Guidewire Software, Inc. (GWRE) SEC Filing 10-Q Quarterly report for the period ending Wednesday, October 31, 2018

PDFPDF Microsoft WordWord Microsoft ExcelExcel SubscribeRSS E-mailEmail Smartphone and TabletMobile last10k.com/sec-filings/gwre/0001528396-18-000048.htm



Exhibit 99.1

Guidewire Software Announces First Quarter Fiscal 2019 Financial Results

Foster City, CA - December 4, 2018 - Guidewire Software, Inc. (NYSE: GWRE), provider of the industry platform Property and Casualty (“P&C”) insurers rely upon, today announced its financial results for the fiscal quarter ended October 31, 2018.

“Revenue and profitability exceeded our expectations for the first quarter, further supplemented by a large contract consolidation that accelerated revenue recognition into the quarter,” said Marcus Ryu, chief executive officer, Guidewire Software. “During the first quarter new and existing customers selected multiple components of Guidewire InsurancePlatform - including InsuranceSuite, digital, data and analytics - and we advanced multiple evaluations underway for Guidewire Cloud.”
 
Ryu continued, “During the quarter we also hosted almost 2,200 professionals at our annual Connections user conference, during which we announced the latest releases of Guidewire InsuranceSuite, InsuranceNow, Guidewire Marketplace, and our new Analytics and Data Services team. Customers, prospects, and partners were very supportive of our strategy to use Guidewire Cloud as a key lever to lower the cost, effort, and complexity of managing core system environments. We believe we are better positioned than ever to fulfill our mission of delivering the industry platform that P&C insurers need to adapt and succeed in a rapidly evolving insurance marketplace.”

As of the first quarter of fiscal 2019, Guidewire is reporting results under Accounting Standards Codification Topic 606, Revenue Recognition (“ASC 606”), using the modified retrospective method. Financial results for reporting periods prior to fiscal year 2019 are presented as previously disclosed in conformity with then existing guidance.

First Quarter Fiscal 2019 Financial Highlights

Revenue
Total revenue for the first quarter of fiscal year 2019 was $179.7 million, an increase of 66% from the same quarter in fiscal year 2018. License and subscription revenue was $94.3 million, an increase of 213%; services revenue was $64.4 million, an increase of 9%; and maintenance revenue was $21.0 million, an increase of 11%. First quarter year-over-year growth comparisons were positively impacted by the adoption of ASC 606.
Profitability
GAAP income from operations was $1.1 million for the first quarter of fiscal year 2019, compared with a $32.7 million loss in the comparable period in fiscal year 2018.
Non-GAAP income from operations was $31.7 million for the first quarter of fiscal year 2019, compared with an $8.3 million loss in the comparable period in fiscal year 2018.
GAAP net income was $5.5 million for the first quarter of fiscal year 2019, compared with an $8.9 million loss for the comparable period in fiscal year 2018. GAAP net income per share was $0.07, based on diluted weighted average shares outstanding of 82.2 million, compared with a $0.12 net loss per share for the comparable period in fiscal year 2018, based on diluted weighted average shares outstanding of 75.2 million.
Non-GAAP net income was $29.9 million for the first quarter of fiscal year 2019, compared with a $4.8 million net loss in the comparable period in fiscal year 2018. Non-GAAP net income per share was $0.36, based on diluted weighted average shares outstanding of 82.2 million, compared with a $0.06 net loss per share in the comparable period in fiscal year 2018, based on diluted weighted average shares outstanding of 75.2 million.
Liquidity
The Company had $1.2 billion in cash, cash equivalents, and investments at October 31, 2018, compared with $1.3 billion at July 31, 2018. The Company used $27.2 million cash from operations in the first quarter of fiscal year 2019, reflecting normal seasonal patterns.




The following information was filed by Guidewire Software, Inc. on Tuesday, December 4, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

Sentiment Analysis off   on

Filter by Sentiment:
Filter by Category:

