Guidewire Software Announces Second Quarter Fiscal 2013 Financial Results

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 portion

206

3,726

Short-term investments

64,384

-

Accounts receivable

41,779

32,313

Deferred tax asset, current portion

15,430

13,442

Prepaid expenses and other current assets

6,598

7,266

Total current assets

229,862

262,465

Long-term investments

37,394

-

Property and equipment, net

11,608

11,924

Deferred tax asset, net of current portion

9,313

9,313

Other assets

511

545

Total assets

$

288,688

$

284,247

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

6,384

$

9,781

Accrued employee compensation

18,808

26,502

Deferred revenues, current portion

43,043

52,947

Other current liabilities

5,848

3,957

Total current liabilities

74,083

93,187

Deferred revenues, net of current portion

2,014

2,569

Other liabilities

5,555

4,529

Total liabilities

81,652

100,285

Stockholders' Equity

Common stock

6

5

Additional paid-in capital

224,730

207,624

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

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

Maintenance

9,210

6,805

18,580

13,911

Services

32,226

22,563

65,345

47,022

Total revenues

72,188

55,097

135,489

107,477

Cost of revenues: (1)

License

130

234

297

533

Maintenance

1,787

1,197

3,351

2,463

Services

29,471

19,310

55,297

37,235

Total cost of revenues

31,388

20,741

58,945

40,231

Gross profit :

License

30,622

25,495

51,267

46,011

Maintenance

7,423

5,608

15,229

11,448

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 development

15,885

12,162

30,649

23,121

Sales and marketing

12,389

9,198

24,765

16,559

General and administrative

7,445

7,639

16,111

14,077

Total operating expenses

35,719

28,999

71,525

53,757

Income from operations

5,081

5,357

5,019

13,489

Interest income, net

132

73

222

113

Other income (expense), net

23

(319

)

164

(635

)

Income before provision for (benefit from) income taxes

5,236

5,111

5,405

12,967

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,