Guidewire Software Announces Fourth Quarter and Fiscal 2013 Financial Results

Guidewire Software Announces Fourth Quarter and Fiscal 2013 Financial Results

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

"Revenue and profitability exceeded our expectations in the fourth quarter, contributing to full year revenue growth of 30% and trailing twelve month recurring revenue growth of 44%," said Marcus Ryu, Chief Executive Officer of Guidewire Software. "Investments in sales, delivery and new products helped us to advance our market leadership position in fiscal 2013 by expanding our customer base, including several key Tier 1 wins and our 50th PolicyCenter customer. We also achieved more multi-product and Suite transactions than last year and achieved the milestone of bringing our 100th customer into live production."


Ryu added, "We believe it is still early days in the global P/C insurance industry's generational transition from decades-old legacy systems to flexible, upgradeable platforms for their core operations. We plan to continue to invest in expanding both our product and sale capabilities in fiscal 2014 to capitalize on this significant opportunity."

Fourth Quarter Fiscal 2013 Financial Highlights

Revenue

  • Total revenue for the fourth quarter of fiscal 2013 was $96.9 million, an increase of 43% from the comparable period in fiscal 2012.
  • Total license revenue, including term and perpetual licenses, for the fourth quarter of fiscal 2013 was $49.1 million, an increase of 70% from the comparable period in fiscal 2012. Recurring term license revenue was $44.9 million, a 64% increase from a year ago and revenue from perpetual licenses was $4.2 million compared with $1.6 million a year ago. Maintenance revenue was $9.9 million, up 26% from the comparable period in fiscal 2012, and services revenue was $38.0 million, up 23% from the comparable period in fiscal 2012.
  • Rolling four-quarter recurring term license and maintenance revenue was $150.4 million, an increase of 44% from the comparable period in fiscal 2012.

Profitability

  • GAAP operating income was $16.2 million for the fourth quarter of fiscal 2013, compared to $5.3 million in the comparable period in fiscal 2012.
  • Non-GAAP operating income was $26.5 million for the fourth quarter of fiscal 2013, compared to $9.6 million in the comparable period in fiscal 2012.
  • Adjusted EBITDA was $27.8 million for the fourth quarter of fiscal 2013, compared to $10.4 million in the comparable period in fiscal 2012.
  • GAAP net income was $12.1 million for the fourth quarter of fiscal 2013, compared to $3.5 million for the comparable period in fiscal 2012. GAAP earnings per share was $0.19, based on diluted weighted average shares outstanding of 62.5 million, compared to $0.06 for the comparable period in fiscal 2012, based on diluted weighted average shares outstanding of 61.2 million.
  • Non-GAAP net income was $15.6 million for the fourth quarter of fiscal 2013, compared to $6.4 million in the comparable period in fiscal 2012. Non-GAAP net income per diluted share was $0.25, based on diluted weighted average shares outstanding of 62.5 million, compared to $0.10 for the fourth quarter of fiscal 2012, based on diluted weighted average shares outstanding of 61.2 million.

Fiscal 2013 Financial Highlights

Revenue

  • Total revenue for the fiscal year ended July 31, 2013 was $300.6 million, an increase of 30% from fiscal 2012.
  • License revenue for fiscal 2013 was $123.6 million, an increase of 27% from fiscal 2012. Recurring term license revenue was $112.9 million, a 51% increase from a year ago and revenue from perpetual licenses was $10.7 million compared with $22.3 million a year ago. Maintenance revenue was $37.6 million, an increase of 27% from the year ago period, and services revenue was $139.5 million, an increase of 32% from the year ago period.
  • In fiscal 2013, 57% of total revenue was in the United States, and 43% was generated outside the United States.

Profitability

  • GAAP operating income was $16.8 million for fiscal 2013, compared to $23.6 million in fiscal 2012.
  • Non-GAAP operating income was $55.6 million for fiscal 2013, an increase of 33% from fiscal 2012.
  • Adjusted EBITDA was $60.1 million for fiscal 2013, an increase of 34% from fiscal 2012.
  • GAAP net income was $15.4 million for fiscal 2013, compared to $15.2 million for fiscal 2012. GAAP earnings per diluted share was $0.25, based on diluted weighted average shares outstanding of 61.9 million, compared to $0.25 in fiscal 2012, based on diluted weighted average shares outstanding of 41.5 million.
  • Non-GAAP net income was $38.5 million in fiscal 2013, an increase of 42% from fiscal 2012. Non-GAAP earnings per diluted share was $0.62, based on diluted weighted average shares outstanding of 61.9 million, compared to $0.50 in fiscal 2012, based on pro forma diluted weighted average shares outstanding of 53.8 million.

Balance Sheet

  • The Company had $207.7 million in cash, cash equivalents and investments at July 31, 2013, compared to $203.6 million at April 30, 2013. The Company generated $24.4 million in cash flow from operations in the fourth quarter, compared to $19.1 million in the comparable period in fiscal 2012. The Company generated $32.5 million in cash flow from operations in fiscal 2013, compared to $17.1 million in the comparable period in fiscal 2012.

