Business Wire | Dec 8, 2020 04:15PM EST

Guidewire Software Announces First Quarter Fiscal Year 2021 Financial Results

Dec. 08, 2020

SAN MATEO, Calif.--(BUSINESS WIRE)--Dec. 08, 2020--Guidewire Software, Inc. (NYSE: GWRE), the platform Property and Casualty ("P&C") insurers trust to engage, innovate, and grow efficiently, today announced its financial results for the fiscal quarter ended October 31, 2020.

"We're off to a solid start to the fiscal year with first quarter ARR, revenue, and operating income exceeding the high-end of our guidance ranges. Customer activity and enthusiasm for our platform continued to build coming out of our annual customer conference, Connections," said Mike Rosenbaum, chief executive officer, Guidewire Software. "At Connections, we announced Banff, which delivers on our commitment to a bi-annual release cadence and expands on the cloud-native services offered in the Guidewire Cloud Platform."

First Quarter Fiscal Year 2021 Financial Highlights

Revenue

* Total revenue for the first quarter of fiscal year 2021 was $169.8 million, an increase of 8% from the same quarter in fiscal year 2020. Subscription and support revenue was $58.0 million, an increase of 18%; license revenue was $65.3 million, an increase of 20%; and services revenue was $46.6 million, a decrease of 13%. * Annual recurring revenue, or ARR, was $513 million as of October 31, 2020, compared to $514 million as of July 31, 2020. ARR results for interim quarterly periods in fiscal year 2021 are based on actual currency rates at the end of fiscal year 2020, held constant throughout the year.

Profitability

* GAAP loss from operations was $31.6 million for the first quarter of fiscal year 2021, compared with $24.6 million for the comparable period in fiscal year 2020. * Non-GAAP income from operations was $2.8 million for the first quarter of fiscal year 2021, compared with $7.1 million for the comparable period in fiscal year 2020. * GAAP net loss was $20.2 million for the first quarter of fiscal year 2021, compared with $15.0 million for the comparable period in fiscal year 2020. GAAP net loss per share was $0.24, based on diluted weighted average shares outstanding of 83.6 million, compared with $0.18 for the comparable period in fiscal year 2020, based on diluted weighted average shares outstanding of 82.4 million. * Non-GAAP net income was $14.4 million for the first quarter of fiscal year 2021, compared with $11.0 million for the comparable period in fiscal year 2020. Non-GAAP net income per share was $0.17, based on diluted weighted average shares outstanding of 84.2 million, compared with $0.13 for the comparable period in fiscal year 2020, based on diluted weighted average shares outstanding of 83.1 million.

Liquidity

* The Company had $1.4 billion in cash, cash equivalents, and investments at both October 31, 2020 and July 31, 2020. The Company used $15.7 million in cash from operations and had negative free cash flow of $20.2 million during the three months ended October 31, 2020.

Business Outlook

Guidewire is issuing the following outlook for the second quarter of fiscal year 2021 based on current expectations:

* ARR between $518 million and $521 million * Total revenue between $168 million and $172 million * Operating income (loss) between $(41) million and $(37) million * Non-GAAP operating income (loss) between $(5) million and $(1) million

Guidewire is issuing the following outlook for fiscal year 2021 based on current expectations:

* ARR between $560 million and $571 million * Total revenue between $723 million and $733 million * Operating income (loss) between $(147) million and $(137) million * Non-GAAP operating income (loss) between $(5) million and $5 million * Operating cash flow between $60 million and $70 million

Conference Call Information

What: Guidewire Software First Quarter Fiscal Year 2021 Financial Results Conference Call

When: Tuesday, December 8, 2020

Time: 2:00 p.m. PT (5:00 p.m. ET)

Live (877) 705-6003, DomesticCall:

(201) 493-6725, International

Replay: (844) 512-2921, Passcode 13713614, Domestic

(412) 317-6671, Passcode 13713614, 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 and amortization of intangibles. 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 depreciation, amortization, stock-based compensation, and changes in fair value of strategic investments.

Annual recurring revenue ("ARR") is used to identify the annualized recurring value of 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 services) are excluded.

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 Software

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. More than 400 insurers, 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.