View our Sentiment Analysis Tour
Filter by Subcategory:
Click a sentiment analysis snippet below from Guidewire Software, Inc.'s Management Discussions to find these positive and negative remarks within their 10-Q Quarterly report:
  • 18466300_46
    Revenue - Product
    We face a number of risks in the execution of our strategy including risks related to expanding to new markets, managing lengthy sales cycles, competing effectively in the global market, relying on sales to a relatively small number of large customers, developing new or acquiring existing products successfully, migrating a portion of our business to a more ratable revenue recognition model as we bring to market more cloud-based solutions, and increasing the overall adoption of our products.
  • 18466300_261
    Financial - Expense
    The increase in our interest expense is due to the non-cash interest expense of $3.0 million related to the amortization of debt discount and issuance costs, and stated interest of $1.2 million associated with the Convertible Senior Notes issued in March 2018.
  • 18466300_222
    Financial - Expense
    The resulting $6.6 million increase was primarily attributable to $4.4 million increase in personnel expenses and cloud infrastructure costs incurred in order to support the growth of our subscription and cloud offerings, an increase of $1.2 million related to the amortization of intangible assets, and a $0.5 million increase in royalties.
  • 18466300_140
    Revenue - Product
    In substantially all of our professional service contracts, services are separately identifiable performance obligations for which related revenue and costs are recognized according to when each respective service obligation is delivered.
  • 18466300_104
    Other - Other
    Identification of the performance obligation in the contract Performance obligations promised in a contract are identified based on the services or products that will be transferred to the customer that are both: capable of being distinct, whereby the customer can benefit from the service or product either on its own or together with other resources that are readily available from third parties or from our own services or products, and distinct in the context of the contract, whereby the transfer of the services or products is separately identifiable from other promises in the contract.
  • 18466300_289
    Revenue - Product
    Net cash used in investing activities increased by $42.3 million for the three months ended October 31, 2018 as compared to cash provided by investing activities during the three months ended October 31, 2017 primarily due to $41.3 million in net cash outflows resulting from sales and purchases of marketable securities, and a $1.0 million increase in capital expenditures.
  • 18466300_231
    Revenue - Product
    We intend to continue to invest in our cloud operations as our subscription revenue increases, which will impact license and subscription margins.
  • 18466300_283
    Revenue - Product
    In particular, we typically use more cash during the first fiscal quarter ended October 31, as we generally pay cash bonuses to our employees for the prior fiscal year during that period and pay seasonally higher sales commissions from increased customer orders booked in our fourth fiscal quarter.
  • 18466300_245
    Revenue - Product
    The $8.7 million increase in sales and marketing expenses during the three months ended October 31, 2018, compared to the same period a year ago, was primarily attributable to an increase in personnel expenses of $4.3 million due to higher headcount to sell our products, an increase of $1.9 million in marketing and advertising expenses resulting from the timing of expenses for our annual Connections User Conference, which occurred in the first quarter of our current fiscal year compared to the second quarter in our prior fiscal year, and increased amortization expense of $1.5 million due to the Cyence acquisition, partially offset by the change in accounting for commission costs under ASC 606.
  • 18466300_287
    Financial - Cash Flow
    The following summary of cash flows for the periods indicated has been derived from our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q: Net cash used in operating activities decreased by $4.0 million for the three months ended October 31, 2018, compared to the three months ended October 31, 2017.
  • 18466300_21
    Revenue - Product
    We must earn credibility with each successful implementation as we expand our sales operations, market products that have been acquired or newly introduced, and expand the ways we deliver our software.
  • 18466300_183
    Revenue - Product
    Effective with our adoption of ASC 606 on August 1, 2018, license revenue under term licenses is recognized upon delivery for the entire initial term rather than annually upon the earlier of receipt or when the payment is due.
  • 18466300_22
    Revenue - Product
    The success of our sales efforts relies on continued improvements and enhancements to our current products, the introduction of new products, and the continued development of relevant local content and the automated tools that we believe are optimal for updating that content.
  • 18466300_230
    Financial - Earnings
    The increase in our gross margin is primarily attributable to the increased revenue recognized under the new revenue guidance as a result of adopting ASC 606, which was partially offset by decreased services gross margin as a result of increased personnel costs and third-party subcontractor costs to increase capacity for future implementations and incremental costs associated with a fixed-fee contract due to our continued investment in ongoing cloud implementations.
  • 18466300_151
    Financial - Expense
    Costs to fulfill a contract, or fulfillment costs, mainly consist of royalties payable to third-party software providers that support both of our software offerings and support services.
