Guidewire Announces Fourth Quarter and Fiscal Year 2024 Financial Results

Business Wire 5-Sep-2024 4:15 PM

Guidewire (NYSE:GWRE) today announced its financial results for the fiscal quarter and year ended July 31, 2024.

"We finished the year with record fourth quarter sales activity and fully ramped ARR growth of 19%," said Mike Rosenbaum, chief executive officer, Guidewire. "We enter the new fiscal year positioned well to continue accelerating modernization programs in the P&C industry and delivering increasing value to P&C insurers' drive for greater agility and innovation."

"The fourth quarter capped off a tremendous year and strong financial results," said Jeff Cooper, chief financial officer, Guidewire. "The combination of fully ramped ARR growth and 20% cash flow from operations as a percent of revenue demonstrates the power and durability of our model."

Fiscal Year 2024 Financial Highlights

Revenue

• Total revenue for fiscal year 2024 was $980.5 million, an increase of 8% from fiscal year 2023. Subscription and support revenue was $549.1 million, an increase of 28%; license revenue was $250.2 million, a decrease of 6%; and services revenue was $181.2 million, a decrease of 14%, each compared to fiscal year 2023.
• As of July 31, 2024, annual recurring revenue, or ARR, was $872 million based on currency exchange rates as of July 31, 2023, compared to $763 million as of July 31, 2023. We measure ARR on a constant currency basis during the fiscal year and revalue ARR at year end to current currency rates and, based on this revaluation to currency rates as of July 31, 2024, ARR was $864 million. ARR grew in fiscal year 2024 by 14% on a constant currency basis.

Profitability

• GAAP loss from operations was $52.6 million for fiscal year 2024, compared with $149.5 million for fiscal year 2023.
• Non-GAAP income from operations was $99.5 million for fiscal year 2024, compared with $11.7 million for fiscal year 2023.
• GAAP net loss was $6.1 million for fiscal year 2024, compared with $111.9 million for fiscal year 2023. GAAP net loss per share was $0.07 for fiscal year 2024, based on diluted weighted average shares outstanding of 82.3 million, compared with $1.36 for fiscal year 2023, based on diluted weighted average shares outstanding of 82.2 million.
• Non-GAAP net income was $114.5 million for fiscal year 2024, compared with $29.2 million for fiscal year 2023. Non-GAAP net income per share was $1.35 for fiscal year 2024, based on diluted weighted average shares outstanding of 87.4 million, compared with $0.35 for fiscal year 2023, based on diluted weighted average shares outstanding of 82.6 million.

Liquidity and Capital Resources

• Guidewire had $1,129.5 million in cash, cash equivalents, and investments at July 31, 2024, compared to $927.5 million at July 31, 2023.
• Guidewire generated $195.7 million in cash from operations during the fiscal year ended July 31, 2024.
• During the fiscal year ended July 31, 2024, the Company did not repurchase any shares of common stock.

Fourth Quarter Fiscal Year 2024 Financial Highlights

Revenue

• Total revenue for the fourth quarter of fiscal year 2024 was $291.5 million, an increase of 8% from the same quarter in fiscal year 2023. Subscription and support revenue was $151.8 million, an increase of 29%; license revenue was $88.9 million, a decrease of 12%; and services revenue was $50.8 million, a decrease of 2%, each as compared to the same quarter in fiscal year 2023.

Profitability

• GAAP income from operations was $10.3 million for the fourth quarter of fiscal year 2024, compared with $6.1 million for the same quarter in fiscal year 2023.
• Non-GAAP income from operations was $49.0 million for the fourth quarter of fiscal year 2024, compared with $44.7 million for the same quarter in fiscal year 2023.
• GAAP net income was $16.8 million for the fourth quarter of fiscal year 2024, compared with $12.2 million for the same quarter in fiscal year 2023. GAAP net income per share was $0.20, based on diluted weighted average shares outstanding of 85.0 million, compared to $0.15 for the same quarter in fiscal year 2023, based on diluted weighted average shares outstanding of 82.1 million.
• Non-GAAP net income was $54.0 million for the fourth quarter of fiscal year 2024, compared with $62.8 million for the same quarter in fiscal year 2023. Non-GAAP net income per share was $0.62, based on diluted weighted average shares outstanding of 88.5 million, compared to $0.74 for the same quarter in fiscal year 2023, based on diluted weighted average shares outstanding of 85.7 million.