NOTE: For information about Guidewire's trademarks, visit https://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, future business momentum and customer enthusiasm related to Guidewire Cloud Platform, and future technical and product development related to Guidewire Cloud Platform. 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 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 may cause significant fluctuations in our results of operations 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; 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, which have and may cause us to experience greater volatility in our quarterly and annual results; assertions by third parties that we violate their intellectual property rights could substantially harm our business; weakened global economic conditions may adversely affect the P&C insurance industry including the rate of information technology spending; 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 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)



October 31, July 31, 2020 2020

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $ 293,836 $ 366,969

Short-term investments 856,376 766,527

Accounts receivable, net 78,295 114,242

Unbilled accounts receivable, net 74,837 49,491

Prepaid expenses and other current assets 45,751 45,989

Total current assets 1,349,095 1,343,218

Long-term investments 254,954 300,771

Unbilled accounts receivable, net 34,605 34,737

Property and equipment, net 67,416 65,235

Operating lease assets 108,378 103,797

Intangible assets, net 33,385 39,708

Goodwill 340,877 340,877

Deferred tax assets, net 113,735 101,565

Other assets 36,512 34,944

TOTAL ASSETS $ 2,338,957 $ 2,364,852

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable $ 21,855 $ 22,634

Accrued employee compensation 45,000 58,547

Deferred revenue, net 95,930 118,311

Other current liabilities 22,838 25,706

Total current liabilities 185,623 225,198

Lease liabilities 125,536 119,408

Convertible senior notes, net 333,543 330,208

Deferred revenue, net 13,420 14,685

Other liabilities 20,974 18,585

Total liabilities 679,096 708,084

STOCKHOLDERS' EQUITY:

Common stock 8 8

Additional paid-in capital 1,529,160 1,499,050

Accumulated other comprehensive income (loss) (7,073 ) (5,246 )

Retained earnings 137,766 162,956

Total stockholders' equity 1,659,861 1,656,768

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,338,957 $ 2,364,852

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three Months Ended October 31,

2020

2019

Revenue:

Subscription and support

$

57,966

$

49,031

License

65,283

54,363

Services

46,553

53,616

Total revenue

169,802

157,010

Cost of revenue(1):

Subscription and support

37,006

24,933

License

2,937

2,557

Services

51,024

53,366

Total cost of revenue

90,967

80,856

Gross profit:

Subscription and support

20,960

24,098

License

62,346

51,806

Services

(4,471

)

250

Total gross profit

78,835

76,154

Operating expenses(1):

Research and development

52,615

46,496

Sales and marketing

36,644

33,016

General and administrative

21,180

21,239

Total operating expenses

110,439

100,751

Income (loss) from operations

(31,604

)

(24,597

)

Interest income

2,789

7,636

Interest expense

(4,620

)

(4,429

)

Other income (expense), net

2,568

(251

)

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

(30,867

)

(21,641

)

Provision for (benefit from) income taxes

(10,677

)

(6,650

)

Net income (loss)

$

(20,190

)

$

(14,991

)

Net income (loss) per share:

Basic

$

(0.24

)

$

(0.18

)

Diluted

$

(0.24

)

$

(0.18

)

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

Basic

83,613,287

82,360,891

Diluted

83,613,287

82,360,891

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

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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



Three Months Ended October 31,

2020 2019

Revenue:

Subscription and support $ 57,966 $ 49,031

License 65,283 54,363

Services 46,553 53,616

Total revenue 169,802 157,010

Cost of revenue^(1):

Subscription and support 37,006 24,933

License 2,937 2,557

Services 51,024 53,366

Total cost of revenue 90,967 80,856

Gross profit:

Subscription and support 20,960 24,098

License 62,346 51,806

Services (4,471 ) 250

Total gross profit 78,835 76,154

Operating expenses^(1):

Research and development 52,615 46,496

Sales and marketing 36,644 33,016

General and administrative 21,180 21,239

Total operating expenses 110,439 100,751

Income (loss) from operations (31,604 ) (24,597 )

Interest income 2,789 7,636

Interest expense (4,620 ) (4,429 )

Other income (expense), net 2,568 (251 )

Income (loss) before provision for (benefit from) (30,867 ) (21,641 )income taxes

Provision for (benefit from) income taxes (10,677 ) (6,650 )

Net income (loss) $ (20,190 ) $ (14,991 )