  • 18466300_202
    Revenue - Geography
    The increase is primarily driven by an increase in professional services relating to projects for new and existing customers, partially offset by the change in presentation of hosting revenue.
  • 18466300_152
    Financial - Expense
    Fulfillment costs are only capitalized if they relate directly to a contract with a customer, the costs generate or enhance resources that will be used to satisfy performance obligations in the future, and the costs are expected to be recoverable.
  • 18466300_290
    Other - Other
    Net cash provided by financing activities increased by $0.3 million for the three months ended October 31, 2018, as compared to the three months ended October 31, 2017 due to the exercise of employee stock options.
  • 18466300_228
    Financial - Earnings
    Our gross margin increased to 54% during the three months ended October 31, 2018, compared to 42% for the corresponding prior year period.
  • 18466300_44
    Revenue - Product
    We encourage our partners to co-market, pursue joint sales initiatives, and drive broader adoption of our technology, helping us grow our business more efficiently.
  • 18466300_190
    Revenue - Product
    Another customer consolidated its contracts in the first quarter of fiscal year 2019 that resulted in $9.1 million of revenue being recognized during the three months ended October 31, 2018 that would have been recognized in later quarters in fiscal year 2019.
  • 18466300_150
    MA - Other
    The amortization of customer acquisition costs are classified as sales and marketing expense in the condensed consolidated statement of operations.
  • 18466300_88
    Other - Other
    Certain accounting policies, methods and estimates are particularly sensitive because of their significance to the condensed consolidated financial statements and because of the possibility that future events affecting them may differ markedly from management?s current judgments.
  • 18466300_262
    Financial - Income
    Other Income (Expense), Net Other income (expense), net consists primarily of foreign exchange gains and losses resulting from fluctuations in foreign exchange rates on receivables and payables denominated in currencies other than the U.S. dollar.
  • 18466300_237
    Financial - Expense
    Research and Development Our research and development expenses primarily consist of costs incurred for compensation and benefit expenses for our technical staff, including stock-based awards and professional services costs.
  • 18466300_243
    Revenue - Product
    Sales and Marketing Our sales and marketing expenses primarily consist of costs incurred for compensation and benefit expenses for our sales and marketing employees, including stock-based awards and commissions.
  • 18466300_15
    Revenue - Product
    We maintain and continue to grow our sales and marketing efforts globally, and maintain regional sales centers in the Americas, Europe and Asia.
  • 18466300_198
    Revenue - Product
    The increase in our maintenance revenue reflects our growing term license customer base.
  • 18466300_211
    Revenue - Product
    We also expect modestly higher levels of variability in our service revenue.
  • 18466300_258
    Financial - Income
    The increase in our interest income is associated with the increase in our investment portfolio primarily as a result of proceeds of approximately $220.9 million related to the common stock offering and $387.2 million related to the convertible note offering in March 2018 and, to a lesser extent, higher yields on invested funds.
  • 18466300_285
    Revenue - Product
    Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of our spending to support our research and development efforts, and expansion into other markets.
  • 18466300_73
    Financial - Expense
    Net of issuance costs, we received proceeds of approximately $220.9 million related to the common stock offering and $387.2 million related to the convertible note offering.
  • 18466300_133
    Revenue - Product
    Subscription arrangements Revenue from subscription arrangements is recognized ratably over the subscription period using a time-based measure of progress as customers receive the benefits from their subscriptions over the contractually agreed-upon term.
  • 18466300_274
    Financial - Income
    These provisions of the Tax Act became effective for us beginning on August 1, 2018 and had no impact on our income tax benefit for the three months ended October 31, 2018.
  • 18466300_67
    Financial - Earnings
    Because we pay our services professionals the same amount throughout the year, our gross margins on our services revenue is usually lower in these quarters.
  • 18466300_31
    Revenue - Product
    Revenue derived from these subscriptions are recognized ratably over the contractual term beginning after the subscription is effectively provisioned, which is the date our software service is made available to customers.
  • 18466300_90
    Revenue - Product
    While we continue to evaluate our significant accounting policies to determine which ones involve the most judgment and complexity, aside from revenue recognition, as described herein, there have been no changes to our business combinations or other significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2018 that have had a material impact on our condensed consolidated financial statements and related notes.
  • 18466300_105
    Other - Other
    To the extent a contract includes multiple promised services or products, we apply judgment to determine whether promised services or products are capable of being distinct and distinct in the context of the contract.
  • 18466300_201
    Revenue - Product
    Services Revenue Services revenue increased $5.3 million during the three months ended October 31, 2018, compared to the same period a year ago.
  • 18466300_136
    Revenue - Product
