periods indicated below: | |||||||||||||||||||||||
| Three Months Ended April 30, | Nine Months Ended April 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Gross profit reconciliation: | |||||||||||||||||||||||
| GAAP gross profit | $ | 82,413 | $ | 82,589 | $ | 248,429 | $ | 270,090 | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
Stock-based compensation | 7,025 | 6,584 | 21,713 | 20,723 | |||||||||||||||||||
Amortization of intangibles | 4,805 | 4,945 | 14,695 | 14,835 | |||||||||||||||||||
| Non-GAAP gross profit | $ | 94,243 | $ | 94,118 | $ | 284,837 | $ | 305,648 | |||||||||||||||
| Income (loss) from operations reconciliation: | |||||||||||||||||||||||
| GAAP income (loss) from operations | $ | (25,600) | $ | (15,767) | $ | (68,227) | $ | (19,611) | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
Stock-based compensation | 24,781 | 21,050 | 76,075 | 68,757 | |||||||||||||||||||
Amortization of intangibles | 6,602 | 7,278 | 20,511 | 21,896 | |||||||||||||||||||
| Non-GAAP income (loss) from operations | $ | 5,783 | $ | 12,561 | $ | 28,359 | $ | 71,042 | |||||||||||||||
| Net income (loss) reconciliation: | |||||||||||||||||||||||
| GAAP net income (loss) | $ | (31,038) | $ | (8,581) | $ | (65,973) | $ | (2,273) | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
Stock-based compensation | 24,781 | 21,050 | 76,075 | 68,757 | |||||||||||||||||||
Amortization of intangibles | 6,602 | 7,278 | 20,511 | 21,896 | |||||||||||||||||||
Amortization of debt discount and issuance costs | 3,244 | 3,070 | 9,598 | 9,083 | |||||||||||||||||||
Changes in fair value of strategic investment (1) | 10,672 | — | 10,672 | — | |||||||||||||||||||
Tax impact of non-GAAP adjustments (2) | (6,559) | (7,586) | (14,645) | (23,860) | |||||||||||||||||||
| Non-GAAP net income (loss) | $ | 7,702 | $ | 15,231 | $ | 36,238 | $ | 73,603 | |||||||||||||||
| Tax provision (benefit) reconciliation: | |||||||||||||||||||||||
| GAAP tax provision (benefit) | $ | (5,351) | $ | (4,382) | $ | (7,773) | $ | (9,002) | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
Stock-based compensation | 3,295 | 3,676 | 11,824 | 11,578 | |||||||||||||||||||
Amortization of intangibles | 878 | 1,271 | 3,197 | 3,694 | |||||||||||||||||||
Amortization of debt discount and issuance costs | 431 | 536 | 1,489 | 1,540 | |||||||||||||||||||
Changes in fair value of strategic investment (1) | 1,418 | — | 1,418 | — | |||||||||||||||||||
Tax impact of non-GAAP adjustments (2) | 537 | 2,103 | (3,283) | 7,048 | |||||||||||||||||||
| Non-GAAP tax provision (benefit) | $ | 1,208 | $ | 3,204 | $ | 6,872 | $ | 14,858 | |||||||||||||||
(1) Effective the third fiscal quarter of 2020, changes in fair value of strategic investments are excluded from the non-GAAP measures. Prior to the third fiscal quarter of 2020, there have been no changes in fair value of strategic investments in any periods presented.
(2) Adjustments reflect the tax benefit (provision) resulting from all non-GAAP adjustments.
| GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||||||||||
| (unaudited, in thousands except per share amounts) | |||||||||||||||||||||||
| The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP financial measures for the periods indicated below: | |||||||||||||||||||||||
| Three Months Ended April 30, | Nine Months Ended April 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Net income (loss) per share reconciliation: | |||||||||||||||||||||||
| GAAP net income (loss) per share — diluted | $ | (0.37) | $ | (0.11) | $ | (0.80) | $ | (0.03) | |||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
| Stock-based compensation | 0.30 | 0.26 | 0.92 | 0.84 | |||||||||||||||||||
| Amortization of intangibles | 0.08 | 0.09 | 0.25 | 0.27 | |||||||||||||||||||
| Amortization of debt discount and issuance costs | 0.04 | 0.04 | 0.12 | 0.12 | |||||||||||||||||||
Changes in fair value of strategic investment (1) | 0.13 | — | 0.13 | — | |||||||||||||||||||
Tax impact of non-GAAP adjustments (2) | (0.08) | (0.09) | (0.18) | (0.30) | |||||||||||||||||||
Non-GAAP dilutive shares excluded from GAAP net income (loss) per share calculation (3) | (0.01) | (0.01) | (0.02) | (0.01) | |||||||||||||||||||
| Non-GAAP net income (loss) per share — diluted | $ | 0.09 | $ | 0.18 | $ | 0.42 | $ | 0.89 | |||||||||||||||
| Shares used in computing Non-GAAP income (loss) per share amounts: | |||||||||||||||||||||||
| GAAP weighted average shares — diluted | 83,024,291 | 81,606,088 | 82,701,267 | 81,252,993 | |||||||||||||||||||
Non-GAAP dilutive shares excluded from GAAP income (loss) per share calculation (3) | 486,398 | 1,031,086 | 798,189 | 1,245,769 | |||||||||||||||||||
| Pro forma weighted average shares — diluted | 83,510,689 | 82,637,174 | 83,499,456 | 82,498,762 | |||||||||||||||||||
(1) Effective the third fiscal quarter of 2020, changes in fair value of strategic investments are excluded from the non-GAAP measures. Prior to the third fiscal quarter of 2020, there have been no changes in fair value of strategic investments in any periods presented.
(2) Adjustments reflect the impact on the tax benefit (provision) 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 net income (loss) per share, as they would have an anti-dilutive effect. However, these shares have a dilutive effect on non-GAAP net income (loss) per share and, therefore, are included in the non-GAAP net income (loss) per share calculation.
| Nine Months Ended April 30, | |||||||||||
| 2020 | 2019 | ||||||||||
| Free cash flow: | |||||||||||
| Net cash provided by (used in) operating activities | $ | 5,907 | $ | 13,252 | |||||||
| Purchases of property and equipment | (18,966) | (28,746) | |||||||||
| Capitalized software development costs | (3,273) | (2,302) | |||||||||
| Free cash flow | $ | (16,332) | $ | (17,796) | |||||||
| GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Outlook | ||||||||||||||||||||||||||
| The following tables reconcile the specific items excluded from GAAP outlook in the calculation of non-GAAP outlook for the periods indicated below: | ||||||||||||||||||||||||||
| (in $ millions) | Fourth Quarter Fiscal Year 2020 | Fiscal Year 2020 | ||||||||||||||||||||||||
| Income (loss) from operations outlook reconciliation: | ||||||||||||||||||||||||||
| GAAP income (loss) from operations | 4.2 | - | 12.2 | (64.8) | - | (56.8) | ||||||||||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||||||||
| Stock-based compensation | 24.0 | - | 26.0 | 99.6 | - | 101.6 | ||||||||||||||||||||
| Amortization of intangibles | 7.4 | - | 7.4 | 29.1 | - | 29.1 | ||||||||||||||||||||
| Non-GAAP income (loss) from operations | 36.7 | - | 44.7 | 65.0 | - | 73.0 | ||||||||||||||||||||
| Net income (loss) outlook reconciliation: | ||||||||||||||||||||||||||
| GAAP net income (loss) | (2.4) | - | (5.6) | (70.9) | - | (63.2) | ||||||||||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||||||||
| Stock-based compensation | 24.0 | - | 26.0 | 99.6 | - | 101.6 | ||||||||||||||||||||
| Amortization of intangibles | 7.4 | - | 7.4 | 29.1 | - | 29.1 | ||||||||||||||||||||
| Amortization of debt discount and issuance costs | 3.1 | - | 3.1 | 12.7 | - | 12.7 | ||||||||||||||||||||
| Change in fair value of strategic investment | — | - | — | 10.7 | - | 10.7 | ||||||||||||||||||||
| Tax impact of non-GAAP adjustments | 0.6 | - | 10.3 | (12.3) | - | (13.3) | ||||||||||||||||||||
| Non-GAAP net income (loss) | 33.8 | - | 40.3 | 70.0 | - | 76.7 | ||||||||||||||||||||