Earnings Release 8-K
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): November 27, 2012
_______________________________________________________________
Guidewire Software, Inc.
(Exact name of registrant as specified in its charter)
_______________________________________________________________
 
 
 
 
 
Delaware
 
001-35394
 
36-4468504
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)

1001 East Hillsdale Blvd., Suite 800
Foster City, CA 94404
(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))






Item 2.02     Results of Operations and Financial Condition.

On November 27, 2012, Guidewire Software, Inc. (the "Company") issued a press release announcing unaudited financial results for its first quarter ended October 31, 2012. 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 9.01    Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No.
 
Description of Exhibits
99.1
 
Press release dated November 27, 2012, titled "Guidewire Software Announces First Quarter Fiscal 2013 Financial Results"




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: November 27, 2012
GUIDEWIRE SOFTWARE, INC.
 
 
By:
/s/ Karen Blasing
 
Karen Blasing
 
Chief Financial Officer




EXHIBIT INDEX
Exhibit No.
 
Description of Exhibits
99.1

 
Press release dated November 27, 2012, titled "Guidewire Software Announces First Quarter Fiscal 2013 Financial Results"



EX 99.1 Q1 2013 Earnings Release


Exhibit 99.1

Guidewire Software Announces First Quarter Fiscal 2013 Financial Results

Foster City, CA - November 27, 2012 - Guidewire Software, Inc. (NYSE: GWRE), a provider of core system software to property and casualty insurers, today announced its financial results for the fiscal quarter ended October 31, 2012.

“We are reporting revenue and profitability that exceeded our guidance for the first quarter of fiscal year 2013,” said Marcus Ryu, Chief Executive Officer of Guidewire Software. “Term license revenue increased by 67%, contributing to 31% growth in our rolling four-quarter recurring revenue metric. Underlying this strong financial performance is our further penetration into the Tier 1 segment of the market, continued international traction, and multiple go-lives that expand our track record of successful customer deployments. We are pleased with the fact that we continue to see positive returns on the investments we are making in engineering, sales and services.”

Ryu added, “We hosted our largest-ever user conference in the first quarter, during which we launched Guidewire Live, a network over which we are delivering hosted, data-driven apps that work in concert with our InsuranceSuite. We believe that Guidewire Live further expands our technology leadership position and contributes to our growth opportunity as we focus on serving the demand from P&C insurers seeking to replace their legacy core systems with flexible and upgradeable software products.”

First Quarter Fiscal 2013 Financial Highlights

Revenue
Total revenue for the first quarter of fiscal 2013 was $63.3 million, an increase of 21% from the comparable period in fiscal 2012.
License revenue for the first quarter of fiscal 2013 was $20.8 million, consistent with the comparable period in fiscal 2012. Reflecting the company's focus on recurring revenue, term license revenue was $20.6 million, a 67% increase from a year ago and revenue from perpetual licenses was $0.2 million compared with $8.5 million a year ago. Maintenance revenue was $9.4 million, up 32% from the comparable period in fiscal 2012, and services revenue was $33.1 million, up 35% from the comparable period in fiscal 2012.
Rolling four-quarter recurring term license and maintenance revenue was $114.9 million, an increase of 31% from the comparable period in fiscal 2012.

Profitability
GAAP operating loss was $0.1 million for the first quarter of fiscal 2013, compared to operating income of $8.1 million in the comparable period in fiscal 2012.
Non-GAAP operating income was $9.7 million for the first quarter of fiscal 2013, compared to $11.4 million in the comparable period in fiscal 2012.
Adjusted EBITDA was $10.8 million for the first quarter of fiscal 2013, compared to $12.1 million in the comparable period in fiscal 2012.
GAAP net income was $0.4 million for the first quarter of fiscal 2013, compared to $4.8 million for the comparable period in fiscal 2012. GAAP net income per share was $0.01, based on diluted weighted average shares outstanding of 61.2 million, compared to a GAAP net income per share of $0.09 for the comparable period in fiscal 2012, based on diluted weighted average shares outstanding of 21.2 million.
Non-GAAP net income was $6.7 million for the first quarter of fiscal 2013, compared to $7.0 million in the comparable period in fiscal 2012. Non-GAAP net income per diluted share was $0.11, based on diluted weighted average shares outstanding of 61.2 million, compared to $0.15 for the first quarter of fiscal 2012, based on pro forma diluted weighted average shares outstanding of 46.5 million.
The year-over-year decline in profitability metrics during the first quarter of 2012 was due primarily to greater investment across the business and increased stock-based compensation expense.

Balance Sheet
The Company had $185.5 million in cash and cash equivalents at October 31, 2012, a decrease from $205.7 million at July 31, 2012. The Company used $16.3 million in cash flow for operations in the first quarter, an improvement from $27.1 million used in cash flow for operations in the comparable period in fiscal 2012. The company used $10.0 million in cash during the first quarter of fiscal 2012 to pay for a litigation settlement.






