Guidewire Announces Fourth Quarter and Fiscal Year 2022 Financial Results

Guidewire (NYSE: GWRE) today announced its financial results for the fiscal quarter and fiscal year ended July 31, 2022.

“We closed fiscal year 2022 exceeding our outlook for ARR, revenue, and profitability driven by strong cloud adoption,” said Mike Rosenbaum, Chief Executive Officer, Guidewire. “We won sixteen cloud deals in the fourth quarter across new and existing customers. As we look forward to fiscal year 2023, we are positioned to build on our record of consistent product innovation and to transition the P&C insurance industry to cloud-based core systems.”

Fourth Quarter Fiscal Year 2022 Financial Highlights

Revenue

  • Total revenue for the fourth quarter of fiscal year 2022 was $244.6 million, an increase of 7% from the same quarter in fiscal year 2021. Subscription and support revenue was $93.6 million, an increase of 34%; services revenue was $56.2 million, an increase of 13%; and license revenue was $94.8 million, a decrease of 14%.

Profitability

  • GAAP loss from operations was $32.2 million for the fourth quarter of fiscal year 2022, compared with $0.1 million for the same quarter in fiscal year 2021.
  • Non-GAAP income from operations was $5.3 million for the fourth quarter of fiscal year 2022, compared with $32.0 million for the same quarter in fiscal year 2021.
  • GAAP net loss was $31.0 million for the fourth quarter of fiscal year 2022, compared with $1.0 million for the same quarter in fiscal year 2021. GAAP net loss per share was $0.37, based on diluted weighted average shares outstanding of 84.0 million, compared with $0.01 for the same quarter in fiscal year 2021, based on diluted weighted average shares outstanding of 83.2 million.
  • Non-GAAP net income was $2.2 million for the fourth quarter of fiscal year 2022, compared with $31.1 million for the same quarter in fiscal year 2021. Non-GAAP net income per share was $0.03, based on diluted weighted average shares outstanding of 84.1 million, compared with Non-GAAP net income per share of $0.37 for the same quarter in fiscal year 2021, based on diluted weighted average shares outstanding of 83.7 million.

Liquidity

  • The Company generated $83.6 million in cash from operations and had positive free cash flow of $79.0 million during the fourth quarter of fiscal year 2022.

Fiscal Year 2022 Financial Highlights

Revenue

  • Total revenue for fiscal year 2022 was $812.6 million, an increase of 9% from fiscal year 2021. Subscription and support revenue was $343.7 million, an increase of 36%; services revenue was $210.3 million, an increase of 12%; and license revenue was $258.6 million, a decrease of 15%.
  • As of July 31, 2022, annual recurring revenue, or ARR, was $664 million, or $683 million based on currency exchange rates as of July 31, 2021, compared to $582 million as of July 31, 2021. We measure ARR on a constant currency basis during the fiscal year and revalue ARR at year end to current currency rates. ARR grew in fiscal year 2022 by 14%, or 17% on a constant currency basis.

Profitability

  • GAAP loss from operations was $199.4 million for fiscal year 2022, compared with $105.6 million for fiscal year 2021.
  • Non-GAAP loss from operations was $45.3 million for fiscal year 2022, compared with Non-GAAP income from operations of $26.0 million for fiscal year 2021.
  • GAAP net loss was $180.4 million for fiscal year 2022, compared with $66.5 million for fiscal year 2021. GAAP net loss per share was $2.16, based on diluted weighted average shares outstanding of 83.6 million, compared with $0.79 for fiscal year 2021, based on diluted weighted average shares outstanding of 83.6 million.
  • Non-GAAP net loss was $42.5 million for fiscal year 2022, compared with non-GAAP net income of $41.3 million for fiscal year 2021. Non-GAAP net loss per share was $0.51 for fiscal year 2022, based on diluted weighted average shares outstanding of 83.6 million, compared with non-GAAP net income per share of $0.49 for fiscal year 2021, based on diluted weighted average shares outstanding of 84.4 million.

Liquidity and Capital Resources

  • The Company had $1.2 billion in cash, cash equivalents, and investments at July 31, 2022, compared to $1.3 billion at July 31, 2021.
  • The Company used $37.9 million in cash from operations during fiscal year 2022 and $43.8 million for the acquisition of HazardHub during the first quarter of fiscal year 2022.

