Guidewire Q3 Earnings & Revenues Top Estimates, Up Y/Y

Guidewire Software GWRE reported non-GAAP earnings per share of 26 cents in third-quarter fiscal 2024 (ended Apr 30, 2024), which surpassed the Zacks Consensus Estimate of 13 cents. The company reported a non-GAAP loss of 8 cents in the year-ago quarter.
The company reported revenues of $240.7 million, up 16% year over year. The revenues surpassed the Zacks Consensus Estimate by 4%. The uptick was driven by solid Tier-1 deal volume and increasing migration activity, especially in Asia Pacific.
Guidewire Cloud continued to gain momentum in the reported quarter with eight deal wins. Management highlighted that including the eight deal wins, InsuranceSuite cloud wins now stand at 24 for the year-to-date period, representing a 33% increase from the same period in the last fiscal year.
As of Apr 30, annual recurring revenues were $828 million, up 14.7% year over year.
Management raised its guidance for fiscal 2024 owing to strong pipeline activity. The company expects total revenues between $968 million and $976 million compared with the previous guidance of $957-$967 million. ARR is now expected to be in the range of $856-$864 million (previously projected range: $852-$862 million).

Guidewire Software, Inc. Price, Consensus and EPS Surprise

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

Non-GAAP operating income is estimated between $94 million and $102 million.
Cash flow from operations is now anticipated in the range of $130-$150 million compared with the previous guidance of $120-$140 million.
Following the results, shares are up 10.1% in the pre-market trading on Jun 5. In the past year, shares of the company have surged 47.7% compared with sub-industry's growth of 14.5%.

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Quarter in Detail

Subscription and support segment's revenues (57.3% of total revenues) soared 28% from the year-ago quarter to $138 million.
License's revenues (23.4%) were up 11% year over year to $56.2 million. The performance was driven by expansions upon renewal of term license arrangements and steady DWP true-up activity.
Services' revenues (19.3%) fell 6% year over year to $46.5 million.
Non-GAAP gross margin expanded to 62.6% from 51.9% on a year-over-year basis.

Subscription and support segment's gross margin increased to 65.5% from 55.1% on a year-over-year basis attributed to increased cloud infrastructure efficiency. Services' non-GAAP gross margin was 10.3% against a negative gross margin of 2.1% in the year-ago quarter.
Total operating expenses increased 1.4% year over year to $158.9 million. Non-GAAP operating income was $20.8 compared with an operating loss of $12.2 million in the year-ago quarter.

Financial Details

As of Apr 30, 2024, cash and cash equivalents and short-term investments were $934.2 million compared with $777.6 million as of Jan 31.
GWRE generated $4.8 million in cash from operations in the quarter under review, with a free cash flow of nearly $0.8 million.

Outlook

For the fourth quarter of fiscal 2024, revenues are expected in the range of $279-$287 million. ARR is suggested between $856 million and $864 million. Non-GAAP operating income is estimated in the range of $43-$51 million. 

Zacks Rank & Stocks to Consider

Guidewire currently carries a Zacks Rank #3 (Hold).
Some top-ranked stocks worth consideration in the broader technology space are Badger Meter BMI, Arista Networks ANET and NVIDIA Corporation NVDA, sporting a Zacks Rank #1 (Strong Buy) each.

The Zacks Consensus Estimate for BMI's 2024 EPS is pegged at $3.89, up 9.9% in the past 60 days. BMI's earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.7%. The long-term earnings growth rate is 15.6%. Shares of BMI have risen 27.9% in the past year.

The Zacks Consensus Estimate for Arista Network's 2024 EPS is pegged at $7.92, up 6.2% in the past 60 days. The long-term earnings growth rate is 15.7%. ANET's earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 15.4%. Shares of ANET have gained 83.6% in the past year.

The Zacks Consensus Estimate for NVIDIA's fiscal 2025 EPS has increased 12% in the past 60 days to $26.84. NVDA earnings beat the Zacks Consensus Estimate in all the last four quarters, the average surprise being 18.4%. Shares of NVDA have risen 200.7% in the past year.

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