Conference Call Information
What:
Guidewire Software first quarter fiscal 2013 financial results conference call
When:        Tuesday, November 27, 2012
Time:        2:00 p.m. PT (5:00 p.m. ET)
Live Call:    (888) 329-8903, domestic
(719) 457-2621, international
Replay:        (877) 870-5176, passcode 7694345, domestic
(858) 384-5517, passcode 7694345, 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 judgment 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 (general) 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 Foster City, 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 market positioning, future adoption of our products 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 Form 10-K 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.

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

Investor Contact:
Garo Toomajanian
ICR
(650) 357-5282
ir@guidewire.com






GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 
 
 
 
 
October 31,
2012
 
July 31,
2012
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
185,472

 
$
205,718

Restricted cash, current portion
2,121

 
3,726

Accounts receivable
38,132

 
32,313

Deferred tax asset, current portion
14,359

 
13,442

Prepaid expenses and other current assets
6,275

 
7,266

Total current assets
246,359

 
262,465

Property and equipment, net
11,535

 
11,924

Deferred tax asset, net of current portion
9,313

 
9,313

Other assets
534

 
545

TOTAL ASSETS
$
267,741

 
$
284,247

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable
$
6,517

 
$
9,781

Accrued employee compensation
14,695

 
26,502

Deferred revenues, current portion
41,549

 
52,947

Other current liabilities
3,942

 
3,957

Total current liabilities
66,703

 
93,187

Deferred revenues, net of current portion
2,057

 
2,569

Other liabilities
5,362

 
4,529

Total liabilities
74,122

 
100,285

STOCKHOLDERS’ EQUITY:
 
 
 
Common stock
5

 
5

Additional paid-in capital
216,850

 
207,624

Accumulated other comprehensive loss
(512
)
 
(496
)
Accumulated deficit
(22,724
)
 
(23,171
)
Total stockholders’ equity
193,619

 
183,962

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
267,741

 
$
284,247







GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands)
 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
Revenues :
 
 
 
License
$
20,812

 
$
20,815

Maintenance
9,370

 
7,106

Services
33,119

 
24,459

Total revenues
63,301

 
52,380

Cost of revenues:
 
 
 
License
167

 
299

Maintenance
1,564

 
1,266

Services
25,826

 
17,925

Total cost of revenues (1)
27,557

 
19,490

Gross profit :
 
 
 
License
20,645

 
20,516

Maintenance
7,806

 
5,840

Services
7,293

 
6,534

Total gross profit
35,744

 
32,890

Operating expenses:
 
 
 
Research and development
14,764

 
10,959

Sales and marketing
12,376

 
7,361

General and administrative
8,666

 
6,438

Total operating expenses (1)
35,806

 
24,758

Income (loss) from operations
(62
)
 
8,132

Interest income, net
90

 
40

Other income (expense), net
141

 
(316
)
Income before provision for (benefit from) income taxes
169

 
7,856

Provision for (benefit from) income taxes
(278
)
 
3,044

Net income
$
447

 
$
4,812

Net income per share:
 
 
 
Basic
$
0.01

 
$
0.10

Diluted
$
0.01

 
$
0.09

Shares used in computing net income per share:
 
 
 
Basic
54,814,044

 
14,554,428

Diluted
61,185,270

 
21,153,440


(1) Amounts include stock-based compensation expense as follows:
 
Three Months Ended October 31,
 
2012
 
2011
 Stock-based compensation expenses:
(in thousands)
Cost of maintenance revenues
$
261

 
$
72

 Cost of services revenues
$
2,616

 
$
686

 Research and development
2,042

 
845

 Marketing and sales
1,651

 
497

 General and administrative
3,214

 
1,212

 Total stock-based compensation expenses
$
9,784

 
$
3,312






GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
447

 
$
4,812

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation and amortization
1,100

 
679

Stock-based compensation
9,784

 
3,312

Excess tax benefit from exercise of stock options and vesting of RSUs
(114
)
 

Deferred tax assets
(917
)
 
2,819

Changes in operating assets and liabilities:
 
 

Accounts receivable
(5,847
)
 
(7,749
)
Prepaid expenses and other assets
1,016

 
1,543

Accounts payable
827

 
644

Accrued employee compensation
(11,604
)
 
(9,000
)
Other liabilities
929

 
(10,366
)
Deferred revenues
(11,900
)
 
(13,779
)
Net cash used in operating activities
(16,279
)
 
(27,085
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchase of property and equipment
(4,810
)
 
(490
)
Decrease in restricted cash
1,605

 

Net cash used in investing activities
(3,205
)
 