Conference Call Information

What:   Guidewire Software fourth quarter fiscal 2013 financial results conference call
When:Tuesday, September 3, 2013
Time:2:00 p.m. PT (5:00 p.m. ET)
Live Call:(877) 852-6575, domestic
(719) 325-4816, international
Replay:(877) 870-5176, passcode 3709788, domestic
(858) 384-5517, passcode 3709788, 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 earnings 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. 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 software products for Property/Casualty insurers. Designed to be flexible and scalable, Guidewire products enable insurers to deliver excellent service, increase market share and lower operating costs. Guidewire products include Guidewire InsuranceSuite™, consisting of Guidewire PolicyCenter®, Guidewire ClaimCenter® and Guidewire BillingCenter® which span the core functional areas in insurance; Guidewire LiveSM, a cloud-based network connecting peer insurers, core system data and expert tools through instant on apps; Guidewire DataHub™ and Guidewire InfoCenter™ which help insurers address their data management and business intelligence challenges. 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, Guidewire DataHub, Guidewire InfoCenter, Guidewire Live, Live Inside, Before & After, Claim Canvas, ViewPoint, Guidewire PartnerConnect, Guidewire SolutionConnect, Deliver Insurance Your Way, and the Guidewire logo are trademarks, service marks, or registered trademarks of Guidewire Software, Inc. in the United States and/or other countries.

Cautionary Language Concerning Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our 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 Forms 10-K and 10-Q filed with the Securities and Exchange Commission as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission. In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: the market for our software may develop more slowly than expected or than it has in the past; quarterly and annual operating results may fluctuate more than expected; seasonal and other variations related to our revenue recognition may cause significant fluctuations in our results of operations and cash flows; our reliance on sales to and renewals from a relatively small number of large customers for a substantial portion of our revenues; our services revenues produce lower gross margins than our license and maintenance revenues; assertions by third parties that we violate their intellectual property rights could substantially harm our business; we face intense competition in our market; weakened global economic conditions may adversely affect the P&C insurance industry including the rate of information technology spending; our product development and sales cycles are lengthy; the risk of losing key employees; changes in foreign exchange rates; general political or destabilizing events, including war, conflict or acts of terrorism; and other risks and uncertainties. Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent Guidewire's views as of the date of this press release. The Company anticipates that subsequent events and developments will cause its views to change. Guidewire undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing Guidewire's views as of any date subsequent to the date of this press release.

 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
       
July 31,
2013
July 31,
2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$79,767$205,718
Short-term investments76,932
Restricted cash, current1673,726
Accounts receivable40,88532,313
Deferred tax assets, current2,89713,442
Prepaid expenses and other current assets9,445 7,266 
Total current assets210,093262,465
Long-term investments51,040
Property and equipment, net12,91411,924
Intangible assets, net6,879
Deferred tax assets, noncurrent21,0919,313
Goodwill9,048
Other assets1,205 545 
TOTAL ASSETS$312,270 $284,247 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable$6,517$9,781
Accrued employee compensation26,30226,502
Deferred revenues, current37,35152,947
Other current liabilities4,614 3,957 
Total current liabilities74,78493,187
Deferred revenues, noncurrent3,8452,569
Other liabilities5,212 4,529 
Total liabilities83,841100,285
STOCKHOLDERS' EQUITY:
Common stock65
Additional paid-in capital237,769207,624
Accumulated other comprehensive loss(1,558)(496)
Accumulated deficit(7,788)(23,171)
Total stockholders' equity228,429 183,962 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$312,270 $284,247 
 
 
GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in thousands except share and per share data)
              
Three Months Ended July 31,   Year Ended July 31,
2013  20122013  2012
Revenues:
License$49,078$28,930$123,560$97,136
Maintenance9,8717,85837,56129,538
Services37,961 30,801 139,528 105,387 
Total revenues96,910 67,589 300,649 232,061 
Cost of revenues: (1)
License48479920762
Maintenance2,1831,5157,6135,288
Services34,139 25,612 123,210 85,360 
Total cost of revenues36,806 27,206 131,743 91,410 
Gross profit:
License48,59428,851122,64096,374
Maintenance7,6886,34329,94824,250
Services3,822 5,189 16,318 20,027 
Total gross profit60,104 40,383 168,906 140,651 
Operating expenses: (1)
Research and development18,84314,35566,34650,462
Sales and marketing16,62113,28653,30138,254
General and administrative8,452 7,474 32,414 28,336 
Total operating expenses43,916 35,115 152,061 117,052 
Income from operations16,1885,26816,84523,599
Interest income, net13988498308
Other expense, net(27)(257)(131)(728)
Income before provision for income taxes16,3005,09917,21223,179
Provision for income taxes4,195 1,551 1,829 7,979 
Net income$12,105 $3,548 $15,383 $15,200 
Earnings per share:
Basic$0.21 $0.07 $0.27 $0.29 
Diluted$0.19 $0.06 $0.25 $0.25 
Shares used in computing earnings per share:
Basic57,646,262 53,965,083 56,331,018 34,774,983 
Diluted62,492,753 61,172,597 61,943,087 41,509,185 
 

(1) Amounts include stock-based compensation expense as follows:

      
Three Months Ended July 31,   Year Ended July 31,
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