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Guidewire Software (GWRE) Down 2.2% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Guidewire Software (GWRE - Free Report) . Shares have lost about 2.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Guidewire Software due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Guidewire Posts Q4 Earnings Beats Estimates
Guidewire reported non-GAAP earnings of 3 cents per share in fourth-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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -25.66% due to these changes.
VGM Scores
At this time, Guidewire Software has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Guidewire Software has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Guidewire Software (GWRE) Down 2.2% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Guidewire Software (GWRE - Free Report) . Shares have lost about 2.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Guidewire Software due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Guidewire Posts Q4 Earnings Beats Estimates
Guidewire reported non-GAAP earnings of 3 cents per share in fourth-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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -25.66% due to these changes.
VGM Scores
At this time, Guidewire Software has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Guidewire Software has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.