(490
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from issuance of common stock upon exercise of stock options
3,163

 
402

Taxes remitted on RSU awards vested
(4,164
)
 

Costs paid in connection with public offerings

 
(973
)
Excess tax benefit from exercise of stock options and vesting of RSUs
114

 

Net cash used in financing activities
(887
)
 
(571
)
Effect of foreign exchange rate changes on cash and cash equivalents
125

 
(308
)
NET DECREASE IN CASH AND CASH EQUIVALENTS
(20,246
)
 
(28,454
)
CASH AND CASH EQUIVALENTS—Beginning of period
205,718

 
59,625

CASH AND CASH EQUIVALENTS—End of period
$
185,472

 
$
31,171







GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
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 October 31,
 
2012
 
2011
Gross profit reconciliation:
 
 
 
GAAP gross profit
$
35,744

 
$
32,890

Stock-based compensation
2,877

 
758

Non-GAAP gross profit
$
38,621

 
$
33,648

 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
Gross margin reconciliation - maintenance:
 
 
 
GAAP gross margin - maintenance
83.3
%
 
82.2
%
Stock-based compensation - maintenance
2.8
%
 
1.0
%
Non-GAAP gross margin - maintenance
86.1
%
 
83.2
%
 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
Gross margin reconciliation - services:
 
 
 
GAAP gross margin - services
22.0
%
 
26.7
%
Stock-based compensation - services
7.9
%
 
2.8
%
Non-GAAP gross margin - services
29.9
%
 
29.5
%
 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
Gross margin reconciliation - total:
 
 
 
GAAP gross margin
56.5
%
 
62.8
%
Stock-based compensation
4.5
%
 
1.4
%
Non-GAAP gross margin
61.0
%
 
64.2
%
 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
Operating expense reconciliation:
 
 
 
Total GAAP operating expenses
35,806

 
24,758

Less Stock-based compensation
6,907

 
2,554

Total non-GAAP operating expenses
$
28,899

 
$
22,204

 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
Operating income (loss) reconciliation:
 
 
 
GAAP operating income (loss)
$
(62
)
 
$
8,132

Stock-based compensation
9,784

 
3,312

Non-GAAP operating income
$
9,722

 
$
11,444

 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
Pre-tax income reconciliation:
 
 
 
GAAP pre-tax income
$
169

 
$
7,856

Stock-based compensation
9,784

 
3,312

Non-GAAP pre-tax income
$
9,953

 
$
11,168

 
 
 
 





 
Three Months Ended October 31,
 
2012
 
2011
Net income reconciliation:
 
 
 
GAAP net income
$
447

 
$
4,812

Stock-based compensation
9,784

 
3,312

Less tax benefit of non-GAAP items
(3,532
)
 
(1,159
)
Non-GAAP net income
$
6,699

 
$
6,965

 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
Computation of net income per share:
 
 
 
GAAP net income
$
447

 
$
4,812

Non-cumulative dividends to preferred stockholders

 
(823
)
Undistributed earnings allocated to preferred stockholders

 
(2,534
)
Net income, Basic
447

 
1,455

Adjustments to net income for dilutive options and restricted stock units

 
358

Net income, Diluted
$
447

 
$
1,813

 
 
 
 
GAAP net income per share - Basic
$
0.01

 
$
0.10

GAAP net income per share - Diluted
$
0.01

 
$
0.09

 
 
 
 
Weighted average shares - Basic
54,814,044

 
14,554,428

Weighted average shares - Diluted
61,185,270

 
21,153,440

 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
Net income per share reconciliation:
 
 
 
GAAP net income per share - Diluted
$
0.01

 
$
0.09

Stock-based compensation
0.16

 
0.16

Less tax benefit of non GAAP items
(0.06
)
 
(0.05
)
Pro forma conversion of preferred shares

 
(0.05
)
Non-GAAP net income per share - Diluted
$
0.11

 
$
0.15

 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
Shares used in computing non-GAAP per share amounts:
 
 
 
Weighted average shares - Diluted
61,185,270

 
21,153,440

Pro forma conversion of preferred shares

 
25,357,721

Pro forma weighted average shares - Diluted
61,185,270

 
46,511,161

 
 
 
 
 
Three Months Ended October 31,
 
2012
 
2011
Adjusted EBITDA reconciliation:
 
 
 
GAAP net income
$
447

 
$
4,812

Non-GAAP adjustments:
 
 
 
Provision for (benefit from) income taxes
(278
)
 
3,044

Other (income) expense, net
(141
)
 
316

Interest (income) expense, net
(90
)
 
(40
)
Depreciation and amortization
1,100

 
679

Stock-based compensation
9,784

 
3,312

Adjusted EBITDA
$
10,822

 
$
12,123