Business Outlook

Guidewire is issuing the following outlook for the first quarter of fiscal year 2023 based on current expectations:

  • ARR between $667 million and $670 million
  • Total revenue between $190 million and $195 million
  • Operating income (loss) between $(82) million and $(77) million
  • Non-GAAP operating income (loss) between $(45) million and $(40) million

Guidewire is issuing the following outlook for fiscal year 2023 based on current expectations:

  • ARR between $745 million and $760 million
  • Total revenue between $885 million and $895 million
  • Operating income (loss) between $(177) million and $(167) million
  • Non-GAAP operating income (loss) between $(30) million and $(20) million
  • Operating cash flow between $50 million and $80 million

Conference Call Information

What:

Guidewire Fourth Quarter and Fiscal Year 2022 Financial Results Conference Call

When:

Tuesday, September 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 13732349, Domestic

Replay

(412) 317-6671, Passcode 13732349, 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 income 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 income 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. In fiscal year 2022, the recurring license and support or subscription contract value recognized as services revenue was $28.9 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.

GWRE-F

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; the impact of the COVID-19 pandemic, inflation, and other global events, such as the conflict between Russia and Ukraine, on our employees and our business and the businesses of our customers, system integrator ("SI") partners, and vendors; seasonal and other variations related to our customer agreements and related revenue recognition and ARR; 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 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; our products or cloud-based services may experience data security breaches; we face intense competition in our market; 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; changes in accounting guidance, such as revenue recognition; 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 and the amount of direct written premiums; 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 and hiring sufficient 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. 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

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)

 

 

 

 

 

July 31,

2022

 

July 31,

2021

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

606,303

 

 

$

384,910

 

Short-term investments

 

369,865

 

 

 

734,517

 

Accounts receivable, net

 

143,797

 

 

 

104,068

 

Unbilled accounts receivable, net

 

71,515

 

 

 

79,061

 

Prepaid expenses and other current assets

 

61,223

 

 

 

52,729

 

Total current assets

 

1,252,703

 

 

 

1,355,285

 

Long-term investments

 

187,507

 

 

 

227,164

 

Unbilled accounts receivable, net

 

13,914

 

 

 

24,361

 

Property and equipment, net

 

80,740

 

 

 

80,061

 

Operating lease assets

 

90,287

 

 

 

97,447

 

Intangible assets, net

 

21,361

 

 

 

19,743

 

Goodwill

 

372,192

 

 

 

340,877

 

Deferred tax assets, net

 

191,461

 

 

 

138,428

 

Other assets

 

56,732

 

 

 

38,479

 

TOTAL ASSETS

$

2,266,897

 

 

$

2,321,845

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

40,440

 

 

$

27,830

 

Accrued employee compensation

 

90,962

 

 

 

102,137

 

Deferred revenue, net

 

170,776

 

 

 

138,699

 

Other current liabilities

 

35,340

 

 

 

31,648

 

Total current liabilities

 

337,518

 

 

 

300,314

 

Lease liabilities

 

105,123

 

 

 

115,374

 

Convertible senior notes, net

 

358,216

 

 

 

343,825

 

Deferred revenue, net

 

7,500

 

 

 

7,237

 

Other liabilities

 

6,883

 

 

 

10,201

 

Total liabilities

 

815,240

 

 

 

776,951

 

STOCKHOLDERS’ EQUITY:

 

 

 

Common stock

 

8

 

 

 

8

 

Additional paid-in capital

 

1,755,476

 

 

 

1,617,204

 

Accumulated other comprehensive income (loss)

 

(19,845

)

 

 

(6,218

)

Retained earnings (accumulated deficit)

 

(283,982

)

 

 

(66,100

)

Total stockholders’ equity

 

1,451,657

 

 

 

1,544,894

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

2,266,897

 

 

$

2,321,845

 

 

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands except share and per share data)

 

 

 

 

 

 

 

 

 

Three Months Ended July 31,

 

Twelve Months Ended July 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

Subscription and support

$

93,570

 

 

$

69,993

 

 

$

343,708

 

 