    Maintenance activities Revenue from maintenance activities associated with on-premise licenses is a stand-ready obligation, and is recognized over the contractually agreed-upon term using a time-based measure of progress as customers receive benefits from the availability of support technicians over the support period.
  • 18466300_59
    Revenue - Product
    For example, in the first quarter of fiscal year 2019, we experienced license revenue growth due to the remediation of contracts in anticipation of the transition to ASC 606 and a 10-year term license deal under which revenue was recognized upfront under ASC 606, which will mask our usual positive seasonal impact in our second quarter of fiscal year 2019.
  • 18466300_160
    Revenue - Product
    Additionally, a growing portion of our revenue is derived from subscriptions of our cloud-delivered software.
  • 18466300_185
    Revenue - Product
    Due to the ratable recognition of subscription revenue, growth in subscription revenue will lag behind the growth of subscription sales and will impact the comparative growth of our reported revenue.
  • 18466300_242
    Financial - Expense
    Research and development expenses may also increase if we pursue additional acquisitions.
  • 18466300_36
    Revenue - Product
    Continued investment in product innovation is critical as we seek to assist our customers obtain their IT goals, maintain our competitive advantage, grow our revenue, expand internationally, and meet evolving customer demands.
  • 18466300_214
    Financial - Expense
    Our cost of license and subscription revenue primarily consists of personnel costs for our production services employees, cloud infrastructure costs, amortization of our acquired intangible assets, and royalty fees paid to third parties.
  • 18466300_161
    Other - Other
    We adopted ASC 606 effective August 1, 2018 using the modified retrospective method.
  • 18466300_200
    Revenue - Product
    As a result, we expect an increase in the mix of subscription orders in the future will reduce the growth in maintenance revenue.
  • 18466300_54
    Revenue - Product
    We have historically experienced seasonal variations in our license and subscription revenue as a result of increased customer orders in our second and fourth fiscal quarters.
  • 18466300_193
    MA - Other
    The increase is primarily attributable to $4.7 million in subscription billings from acquired products and services related to the Cyence acquisition, $4.4 million in additional subscription orders from new and existing customers, and $3.0 million of hosting revenue related to our subscription offerings that is included as subscription revenue under ASC 606 that was previously included as services revenue under ASC 605.
  • 18466300_167
    Revenue - Product
    Term license revenue is generally fully recognized upon delivery of the software, which accelerates the timing of revenue recognition compared to previous accounting guidance.
  • 18466300_32
    Revenue - Product
    We anticipate that sales of subscriptions will increase as a percentage of annual new sales as we sell more cloud-based services.
  • 18466300_238
    Financial - Expense
    The $9.8 million increase in research and development expenses during the three months ended October 31, 2018, as compared to the same period in the prior year, was due to increases in our headcount, primarily as a result of our Cyence acquisition that closed on November 1, 2017.
  • 18466300_56
    Revenue - Product
    We also see significantly increased orders in our fourth fiscal quarter, which is the quarter ending July 31, due to efforts by our sales team to achieve annual incentives.
  • 18466300_10
    Other - Other
    Our data and analytics applications enable insurers to manage data more effectively, gain insights into their business, and underwrite new and evolving risks.
  • 18466300_60
    Revenue - Product
    On an annual basis, our maintenance revenue which is recognized ratably, may also be impacted in the event that seasonal patterns change significantly.
  • 18466300_169
    Revenue - Product
    Perpetual license revenue is generally recognized upon delivery.
  • 18466300_62
    Revenue - Product
    The seasonal nature of our sales and the concentration of such sales in our fiscal fourth quarter increases this impact.
  • 18466300_280
    Revenue - Geography
    While we have no current plans to repatriate these funds to the United States, we may repatriate foreign earnings in the future to the extent that the repatriation is not restricted by local laws or there are no substantial incremental costs associated with such repatriation.
  • 18466300_241
    Financial - Expense
    We expect our research and development expenses to continue to increase in absolute dollars as we continue to hire in research and development, and continue to dedicate internal resources to develop, improve and expand the functionality of our solutions.
  • 18466300_28
    Revenue - Product
    Term and perpetual license revenue is typically recognized when software is made available to the customer, provided that all revenue recognition criteria have been met.
  • 18466300_282
    Financial - Cash Flow
    We expect that we will continue to generate positive cash flows from operations on an annual basis, although this may fluctuate significantly on a quarterly basis.
  • 18466300_89
    Revenue - Product
    While there are a number of accounting policies, methods, and estimates affecting our condensed consolidated financial statements, which are described in Note 1 "The Company and Summary of Significant Accounting Policies and Estimates" to our condensed consolidated financial statements, areas that are particularly significant include: Revenue recognition policies; and Business combinations.
  • 18466300_226
    Financial - Expense