Net income (loss) per share:

Basic $ (0.24 ) $ (0.18 )

Diluted $ (0.24 ) $ (0.18 )

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

Basic 83,613,287 82,360,891

Diluted 83,613,287 82,360,891

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

Three Months Ended October 31,

2020

2019

(unaudited, in thousands)

Stock-based compensation expense:

Cost of subscription and support revenue

$

2,602

$

1,633

Cost of license revenue

251

180

Cost of services revenue

5,543

5,332

Research and development

7,247

6,181

Sales and marketing

5,977

5,157

General and administrative

6,464

6,075

Total stock-based compensation expense

$

28,084

$

24,558

Three Months Ended October 31,

2020 2019

(unaudited, in thousands)

Stock-based compensation expense:

Cost of subscription and support revenue $ 2,602 $ 1,633

Cost of license revenue 251 180

Cost of services revenue 5,543 5,332

Research and development 7,247 6,181

Sales and marketing 5,977 5,157

General and administrative 6,464 6,075

Total stock-based compensation expense $ 28,084 $ 24,558

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Three Months Ended October 31,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

(20,190

)

$

(14,991

)

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

Depreciation and amortization

10,537

10,886

Amortization of debt discount and issuance costs

3,335

3,156

Stock-based compensation

28,084

24,558

Changes to bad debt and revenue reserves

(43

)

357

Deferred income tax

(11,827

)

(7,375

)

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

1,390

(1,360

)

Other non-cash items affecting net income (loss)

(10

)

-

Changes in operating assets and liabilities:

Accounts receivable

35,924

58,567

Unbilled accounts receivable

(25,214

)

(23,103

)

Prepaid expenses and other assets

313

(1,446

)

Operating lease assets

(4,581

)

2,340

Accounts payable

(2,198

)

(3,009

)

Accrued employee compensation

(13,513

)

(39,780

)

Deferred revenue

(23,646

)

(24,709

)

Lease liabilities

6,772

285

Other liabilities

(840

)

(2,514

)

Net cash provided by (used in) operating activities

(15,707

)

(18,138

)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of available-for-sale securities

(346,405

)

(406,762

)

Sales of available-for-sale securities

57,903

57,054

Maturities of available-for-sale securities

241,591

303,183

Purchases of property and equipment

(1,907

)

(9,625

)

Capitalized software development costs

(2,581

)

(1,346

)

Acquisition of strategic investments

(2,000

)

-

Net cash provided by (used in) investing activities

(53,399

)

(57,496

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock upon exercise of stock options

1,716

368

Repurchase and retirement of common stock

(5,000

)

-

Net cash provided by (used in) financing activities

(3,284

)

368

Effect of foreign exchange rate changes on cash and cash equivalents

(743

)

254

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(73,133

)

(75,012

)

CASH AND CASH EQUIVALENTS-Beginning of period

366,969

254,101

CASH AND CASH EQUIVALENTS-End of period

$

293,836

$

179,089

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



Three Months Ended October 31,

2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ (20,190 ) $ (14,991 )

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

Depreciation and amortization 10,537 10,886

Amortization of debt discount and issuance costs 3,335 3,156

Stock-based compensation 28,084 24,558

Changes to bad debt and revenue reserves (43 ) 357

Deferred income tax (11,827 ) (7,375 )

Amortization of premium (accretion of discount) on 1,390 (1,360 )available-for-sale securities, net

Other non-cash items affecting net income (loss) (10 ) -

Changes in operating assets and liabilities:

Accounts receivable 35,924 58,567

Unbilled accounts receivable (25,214 ) (23,103 )

Prepaid expenses and other assets 313 (1,446 )

Operating lease assets (4,581 ) 2,340

Accounts payable (2,198 ) (3,009 )

Accrued employee compensation (13,513 ) (39,780 )

Deferred revenue (23,646 ) (24,709 )

Lease liabilities 6,772 285

Other liabilities (840 ) (2,514 )

Net cash provided by (used in) operating activities (15,707 ) (18,138 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of available-for-sale securities (346,405 ) (406,762 )

Sales of available-for-sale securities 57,903 57,054

Maturities of available-for-sale securities 241,591 303,183

Purchases of property and equipment (1,907 ) (9,625 )