$

252,358

 

License

 

94,786

 

 

 

109,660

 

 

 

258,631

 

 

 

303,792

 

Services

 

56,243

 

 

 

49,782

 

 

 

210,275

 

 

 

187,117

 

Total revenue

 

244,599

 

 

 

229,435

 

 

 

812,614

 

 

 

743,267

 

Cost of revenue(1):

 

 

 

 

 

 

 

Subscription and support

 

57,621

 

 

 

46,535

 

 

 

213,275

 

 

 

164,983

 

License

 

2,210

 

 

 

2,807

 

 

 

8,754

 

 

 

10,569

 

Services

 

68,912

 

 

 

50,778

 

 

 

238,365

 

 

 

199,502

 

Total cost of revenue

 

128,743

 

 

 

100,120

 

 

 

460,394

 

 

 

375,054

 

Gross profit:

 

 

 

 

 

 

 

Subscription and support

 

35,949

 

 

 

23,458

 

 

 

130,433

 

 

 

87,375

 

License

 

92,576

 

 

 

106,853

 

 

 

249,877

 

 

 

293,223

 

Services

 

(12,669

)

 

 

(996

)

 

 

(28,090

)

 

 

(12,385

)

Total gross profit

 

115,856

 

 

 

129,315

 

 

 

352,220

 

 

 

368,213

 

Operating expenses(1):

 

 

 

 

 

 

 

Research and development

 

65,287

 

 

 

59,530

 

 

 

249,665

 

 

 

219,494

 

Sales and marketing

 

51,671

 

 

 

43,805

 

 

 

194,611

 

 

 

160,544

 

General and administrative

 

31,107

 

 

 

26,064

 

 

 

107,391

 

 

 

93,759

 

Total operating expenses

 

148,065

 

 

 

129,399

 

 

 

551,667

 

 

 

473,797

 

Income (loss) from operations

 

(32,209

)

 

 

(84

)

 

 

(199,447

)

 

 

(105,584

)

Interest income

 

3,904

 

 

 

1,032

 

 

 

6,277

 

 

 

7,395

 

Interest expense

 

(4,934

)

 

 

(4,742

)

 

 

(19,446

)

 

 

(18,711

)

Other income (expense), net

 

(3,305

)

 

 

(2,013

)

 

 

(17,099

)

 

 

12,619

 

Income (loss) before provision for (benefit from) income taxes

 

(36,544

)

 

 

(5,807

)

 

 

(229,715

)

 

 

(104,281

)

Provision for (benefit from) income taxes

 

(5,514

)

 

 

(4,775

)

 

 

(49,284

)

 

 

(37,774

)

Net income (loss)

$

(31,030

)

 

$

(1,032

)

 

$

(180,431

)

 

$

(66,507

)

Net income (loss) per share:

 

 

 

 

 

 

 

Basic and diluted

$

(0.37

)

 

$

(0.01

)

 

$

(2.16

)

 

$

(0.79

)

Shares used in computing net income (loss) per share:

 

 

 

 

 

 

 

Basic and diluted

 

83,953,164

 

 

 

83,234,153

 

 

 

83,569,517

 

 

 

83,577,375

 

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

 

Three Months Ended July 31,

 

Twelve Months Ended July 31,

 

2022

 

2021

 

2022

 

2021

 

(unaudited, in thousands)

Stock-based compensation expense:

 

 

 

 

 

 

 

Cost of subscription and support revenue

$

3,442

 

$

2,895

 

$

14,614

 

$

11,231

Cost of license revenue

 

151

 

 

191

 

 

692

 

 

770

Cost of services revenue

 

5,354

 

 

5,293

 

 

22,951

 

 

21,809

Research and development

 

8,794

 

 

7,743

 

 

36,134

 

 

29,524

Sales and marketing

 

7,117

 

 

6,450

 

 

32,960

 

 

25,820

General and administrative

 

9,120

 

 

6,234

 

 

29,660

 

 

25,855

Total stock-based compensation expense

$

33,978

 

$

28,806

 

$

137,011

 

$

115,009

 

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

Three Months Ended July 31,

 

Twelve Months Ended July 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income (loss)

$

(31,030

)

 

$

(1,032

)

 

