EX-99.1 2 gwreex991earningsrelease10.htm EX-99.1 Document

Exhibit 99.1

Guidewire Announces First Quarter Fiscal Year 2023 Financial Results

SAN MATEO, Calif., December 6, 2022 - Guidewire (NYSE: GWRE) today announced its financial results for the fiscal quarter ended October 31, 2022.

“We are off to a solid start to the fiscal year with first quarter ARR, revenue, and profitability all exceeding our guidance range, driven by subscription revenue growth and improved subscription and support gross margins,” said Mike Rosenbaum, Chief Executive Officer, Guidewire. “We continued to build on the momentum and enthusiasm for our cloud platform with record in-person attendance at our annual customer conference, Connections.”

First Quarter Fiscal Year 2023 Financial Highlights

Revenue
•Total revenue for the first quarter of fiscal year 2023 was $195.3 million, an increase of 18% from the same quarter in fiscal year 2022. Subscription and support revenue was $99.1 million, an increase of 25%; services revenue was $55.3 million, an increase of 18%; and license revenue was $41.0 million, a decrease of 2%.
•As of October 31, 2022, annual recurring revenue, or ARR, was $673 million, compared to $664 million as of July 31, 2022. ARR results for interim quarterly periods in fiscal year 2023 are based on actual currency rates at the end of fiscal year 2022, held constant throughout the year.
Profitability
•GAAP loss from operations was $74.6 million for the first quarter of fiscal year 2023, compared with $65.4 million for the same quarter in fiscal year 2022.
•Non-GAAP loss from operations was $35.9 million for the first quarter of fiscal year 2023, compared with $28.7 million for the same quarter in fiscal year 2022.
•GAAP net loss was $69.3 million for the first quarter of fiscal year 2023, compared with $51.3 million for the same quarter in fiscal year 2022. GAAP net loss per share was $0.83, based on diluted weighted average shares outstanding of 83.3 million, compared with $0.62 for the same quarter in fiscal year 2022, based on diluted weighted average shares outstanding of 83.2 million.
•Non-GAAP net loss was $9.9 million for the first quarter of fiscal year 2023, compared with $18.1 million for the same quarter in fiscal year 2022. Non-GAAP net loss per share was $0.12, based on diluted weighted average shares outstanding of 83.3 million, compared to Non-GAAP net loss per share of $0.21 for the same quarter in fiscal year 2022, based on diluted weighted average shares outstanding of 83.2 million.

Liquidity and Capital Resources
•The Company had $0.9 billion in cash, cash equivalents, and investments at October 31, 2022, compared to $1.2 billion at July 31, 2022. The Company used $87.4 million in cash from operations during the first quarter of fiscal year 2023.
•During the first quarter of fiscal year 2023, the Company authorized a $400 million share repurchase program. As part of this program, the Company entered into an accelerated share repurchase agreement (“ASR”) to repurchase an aggregate of $200 million of Guidewire’s outstanding shares of common stock. Under the terms of the ASR, the Company received an aggregate initial share delivery of 2,581,478 shares, with the remainder expected to be delivered upon the final settlement under the ASR, which is scheduled to occur no later than the third quarter of its fiscal year 2023, upon completion of the repurchases.


Business Outlook
Guidewire is issuing the following outlook for the second quarter of fiscal year 2023 based on current expectations:
•ARR between $695 million and $700 million
•Total revenue between $221 million and $226 million
•Operating income (loss) between $(41) million and $(37) million
•Non-GAAP operating income (loss) between $(4) million and $0 million

Guidewire is issuing the following updated outlook for fiscal year 2023 based on current expectations:
•ARR between $745 million and $760 million
•Total revenue between $886 million and $896 million
•Operating income (loss) between $(176) million and $(166) million
•Non-GAAP operating income (loss) between $(28) million and $(18) million
•Operating cash flow between $50 million and $80 million

Conference Call Information
What:
Guidewire First Quarter Fiscal Year 2023 Financial Results Conference Call
When:
Tuesday, December 6, 2022
Time:2:00 p.m. PT (5:00 p.m. ET)
Live Call:(877) 704-4453, Domestic
Live Call:(201) 389-0920, International
Replay:(844) 512-2921, Passcode 13734587, Domestic
Replay(412) 317-6671, Passcode 13734587, 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 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, amortization of intangibles, the COVID-19 Canada Emergency Wage Subsidy benefit, and acquisition consideration holdback. Non-GAAP net income (loss), non-GAAP 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 amortization, stock-based compensation, and changes in fair value of strategic investments.
Annual recurring revenue ("ARR") is used to quantify the annualized recurring value outlined in active customer contracts at the end of a reporting period. ARR includes the annualized recurring value of term licenses, subscription agreements, support 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 other arrangements that are not expected to recur (primarily perpetual licenses and professional services) are excluded. In some arrangements with multiple performance obligations, a portion of recurring license and support or subscription contract value is allocated to services revenue for revenue recognition purposes, but does not get allocated for purposes of calculating ARR. This allocation only impacts the initial term of the contract. This means that as we increase arrangements with multiple performance obligations that include services at discounted rates, more of the total contract value will be recognized as


services revenue, but our reported ARR amount will not be impacted. During the fiscal quarter ended October 31, 2022, the recurring license and support or subscription contract value recognized as services revenue was $10.9 million.
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
Guidewire is the platform P&C insurers trust to engage, innovate, and grow efficiently. We combine digital, core, analytics, and AI to deliver our platform as a cloud service. Approximately 520 insurers in 38 countries, from new ventures to the largest and most complex in the world, run on Guidewire.

