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Guidewire (GWRE) Q4 Earnings Top Estimates, Revenues Up Y/Y

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Guidewire Software (GWRE - Free Report) reported non-GAAP earnings of 3 cents per share in fourh-quarter fiscal 2022 (ended Jul 31, 2022), surpassing the Zacks Consensus Estimate of a loss of 4 cents. However, this compares unfavorably with the year-ago quarter’s non-GAAP earnings of 37 cents per share.

The company reported revenues of $244.6 million, rising 7% year over year and beating the Zacks Consensus Estimate by 6.6%.

Guidewire Cloud continued to gain momentum with 16 cloud deals in the reported quarter among new and existing clients.

For the fiscal year, the company reported a non-GAAP loss of 51 cents per share compared with non-GAAP earnings of 49 cents per share in the previous fiscal year. Revenues for the year came in at $812.6 million, up 9% on a year-over-year basis.

Guidewire Software, Inc. Price, Consensus and EPS Surprise

 

Guidewire Software, Inc. Price, Consensus and EPS Surprise

Guidewire Software, Inc. price-consensus-eps-surprise-chart | Guidewire Software, Inc. Quote

 

Quarter in Detail

Subscription and support revenues (38.3% of total revenues) soared 34% from the year-ago quarter’s levels to $93.6 million, owing to higher subscription revenues. Subscription revenues surged 49.9% year over year to $72.8 million. In the fiscal, Subscription and support revenue increased 36% year over year to $343.7 million.

License revenues (38.7% of total revenues) declined 14% year over year to $94.8 million. In the fiscal, license revenues fell 15% year over year to $258.6 million.

Services revenues (23% of total revenues) climbed 13% year over year to $56.2 million, driven by increased cloud implementation programs. For the fiscal year, service revenue increased 12% year over year to $210.3 million

Annual recurring revenues (ARR) were $664 million as of Jul 31, 2022, up 14.1% year-over-year and 17% on a constant-currency basis, driven by new sales and deal ramps.

Non-GAAP gross margin contracted 890 basis points (bps) on a year-over-year basis to 51.9%. This year-over-year decline was due to the revenue mix shift toward subscription and support revenues and away from higher-margin term license revenues.

Subscription and support gross margin came in at 44.2%, up 460 bps from reported in the year-ago quarter. Services’ non-GAAP gross margin was negative 13% compared with a gross margin of 8.6% in the year-ago quarter.

Total operating expenses increased 14.4% year over year to $148.1 million. Non-GAAP operating income was $5.3 million compared with the operating income of $32 million reported in the year-ago quarter.

Financial Details

As of Jul 31, 2022, cash and cash equivalents and short-term investments came in at $1.2 billion compared with $1.1 billion as of Apr 30, 2022.

Guidewire generated $83.6 million in cash from operations during the fiscal fourth quarter, with a free cash flow of nearly $79 million.

For fiscal 2022, Guidewire used $37.9 million in cash for operations, with a free cash outflow of nearly $59.7 million.

Guidance

For first-quarter fiscal 2023, revenues are expected in the range of $190-$195 million. ARR is expected to be between $667 million and $670 million. Non-GAAP operating income (loss) is expected between $(45) million and $(40) million. GAAP operating income (loss) is expected to be between $(82) million and $(77) million.  

For fiscal 2023, the company expects total revenues between $885 million and $895 million. ARR is expected to be between $745 million and $760 million.

Non-GAAP operating loss for fiscal 2023 is projected in the range of $20-$30 million. For fiscal 2022, cash flow from operations is projected in the range of $50-$80 million.

Zacks Rank & Stocks to Consider

At present, Guidewire carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader technology space are Cadence Design Systems (CDNS - Free Report) , Badger Meter (BMI - Free Report) and Arista Networks (ANET - Free Report) . While Badger Meter and Arista Networks sport a Zacks Rank #1 (Strong Buy), Cadence carries Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CDNS 2022 earnings is pegged at $4.11 per share, rising 5.7% in the past 60 days. The long-term earnings growth rate is anticipated to be 17.7%.

Cadence’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 9.8%. Shares of CDNS are up 1.5% in the past year.

The Zacks Consensus Estimate for BMI’s 2022 earnings is pegged at $2.30 per share, up 6% in the past 60 days.

Badger Meter’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters, with the average being 12.6%. Shares of BMI have lost 10.7% of their value in the past year.

The Zacks Consensus Estimate for Arista Network’s 2022 earnings is pegged at $4.04 per share, increasing 9.8% in the past 60 days. The long-term earnings growth rate is anticipated to be 18.6%.

Arista Network’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 10.1%. Shares of ANET have increased 30.8% in the past year.

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