$

(180,431

)

 

$

(66,507

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

7,795

 

 

 

7,927

 

 

 

33,540

 

 

 

36,955

 

Amortization of debt discount and issuance costs

 

3,672

 

 

 

3,474

 

 

 

14,391

 

 

 

13,617

 

Amortization of contract costs

 

4,736

 

 

 

2,944

 

 

 

14,456

 

 

 

11,442

 

Stock-based compensation

 

33,978

 

 

 

28,806

 

 

 

137,011

 

 

 

115,009

 

Changes to allowance for credit losses and revenue reserves

 

(110

)

 

 

216

 

 

 

2,597

 

 

 

226

 

Deferred income tax

 

(6,658

)

 

 

(5,495

)

 

 

(54,115

)

 

 

(35,789

)

Amortization of premium (accretion of discount) on available-for-sale securities, net

 

883

 

 

 

1,645

 

 

 

5,498

 

 

 

6,567

 

Changes in fair value of strategic investments

 

(1,545

)

 

 

 

 

 

(1,545

)

 

 

 

Other non-cash items affecting net income (loss)

 

(158

)

 

 

118

 

 

 

63

 

 

 

863

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

(58,075

)

 

 

(32,555

)

 

 

(42,545

)

 

 

10,820

 

Unbilled accounts receivable

 

36,556

 

 

 

28,693

 

 

 

18,106

 

 

 

(19,194

)

Prepaid expenses and other assets

 

(9,726

)

 

 

(12,177

)

 

 

(23,390

)

 

 

(16,764

)

Operating lease assets

 

(849

)

 

 

3,366

 

 

 

7,160

 

 

 

6,350

 

Accounts payable

 

9,293

 

 

 

3,745

 

 

 

13,580

 

 

 

3,627

 

Accrued employee compensation

 

23,313

 

 

 

25,075

 

 

 

(8,942

)

 

 

41,526

 

Deferred revenue

 

62,782

 

 

 

51,021

 

 

 

31,564

 

 

 

12,940

 

Lease liabilities

 

254

 

 

 

(3,374

)

 

 

(9,637

)

 

 

(3,346

)

Other liabilities

 

8,481

 

 

 

5,957

 

 

 

4,699

 

 

 

(6,755

)

Net cash provided by (used in) operating activities

 

83,592

 

 

 

108,354

 

 

 

(37,940

)

 

 

111,587

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchases of available-for-sale securities

 

(13,530

)

 

 

(274,873

)

 

 

(519,536

)

 

 

(1,033,095

)

Sales of available-for-sale securities

 

9,806

 

 

 

(4,097

)

 

 

74,552

 

 

 

123,234

 

Maturities of available-for-sale securities

 

206,835

 

 

 

319,731

 

 

 

834,362

 

 

 

1,005,290

 

Purchases of property and equipment

 

(1,534

)

 

 

(6,596

)

 

 

(9,510

)

 

 

(19,008

)

Capitalized software development costs

 

(3,079

)

 

 

(2,227

)

 

 

(12,266

)

 

 

(9,846

)

Acquisition of strategic investments

 

(1,039

)

 

 

(384

)

 

 

(11,560

)

 

 

(2,384

)

Acquisition of business, net of acquired cash

 

 

 

 

 

 

 

(43,830

)

 

 

 

Net cash provided by (used in) investing activities

 

197,459

 

 

 

31,554

 

 

 

312,212

 

 

 

64,191

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from issuance of common stock upon exercise of stock options

 

 

 

 

10

 

 

 

116

 

 

 

1,932

 

Repurchase and retirement of common stock

 

 

 

 

(38,742

)

 

 

(37,451

)

 

 

(161,319

)

Net cash provided by (used in) financing activities

 

 

 

 

(38,732

)

 

 

(37,335

)

 

 

(159,387

)

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

 

(1,520

)

 

 

(714

)

 

 

(7,161

)

 

 

1,550

 

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

 

279,531

 

 

 

100,462

 

 

 

229,776

 

 

 

17,941

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period

 

335,155

 

 

 

284,448

 

 

 

384,910

 

 

 

366,969

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period

$

614,686

 

 

$

384,910

 

 

$

614,686

 