As a partner to our customers, we continually evolve to enable their success. We are proud of our unparalleled implementation track record, with 1,000+ successful projects, supported by the largest R&D team and partner ecosystem in the industry. Our marketplace provides hundreds of applications that accelerate integration, localization, and innovation.

For more information, please visit www.guidewire.com and follow us on twitter: @Guidewire_PandC and LinkedIn.

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 our future business momentum regarding our cloud sales, product innovation and cloud migration, and our associated cloud leadership, vision and strategy. 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; seasonal and other variations related to our customer agreements and related 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 and security; recent global events (including, without limitation, the continuing COVID-19 pandemic, the ongoing conflict between Russia and Ukraine, inflation higher than we have seen in decades, and supply chain issues) and their impact on our employees and our business and the businesses of our customers, system integrator (“SI”) partners, and vendors; data security breaches of our cloud-based services or products or unauthorized access to our customers’ data, particularly in connection with our transition to a hybrid in-person and remote workforce; our competitive environment and changes thereto; our services revenue produces lower gross margins than our license, subscription and support revenue; our product development and sales cycles are lengthy and may be affected by factors outside of our control; the impact of new regulations and laws, including tax laws and accounting standards; assertions by third parties that we violate their intellectual property rights; 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; the challenges of international operations, including 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. Guidewire 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.

Investor Contact:
Alex Hughes
Guidewire
(650) 356-4921
ir@guidewire.com

Media Contact:
Diana Stott
Guidewire
(650) 781-9955
dstott@guidewire.com


GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
October 31,
2022		July 31,
2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$263,163 $606,303 
Short-term investments442,023 369,865 
Accounts receivable, net88,273 143,797 
Unbilled accounts receivable, net90,742 71,515 
Prepaid expenses and other current assets59,355 61,223 
Total current assets943,556 1,252,703 
Long-term investments163,335 187,507 
Unbilled accounts receivable, net15,346 13,914 
Property and equipment, net79,040 80,740 
Operating lease assets86,519 90,287 
Intangible assets, net18,574 21,361 
Goodwill372,214 372,192 
Deferred tax assets, net218,769 191,461 
Other assets51,155 56,732 
TOTAL ASSETS$1,948,508 $2,266,897 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable$41,649 $40,440 
Accrued employee compensation43,171 90,962 
Deferred revenue, net137,546 170,776 
Other current liabilities30,398 35,340 
Total current liabilities252,764 337,518 
Lease liabilities100,614 105,123 
Convertible senior notes, net395,891 358,216 
Deferred revenue, net7,155 7,500 
Other liabilities6,923 6,883 
Total liabilities763,347 815,240 
STOCKHOLDERS’ EQUITY:
Common stock8 8 
Additional paid-in capital 1,682,722 1,755,476 
Accumulated other comprehensive income (loss)(23,963)(19,845)
Retained earnings (accumulated deficit)(473,606)(283,982)
Total stockholders’ equity1,185,161 1,451,657 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$1,948,508 $2,266,897 


GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except share and per share data)
Three Months Ended October 31,
20222021
Revenue:
Subscription and support$99,068 $78,990 
License40,952 40,153 
Services55,262 46,791 
Total revenue195,282 165,934 
Cost of revenue(1):
Subscription and support55,691 48,050 
License1,873 2,339 
Services65,566 47,151 
Total cost of revenue123,130 97,540 
Gross profit:
Subscription and support43,377 30,940 
License39,079 37,814 
Services(10,304)(360)
Total gross profit72,152 68,394 
Operating expenses(1):
Research and development58,170 55,124 
Sales and marketing46,468 41,005 
General and administrative42,067 37,642 
Total operating expenses146,705 133,771 
Income (loss) from operations(74,553)(65,377)
Interest income4,638 674 
Interest expense(1,674)(4,794)
Other income (expense), net(13,824)1,183 
Income (loss) before provision for (benefit from) income taxes(85,413)(68,314)
Provision for (benefit from) income taxes(16,095)(17,038)
Net income (loss)$(69,318)$(51,276)
Net income (loss) per share:
Basic and diluted$(0.83)$(0.62)
Shares used in computing net income (loss) per share:
Basic and diluted83,320,967 83,225,743 



(1)Amounts include stock-based compensation expense as follows:
Three Months Ended October 31,
20222021
(unaudited, in thousands)
 Stock-based compensation expense:
 Cost of subscription and support revenue$3,468 $3,030 
 Cost of license revenue147 182 
 Cost of services revenue5,349 5,189 
 Research and development9,291 7,997 
 Sales and marketing6,887 7,113 
 General and administrative9,954 8,729 
 Total stock-based compensation expense$35,096 $32,240 




GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 Three Months Ended October 31,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)$(69,318)$(51,276)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization7,623 8,434 
Amortization of debt discount and issuance costs423 3,524 
Amortization of contract costs4,490 3,001 
Stock-based compensation35,096 32,240 
Changes to allowance for credit losses and revenue reserves(72)35 
Deferred income tax(18,035)(17,551)
Amortization of premium (accretion of discount) on available-for-sale securities, net98 1,601 
Other non-cash items affecting net income (loss)34 131 
Changes in operating assets and liabilities:
Accounts receivable55,245 24,088 
Unbilled accounts receivable(20,659)(6,137)
Prepaid expenses and other assets(839)(7,046)
Operating lease assets3,768 2,879 
Accounts payable847 (1,333)
Accrued employee compensation(45,548)(62,637)
Deferred revenue(33,575)(30,456)
Lease liabilities(4,441)(3,386)
Other liabilities(2,572)(3,153)
Net cash provided by (used in) operating activities(87,435)(107,042)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities(169,232)(241,247)
Sales of available-for-sale securities97,023 27,331 
Maturities of available-for-sale securities22,268 272,943 
Purchases of property and equipment(604)(3,333)
Capitalized software development costs(3,697)(3,783)
Acquisition of strategic investments(181)— 
Acquisition of business, net of acquired cash— (43,830)
Net cash provided by (used in) investing activities(54,423)8,081 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock upon exercise of stock options— 17 
Repurchase and retirement of common stock(200,000)(26,262)
Net cash provided by (used in) financing activities(200,000)(26,245)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash(2,992)(984)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH(344,850)(126,190)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period614,686 384,910 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period$269,836 $258,720 


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 October 31,
20222021
Gross profit reconciliation:
GAAP gross profit$72,152 $68,394 
Non-GAAP adjustments:
Stock-based compensation8,964 8,401 
Amortization of intangibles1,905 1,944 
Non-GAAP gross profit$83,021 $78,739 
Income (loss) from operations reconciliation:
GAAP income (loss) from operations$(74,553)$(65,377)
Non-GAAP adjustments:
Stock-based compensation35,096 32,240 
Amortization of intangibles2,787 3,754 
Acquisition consideration holdback773 673 
Non-GAAP income (loss) from operations$(35,897)$(28,710)
Net income (loss) reconciliation:
GAAP net income (loss)$(69,318)$(51,276)
Non-GAAP adjustments:
Stock-based compensation35,096 32,240 
Amortization of intangibles2,787 3,754 
Acquisition consideration holdback(1)
773 673 
Amortization of debt discount and issuance costs423 3,524 
Tax impact of non-GAAP adjustments20,378 (6,966)
Non-GAAP net income (loss)$(9,861)$(18,051)
Tax provision (benefit) reconciliation:
GAAP tax provision (benefit)$(16,095)$(17,038)
Non-GAAP adjustments:
Stock-based compensation27,626 11,548 
Amortization of intangibles2,194 1,345 
Acquisition consideration holdback (1)
608 241 
Amortization of debt discount and issuance costs333 1,262 
Tax impact of non-GAAP adjustments(51,139)(7,430)
Non-GAAP tax provision (benefit)$(36,473)$(10,072)



GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Measures
(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 financial measures for the periods indicated below:
Three Months Ended October 31,
20222021
Net income (loss) per share reconciliation:
GAAP net income (loss) per share – diluted$(0.83)$(0.62)
Non-GAAP adjustments:
Stock-based compensation0.42 0.39 
Amortization of intangibles0.03 0.05 
Acquisition consideration holdback (1)
0.01 0.01 
Amortization of debt discount and issuance costs0.01 0.04 
Tax impact of non-GAAP adjustments0.24 (0.08)
Non-GAAP dilutive shares excluded from GAAP net income (loss) per share calculation— — 
Non-GAAP net income (loss) per share – diluted $(0.12)$(0.21)
Shares used in computing Non-GAAP income (loss) per share amounts:
GAAP weighted average shares – diluted83,320,967 83,225,743 
Non-GAAP dilutive shares excluded from GAAP income (loss) per share calculation— — 
Pro forma weighted average shares – diluted83,320,967 83,225,743 




The following table summarizes our free cash flow for the periods indicated below (in thousands):

Three Months Ended October 31,
20222021
Free cash flow:
Net cash provided by (used in) operating activities$(87,435)$(107,042)
Purchases of property and equipment(604)(3,333)
Capitalized software development costs(3,697)(3,783)
Free cash flow$(91,736)$(114,158)


GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Outlook
The following table reconciles the specific items excluded from GAAP outlook in the calculation of non-GAAP outlook for the periods indicated below (in millions):
Second Quarter
Fiscal Year 2023
Fiscal Year 2023
Income (loss) from operations outlook reconciliation:
GAAP income (loss) from operations$(41)—$(37)$(176)—$(166)
Non-GAAP adjustments:
Stock-based compensation 35—35138—138
Amortization of intangibles1—17—7
Acquisition consideration holdback1—13—3
Non-GAAP income (loss) from operations$(4)—$0$(28)—$(18)