Business Outlook

Guidewire is issuing the following outlook for the first quarter of fiscal year 2025 based on current expectations:

• ARR between $869 million and $874 million
• Total revenue between $251 million and $257 million
• Operating loss between $18 million and $12 million
• Non-GAAP operating income between $18 million and $24 million

Guidewire is issuing the following outlook for fiscal year 2025 based on current expectations:

• ARR between $995 million and $1,005 million
• Total revenue between $1,135 million and $1,149 million
• Operating income (loss) between $(4) million and $10 million
• Non-GAAP operating income between $157 million and $171 million
• Operating cash flow between $220 million and $250 million

Conference Call Information

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, acquisition consideration holdback, and net impact of assignment of lease agreement. Non-GAAP net income (loss) and non-GAAP tax provision (benefit) also exclude the amortization of debt issuance costs from our convertible senior notes, changes in fair value of strategic investments, gain on sale of strategic investments, and related tax effects of the non-GAAP adjustments. Additionally, non-GAAP net income (loss) per share includes shares from the conversion premium and excludes the tax-effected interest expense on convertible debt using the if-converted method. 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 and stock-based compensation.

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 contractual terms and invoicing activities for the current reporting period, which may not be the same as the timing and amount of revenue recognized. ARR reflects all fee changes due to contract renewals, non-renewals, expansion, cancellations, attrition, or renegotiations at a higher or lower fee arrangement that are effective as of the ARR reporting date. All components of the licensing and other arrangements that are not expected to recur (primarily perpetual licenses and professional services) are excluded from our ARR calculations. 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 revenue allocation generally only impacts the initial term of the contract. This means that if we increase arrangements with multiple performance obligations that include services at discounted rates, more of the total contract value would be recognized as services revenue, but our reported ARR amount would not be impacted. During the twelve months ended July 31, 2024, the recurring license and support or subscription contract value recognized as services revenue was $10.7 million. Fully ramped annual recurring revenue ("fully ramped ARR") is used to quantify the annualized recurring value outlined in active customer contracts including all non-variable price increases outlined in the pricing schedule of an executed customer contract within the first five years.

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. Guidewire'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. Guidewire 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 Guidewire's financial measures with other software companies, many of which present similar non-GAAP financial measures and other metrics to investors.

Guidewire's management 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 Guidewire'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 Guidewire's business.

About Guidewire

Guidewire is the platform P&C insurers trust to engage, innovate, and grow efficiently. More than 570 insurance brands in 42 countries, from new ventures to the largest and most complex in the world, rely on Guidewire products. With core systems leveraging data and analytics, digital, and artificial intelligence, Guidewire defines cloud platform excellence for P&C insurers.

We are proud of our unparalleled implementation record, with 1,700+ successful projects supported by the industry's largest R&D team and SI partner ecosystem. Our marketplace represents the largest solution partner community in P&C, where customers can access hundreds of applications to accelerate integration, localization, and innovation.

Guidewire uses its Investor Relations website (ir.guidewire.com), X (formerly known as Twitter) feed (@Guidewire_PandC), and LinkedIn page (www.linkedin.com/company/guidewire-software) as a means of disclosing information about the company and for complying with its disclosure obligations under Regulation FD. The information that is posted through these channels may be deemed material. Accordingly, investors should monitor these channels in addition to Guidewire's press releases, filings with the Securities and Exchange Commission, public conference calls, and webcasts.

NOTE: For information about Guidewire's trademarks, visit 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 targets, our future business momentum relating to our product leadership, cloud deals, and profitability expectations, and our associated business plan, 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 (the "SEC") as well as other documents that may be filed by Guidewire from time to time with the SEC. 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, ARR, 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 and ARR; our making long-term pricing commitments in our customer contracts based on available information and estimates about our future costs that may change; our ability to successfully manage our business model, including achieving market acceptance of our cloud-based services and products and the costs related to cloud operations, cybersecurity, product development, and services; the timing, success, and number of professional services engagements and the billing rates and utilization of our professional services employees and contractors; the impact of global events (including, without limitation, ongoing global conflicts, inflation, high interest rates, economic volatility, bank failures and associated financial instability, and supply chain issues) on our employees, our business, and the businesses of our customers, system integrator ("SI") partners, and vendors; data security breaches of our cloud-based services and products or unauthorized access to our employees' or our customers' data; our competitive environment and changes thereto; issues in the development and use of AI and machine learning, combined with an uncertain regulatory environment; use of AI by our workforce may present risks to our business; 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, without limitation, security, privacy, AI and machine learning, tax regulations and 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; our ability to sell our services and 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 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.

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