$

384,910

 

 

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 July 31,

 

Twelve Months Ended July 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Gross profit reconciliation:

 

 

 

 

 

 

 

GAAP gross profit

$

115,856

 

 

$

129,315

 

 

$

352,220

 

 

$

368,213

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Stock-based compensation

 

8,947

 

 

 

8,379

 

 

 

38,257

 

 

 

33,810

 

Amortization of intangibles

 

1,905

 

 

 

1,820

 

 

 

7,659

 

 

 

13,175

 

COVID-19 Canada Emergency Wage Subsidy benefit(1)

 

 

 

 

(56

)

 

 

 

 

 

(1,975

)

Non-GAAP gross profit

$

126,708

 

 

$

139,458

 

 

$

398,136

 

 

$

413,223

 

 

 

 

 

 

 

 

 

Income (loss) from operations reconciliation:

 

 

 

 

 

 

 

GAAP income (loss) from operations

$

(32,209

)

 

$

(84

)

 

$

(199,447

)

 

$

(105,584

)

Non-GAAP adjustments:

 

 

 

 

 

 

 

Stock-based compensation

 

33,978

 

 

 

28,806

 

 

 

137,011

 

 

 

115,009

 

Amortization of intangibles

 

2,787

 

 

 

3,398

 

 

 

14,081

 

 

 

19,965

 

COVID-19 Canada Emergency Wage Subsidy benefit(1)

 

 

 

 

(87

)

 

 

 

 

 

(3,396

)

Acquisition consideration holdback (2)

 

749

 

 

 

 

 

 

3,067

 

 

 

 

Non-GAAP income (loss) from operations

$

5,305

 

 

$

32,033

 

 

$

(45,288

)

 

$

25,994

 

 

 

 

 

 

 

 

 

Net income (loss) reconciliation:

 

 

 

 

 

 

 

GAAP net income (loss)

$

(31,030

)

 

$

(1,032

)

 

$

(180,431

)

 

$

(66,507

)

Non-GAAP adjustments:

 

 

 

 

 

 

 

Stock-based compensation

 

33,978

 

 

 

28,806

 

 

 

137,011

 

 

 

115,009

 

Amortization of intangibles

 

2,787

 

 

 

3,398

 

 

 

14,081

 

 

 

19,965

 

COVID-19 Canada Emergency Wage Subsidy benefit(1)

 

 

 

 

(87

)

 

 

 

 

 

(3,396

)

Acquisition consideration holdback(2)

 

749

 

 

 

 

 

 

3,067

 

 

 

 

Amortization of debt discount and issuance costs

 

3,672

 

 

 

3,474

 

 

 

14,391

 

 

 

13,617

 

Changes in fair value of strategic investments

 

(1,538

)

 

 

 

 

 

(1,538

)

 

 

 

Tax impact of non-GAAP adjustments

 

(6,464

)

 

 

(3,472

)

 

 

(29,105

)

 

 

(37,379

)

Non-GAAP net income (loss)

$

2,154

 

 

$

31,087

 

 

$

(42,524

)

 

$

41,309

 

 

 

 

 

 

 

 

 

Tax provision (benefit) reconciliation:

 

 

 

 

 

 

 

GAAP tax provision (benefit)

$

(5,514

)

 

$

(4,775

)

 

$

(49,284

)

 

$

(37,774

)

Non-GAAP adjustments:

 

 

 

 

 

 

 

Stock-based compensation

 

10,397

 

 

 

(1,260

)

 

 

37,826

 

 

 

(20,979

)

Amortization of intangibles

 

853

 

 

 

(149

)

 

 

3,936

 

 

 

(4,220

)

COVID-19 Canada Emergency Wage Subsidy benefit(1)

 

 

 

 

4

 

 

 

 

 

 

(135

)

Acquisition consideration holdback (2)

 

229

 

 

 

 

 

 

847

 

 

 

 

Amortization of debt discount and issuance costs

 

1,124

 

 

 

(152

)

 

 

4,049

 

 

 

(2,555

)

Changes in fair value of strategic investments

 

(471

)

 

 

 

 

 

(471

)

 

 

 

Tax impact of non-GAAP adjustments

 

(5,668

)

 

 

