Guidewire Software Announces Second Quarter Fiscal 2013 Financial Results

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Guidewire Software Announces Second Quarter Fiscal 2013 Financial Results

FOSTER CITY, Calif.--(BUSINESS WIRE)-- Guidewire Software, Inc. (NYS: GWRE) , a provider of core system software to property and casualty insurers, today announced its financial results for the fiscal quarter ended January 31, 2013.

"Solid broad based bookings in the first half of the year led to revenue in the second quarter that was above the high end of our guidance range, and this outperformance was further accentuated by several customers who made payments earlier than their third quarter due dates," said Marcus Ryu, Chief Executive Officer of Guidewire Software. "Moreover, with strong customer adoption, including key up-sells of existing customers, several major go-lives, and continued investments in our sales and services organizations, we also continued to make steady progress in our ambition to make PolicyCenter and our full InsuranceSuite the pre-eminent offerings in the market."


Second Quarter Fiscal 2013 Financial Highlights

Revenue

  • Total revenue for the second quarter of fiscal 2013 was $72.2 million, an increase of 31% from the comparable period in fiscal 2012.
  • Total license revenue, including term and perpetual licenses, for the second quarter of fiscal 2013 was $30.8 million, an increase of 20% from the comparable period in fiscal 2012. Recurring term license revenue was $29.5 million, a 49% increase from a year ago and revenue from perpetual licenses was $1.3 million compared with $5.9 million a year ago. Maintenance revenue was $9.2 million, up 35% from the comparable period in fiscal 2012, and services revenue was $32.2 million, up 43% from the comparable period in fiscal 2012.
  • Rolling four-quarter recurring term license and maintenance revenue was $127.0 million, an increase of 32% from the comparable period in fiscal 2012.

Profitability

  • GAAP operating income was $5.1 million for the second quarter of fiscal 2013, compared to operating income of $5.4 million in the comparable period in fiscal 2012.
  • Non-GAAP operating income was $15.5 million for the second quarter of fiscal 2013, compared to $11.6 million in the comparable period in fiscal 2012.
  • Adjusted EBITDA was $16.4 million for the second quarter of fiscal 2013, compared to $12.3 million in the comparable period in fiscal 2012.
  • GAAP net income was $5.5 million for the second quarter of fiscal 2013, compared to $3.7 million for the comparable period in fiscal 2012. GAAP net income per share was $0.09, based on diluted weighted average shares outstanding of 61.7 million, compared to a GAAP net income per share of $0.06 for the comparable period in fiscal 2012, based on diluted weighted average shares outstanding of 25.6 million.
  • Non-GAAP net income was $12.9 million for the second quarter of fiscal 2013, compared to $7.8 million in the comparable period in fiscal 2012. Non-GAAP net income per diluted share was $0.21, based on diluted weighted average shares outstanding of 61.7 million, compared to $0.16 for the second quarter of fiscal 2012, based on pro forma diluted weighted average shares outstanding of 48.8 million.

Balance Sheet

  • The Company had $203.2 million in cash, cash equivalents and investments at January 31, 2013, compared to $185.5 million at October 31, 2012. During the second quarter, the company purchased a net $101.8 million in short-term and long-term investments. Cash flow from operations provided $19.4 million in the second quarter, an increase from $14.8 million provided by cash flow from operations in the comparable period in fiscal 2012.

Conference Call Information

What:  Guidewire Software second quarter fiscal 2013 financial results conference call
When:Tuesday, February 26, 2013
Time:2:00 p.m. PT (5:00 p.m. ET)
Live Call:(888) 617-5714, domestic
(719) 325-2320, international
Replay:(877) 870-5176, passcode 7384740, domestic
(858) 384-5517, passcode 7384740, 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, Toronto and Warsaw. 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.

    
GUIDEWIRE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)

 
January 31,
2013
July 31,
2012
 
Assets
Current assets:
Cash and cash equivalents$101,465$205,718
Restricted cash, current portion2063,726
Short-term investments64,384-
Accounts receivable41,77932,313
Deferred tax asset, current portion15,43013,442
Prepaid expenses and other current assets 6,598  7,266 
Total current assets229,862262,465
 
Long-term investments37,394-
Property and equipment, net11,60811,924
Deferred tax asset, net of current portion9,3139,313
Other assets 511  545 
Total assets$288,688 $284,247 
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$6,384$9,781
Accrued employee compensation18,80826,502
Deferred revenues, current portion43,04352,947
Other current liabilities 5,848  3,957 
Total current liabilities74,08393,187
Deferred revenues, net of current portion2,0142,569
Other liabilities 5,555  4,529 
Total liabilities81,652100,285
 
Stockholders' Equity
Common stock65
Additional paid-in capital224,730207,624
Accumulated other comprehensive loss(477)(496)
Accumulated deficit (17,223) (23,171)
Total stockholders' equity 207,036  183,962 
Total liabilities and stockholders' equity$288,688 $284,247 
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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,
 2013  2012  2013  2012 
Revenues :
License$30,752$25,729$51,564$46,544
Maintenance9,2106,80518,58013,911
Services 32,226  22,563  65,345  47,022 
Total revenues 72,188  55,097  135,489  107,477 
 
Cost of revenues: (1)
License130234297533
Maintenance1,7871,1973,3512,463
Services 29,471  19,310  55,297  37,235 
Total cost of revenues 31,388  20,741  58,945  40,231 
 
Gross profit :
License30,62225,49551,26746,011
Maintenance7,4235,60815,22911,448
Services 2,755  3,253  10,048  9,787 
Total gross profit 40,800  34,356  76,544  67,246 
 
Operating expenses: (1)
Research and development15,88512,16230,64923,121
Sales and marketing12,3899,19824,76516,559
General and administrative 7,445  7,639  16,111  14,077 
Total operating expenses 35,719  28,999  71,525  53,757 
Income from operations5,0815,3575,01913,489
Interest income, net13273222113
Other income (expense), net 23  (319) 164  (635)
Income before provision for (benefit from) income taxes5,2365,1115,40512,967
Provision for (benefit from) Income taxes (265) 1,420  (543) 4,464 
Net income$5,501 $3,691 $5,948 $8,503 
 
 
Net income per share:
Basic$0.10 $0.07 $0.11 $0.17 
Diluted$0.09 $0.06 $0.10 $0.15 
 
Shares used in computing net income per share:
Basic 55,868,308  18,433,369  55,341,176  16,499,660 
Diluted 61,706,457  25,610,201  61,452,245  23,387,583 
 
(1) Amounts include stock-based compensation expense, as follows:

Three Months Ended January 31,

Six Months Ended January 31,