Capitalized software development costs (2,581 ) (1,346 )

Acquisition of strategic investments (2,000 ) -

Net cash provided by (used in) investing activities (53,399 ) (57,496 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock upon exercise 1,716 368 of stock options

Repurchase and retirement of common stock (5,000 ) -

Net cash provided by (used in) financing activities (3,284 ) 368

Effect of foreign exchange rate changes on cash and (743 ) 254 cash equivalents

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (73,133 ) (75,012 )

CASH AND CASH EQUIVALENTS-Beginning of period 366,969 254,101

CASH AND CASH EQUIVALENTS-End of period $ 293,836 $ 179,089

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 October 31,

2020

2019

Gross profit reconciliation:

GAAP gross profit

$

78,835

$

76,154

Non-GAAP adjustments:

Stock-based compensation

8,396

7,145

Amortization of intangibles

4,526

4,945

Non-GAAP gross profit

$

91,757

$

88,244

Income (loss) from operations reconciliation:

GAAP income (loss) from operations

$

(31,604

)

$

(24,597

)

Non-GAAP adjustments:

Stock-based compensation

28,084

24,558

Amortization of intangibles

6,323

7,167

Non-GAAP income (loss) from operations

$

2,803

$

7,128

Net income (loss) reconciliation:

GAAP net income (loss)

$

(20,190

)

$

(14,991

)

Non-GAAP adjustments:

Stock-based compensation

28,084

24,558

Amortization of intangibles

6,323

7,167

Amortization of debt discount and issuance costs

3,335

3,156

Tax impact of non-GAAP adjustments (1)

(3,143

)

(8,912

)

Non-GAAP net income (loss)

$

14,409

$

10,978

Tax provision (benefit) reconciliation:

GAAP tax provision (benefit)

$

(10,677

)

$

(6,650

)

Non-GAAP adjustments:

Stock-based compensation

(22,291

)

4,200

Amortization of intangibles

(5,019

)

1,227

Amortization of debt discount and issuance costs

(2,647

)

540

Tax impact of non-GAAP adjustments (1)

33,100

2,945

Non-GAAP tax provision (benefit)

$

(7,534

)

$

2,262

(1) Adjustments reflect the tax benefit (provision) resulting from all non-GAAP adjustments.

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 thecalculation of non-GAAP financial measures for the periods indicated below:

Three Months Ended October 31,

2020 2019

Gross profit reconciliation:

GAAP gross profit $ 78,835 $ 76,154

Non-GAAP adjustments:

Stock-based compensation 8,396 7,145

Amortization of intangibles 4,526 4,945

Non-GAAP gross profit $ 91,757 $ 88,244



Income (loss) from operations reconciliation:

GAAP income (loss) from operations $ (31,604 ) $ (24,597 )

Non-GAAP adjustments:

Stock-based compensation 28,084 24,558

Amortization of intangibles 6,323 7,167

Non-GAAP income (loss) from operations $ 2,803 $ 7,128



Net income (loss) reconciliation:

GAAP net income (loss) $ (20,190 ) $ (14,991 )

Non-GAAP adjustments:

Stock-based compensation 28,084 24,558

Amortization of intangibles 6,323 7,167

Amortization of debt discount and issuance costs 3,335 3,156

Tax impact of non-GAAP adjustments ^(1) (3,143 ) (8,912 )

Non-GAAP net income (loss) $ 14,409 $ 10,978



Tax provision (benefit) reconciliation:

GAAP tax provision (benefit) $ (10,677 ) $ (6,650 )

Non-GAAP adjustments:

Stock-based compensation (22,291 ) 4,200

Amortization of intangibles (5,019 ) 1,227

Amortization of debt discount and issuance costs (2,647 ) 540

Tax impact of non-GAAP adjustments ^(1) 33,100 2,945

Non-GAAP tax provision (benefit) $ (7,534 ) $ 2,262

(1) Adjustments reflect the tax benefit (provision) resultingfrom all non-GAAP adjustments.