5,029

 

 

 

(17,082

)

 

 

65,268

 

Non-GAAP tax provision (benefit)

$

950

 

 

$

(1,303

)

 

$

(20,179

)

 

$

(395

)

 

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 July 31,

 

Twelve Months Ended July 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

Net income (loss) per share reconciliation:

 

 

 

 

 

 

 

GAAP net income (loss) per share – diluted

$

(0.37

)

 

$

(0.01

)

 

$

(2.16

)

 

$

(0.79

)

Non-GAAP adjustments:

 

 

 

 

 

 

 

Stock-based compensation

 

0.40

 

 

 

0.35

 

 

 

1.63

 

 

 

1.38

 

Amortization of intangibles

 

0.03

 

 

 

0.04

 

 

 

0.16

 

 

 

0.24

 

COVID-19 Canada Emergency Wage Subsidy benefit(1)

 

 

 

 

 

 

 

 

 

 

(0.04

)

Acquisition consideration holdback (2)

 

0.01

 

 

 

 

 

 

0.03

 

 

 

 

Amortization of debt discount and issuance costs

 

0.04

 

 

 

0.04

 

 

 

0.17

 

 

 

0.16

 

Changes in fair value of strategic investments

 

0.02

 

 

 

 

 

 

0.01

 

 

 

 

Tax impact of non-GAAP adjustments

 

(0.08

)

 

 

(0.04

)

 

 

(0.35

)

 

 

(0.45

)

Non-GAAP dilutive shares excluded from GAAP net income (loss) per share calculation

 

(0.02

)

 

 

(0.01

)

 

 

 

 

 

(0.01

)

Non-GAAP net income (loss) per share – diluted

$

0.03

 

 

$

0.37

 

 

$

(0.51

)

 

$

0.49

 

 

 

 

 

 

 

 

 

Shares used in computing Non-GAAP income (loss) per share amounts:

 

 

 

 

 

 

 

GAAP weighted average shares – diluted

 

83,953,164

 

 

 

83,234,153

 

 

 

83,569,517

 

 

 

83,577,375

 

Non-GAAP dilutive shares excluded from GAAP income (loss) per share calculation

 

149,169

 

 

 

426,718

 

 

 

 

 

 

805,747

 

Pro forma weighted average shares – diluted

 

84,102,333

 

 

 

83,660,871

 

 

 

83,569,517

 

 

 

84,383,122

 

 

(1) Effective the second quarter of fiscal year 2021, the COVID-19 Canada Emergency Wage Subsidy benefit has been included as a non-GAAP adjustment. Prior to the second quarter of fiscal year 2021, this program was unavailable. Beginning with the first quarter of fiscal year 2022, we have not and do not expect to receive a subsidy under the COVID-19 Canada Emergency Wage Subsidy.

(2) Effective the first quarter of fiscal year 2022, acquisition consideration holdback that is earned and recognized as expense over a post-acquisition service period has been included as a non-GAAP adjustment. Prior to the first quarter of fiscal year 2022, there was no acquisition consideration holdback in any periods presented.

 

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

 

 

Three Months Ended July 31,

 

Twelve Months Ended July 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Free cash flow:

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

83,592

 

 

$

108,354

 

 

$

(37,940

)

 

$

111,587

 

Purchases of property and equipment

 

(1,534

)

 

 

(6,596

)

 

 

(9,510

)

 

 

(19,008

)

Capitalized software development costs

 

(3,079

)

 

 

(2,227

)

 

 

(12,266

)

 

 

(9,846

)

Free cash flow

$

78,979

 

 

$

99,531

 

 

$

(59,716

)

 

$

82,733

 

 

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):

 

 

First Quarter

Fiscal Year 2023

 

Fiscal Year 2023

Income (loss) from operations outlook reconciliation:

 

 

 

 

 

 

 

 

GAAP income (loss) from operations

 

$(82)

$(77)

 

$(177)

$(167)

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Stock-based compensation

 

33

33

 

137

137

Amortization of intangibles

 

3

3

 

7

7

Acquisition consideration holdback

 

1

1

 

3

3

Non-GAAP income (loss) from operations

 

$(45)

$(40)

 

$(30)

$(20)

 

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