    The resulting $12.5 million increase is due to a $7.6 million increase in personnel expenses and a $5.6 million increase for billable third-party consultants and sub-contractors to implement InsuranceNow and InsuranceSuite Cloud.
  • 18466300_87
    Other - Other
    Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events.
  • 18466300_78
    Financial - Cash Flow
    Additionally, operating cash flows take into account the impact of changes in deferred revenue, which reflects the receipt of cash payment for products before they are recognized as revenue, and unbilled accounts receivable, which reflects revenue that has been recognized that has yet to be invoiced to our customers.
  • 18466300_192
    Revenue - Product
    Subscription revenue increased by $12.1 million during the three months ended October 31, 2018 compared to the same period a year ago.
  • 18466300_197
    Revenue - Product
    Maintenance Revenue Maintenance revenue increased by $2.1 million during the three months ended October 31, 2018 compared to the same period a year ago.
  • 18466300_33
    Revenue - Product
    As a result of the ratable recognition of revenue associated with subscriptions, a significant shift from term licenses to subscriptions will adversely affect our reported revenue growth.
  • 18466300_34
    Revenue - Product
    As this relatively new sales model matures, we may decide to change certain terms to remain competitive or otherwise meet market demands.
  • 18466300_187
    Revenue - Product
    Revenue from existing contract renewals increased $20.7 million due to the timing of renewals and the recognition of the term license portion of renewals at the renewal date as opposed to over time under previous revenue recognition guidance.
  • 18466300_278
    Financial - Debt
    Substantially all of our investments are comprised of corporate debt securities, U.S. government and agency debt securities, commercial paper and non-U.S. government securities, which include state, municipal and foreign government securities.
  • 18466300_184
    Revenue - Product
    While term licenses remain our predominant licensing model, we anticipate subscriptions will continue to grow as a percentage of annual sales in future periods.
  • 18466300_240
    MA - Other
    The increase in headcount reflects our continued investment in our products, and includes 108 employees gained through the Cyence acquisition.
  • 18466300_16
    Revenue - Product
    Strong customer relationships are a key driver of our success given the long-term nature of our engagements and the importance of customer references for new sales.
  • 18466300_269
    Financial - Income
    The effective tax rate of (152)% for the three months ended October 31, 2018, differs from the statutory U.S. federal income tax rate of 21% mainly due to permanent differences for stock-based compensation, including excess tax benefits, research and development credits, the tax rate differences between the United States and foreign countries, foreign withholding taxes, and certain non-deductible expenses including executive compensation.
  • 18466300_180
    Revenue - Product
    A substantial majority of our services engagements generate revenue on a time and materials basis and revenue is recognized upon providing our services.
  • 18466300_252
    Financial - Expense
    The $0.3 million decrease during the three months ended October 31, 2018, compared to the same period a year ago, was primarily attributable to a decrease in professional services of $4.0 million, partially offset by an increase in personnel expenses of $3.6 million due to higher headcount to support our growth.
  • 18466300_219
    Financial - Expense
    We allocate overhead such as information technology support, information security, facilities, and other administrative costs to all functional departments based on headcount.
  • 18466300_235
    Financial - Expense
    We allocate overhead such as information technology support, information security, facilities, and other administrative costs to all functional departments based on headcount.
  • 18466300_125
    Other - Other
    Some of our performance obligations, such as maintenance, implementation services, and training services, have observable inputs that are used to determine the SSP of those distinct performance obligations.
  • 18466300_271
    Financial - Income
    The Tax Act includes a provision to tax global intangible low-taxed income ("GILTI") of foreign subsidiaries, a special deduction for foreign-derived intangible income, and a base erosion anti-abuse tax measure that taxes certain payments between a U.S. corporation and its foreign subsidiaries.
  • 18466300_218
    Financial - Expense
    In each case, personnel costs include salaries, bonuses, benefits, and stock-based compensation.
  • 18466300_63
    Revenue - Product
    Our services revenue is also subject to seasonal fluctuations, though to a lesser degree than our license revenue.

 Please wait while we load the requested 10-Q Quarterly Report. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/1528396/000152839618000048/gwre-10312018x10q.htm

Companies may provide additional information to their SEC Filings as exhibits. Click a link below to view an exhibit that was filed with this report:

Exhibit 31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/1528396/000152839618000048/gwreex31110312018.htm
Exhibit 31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/1528396/000152839618000048/gwreex31210312018.htm
Exhibit 32.1 - SECTION 1350 CERTIFICATION

 Please wait while we load the requested exhibit. If it does not load, please click the link below:

 https://www.last10k.com/sec-filings/report/1528396/000152839618000048/gwreex32110312018.htm
  • Form Type: Quarterly
  • Number of times amended: 0
  • Accession Number: 0001528396-18-000048
  • Submitted to the SEC: Thursday, December 6, 2018 6:54:54 AM EST
  • Accepted by the SEC: Thursday, December 6, 2018
  • Period ending: October 2018
  • Industry: Prepackaged Software