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Financial Measures

(unaudited, in thousands except per share amounts)

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 October 31,

2020

2019

Net income (loss) per share reconciliation:

GAAP net income (loss) per share - diluted

$

(0.24

)

$

(0.18

)

Non-GAAP adjustments:

Stock-based compensation

0.34

0.30

Amortization of intangibles

0.08

0.09

Amortization of debt discount and issuance costs

0.04

0.04

Tax impact of non-GAAP adjustments (1)

(0.04

)

(0.11

)

Non-GAAP dilutive shares excluded from GAAP net income (loss) per share calculation (2)

(0.01

)

(0.01

)

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

$

0.17

$

0.13

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

GAAP weighted average shares - diluted

83,613,287

82,360,891

Non-GAAP dilutive shares excluded from GAAP income (loss) per share calculation (2)

586,287

788,902

Pro forma weighted average shares - diluted

84,199,574

83,149,793

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Financial Measures

(unaudited, in thousands except per share amounts)



The following tables reconcile the specific items excluded from GAAP in thecalculation of non-GAAP financial measures for the periods indicated below:

Three Months Ended October 31,

2020 2019



Net income (loss) per share reconciliation:

GAAP net income (loss) per share - diluted $ (0.24 ) $ (0.18 )

Non-GAAP adjustments:

Stock-based compensation 0.34 0.30

Amortization of intangibles 0.08 0.09

Amortization of debt discount and issuance costs 0.04 0.04

Tax impact of non-GAAP adjustments ^(1) (0.04 ) (0.11 )

Non-GAAP dilutive shares excluded from GAAP net (0.01 ) (0.01 )income (loss) per share calculation ^(2)

Non-GAAP net income (loss) per share - diluted $ 0.17 $ 0.13



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

GAAP weighted average shares - diluted 83,613,287 82,360,891

Non-GAAP dilutive shares excluded from GAAP income 586,287 788,902 (loss) per share calculation ^(2)

Pro forma weighted average shares - diluted 84,199,574 83,149,793

(1) Adjustments reflect the impact on the tax benefit (provision) resulting from all non-GAAP adjustments.

(2) Due to the occurrence of a net loss on a GAAP basis, potentially dilutive securities were excluded from the calculation of GAAP net income (loss) per share, as they would have an anti-dilutive effect. However, these shares have a dilutive effect on non-GAAP net income (loss) per share and, therefore, are included in the non-GAAP net income (loss) per share calculation.

(1) Adjustments reflect the impact on the tax benefit (provision) resultingfrom all non-GAAP adjustments.

(2) Due to the occurrence of a net loss on a GAAP basis, potentially dilutivesecurities were excluded from the calculation of GAAP net income (loss) pershare, as they would have an anti-dilutive effect. However, these shares have adilutive effect on non-GAAP net income (loss) per share and, therefore, areincluded in the non-GAAP net income (loss) per share calculation.

Three Months Ended October 31,

2020

2019

Free cash flow:

Net cash provided by (used in) operating activities

$

(15,707

)

$

(18,138

)

Purchases of property and equipment

(1,907

)

(9,625

)

Capitalized software development costs

(2,581

)

(1,346

)

Free cash flow

$

(20,195

)

$

(29,109

)

Three Months Ended October 31,

2020 2019

Free cash flow:

Net cash provided by (used in) operating $ (15,707 ) $ (18,138 )activities

Purchases of property and equipment (1,907 ) (9,625 )

Capitalized software development costs (2,581 ) (1,346 )

Free cash flow $ (20,195 ) $ (29,109 )

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Outlook

The following tables reconcile the specific items excluded from GAAP outlook in the calculation of non-GAAP outlook for the periods indicated below:

(in $ millions)

Second Quarter

Fiscal Year 2021

Fiscal Year 2021

Income (loss) from operations outlook reconciliation:

GAAP income (loss) from operations

(41.0)

-

(37.0)

(147.0)

-

(137.0)

Non-GAAP adjustments:

Stock-based compensation

30.0

-

30.0

122.0

-

122.0

Amortization of intangibles

6.0

-

6.0

20.0

-

20.0

Non-GAAP income (loss) from operations

(5.0)

-

(1.0)

(5.0)

-

5.0

View source version on businesswire.com: https://www.businesswire.com/news/home/20201208006086/en/

CONTACT: Investor Contact: Alex Hughes Guidewire Software, Inc. (650) 356-4921 ir@guidewire.com

CONTACT: Media Contact: Diana Stott Guidewire Software, Inc. (650) 356-4941 dstott@guidewire.com