GWRE 10-Q

Guidewire Software, Inc. (GWRE)

10-Q 2021-03-05 For: 2021-01-31

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Added on April 10, 2026

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Delaware			36-4468504
(State or other jurisdiction of Incorporation or organization)			(I.R.S. Employer Identification No.)

2850 S. Delaware St., Suite 400 San Mateo, California			94403
(Address of principal executive offices)			(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	GWRE	New York Stock Exchange


Part I – Financial Information

Item 1.	Financial Statements (unaudited):	2

	Condensed Consolidated Balance Sheets as of January 31, 202 1 and July 31, 2020	3

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended January 31, 202 1 and 2020	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended January 31, 2021 and 2020	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended January 31, 2021 and 2020	6

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended January 3 1 , 20 2 1 and 2020	8

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54

Item 4.	Controls and Procedures	55

Part II – Other Information		56

Item 1.	Legal Proceedings	56

Item 1A.	Risk Factors	56

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80

Item 6.	Exhibits	81

Signatures		82


	January 31, 2021		July 31, 2020

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	331,387	$	366,969
Short-term investments	814,845		766,527
Accounts receivable, net of allowances of $1,392 and $1,276, respectively	92,581		114,242
Unbilled accounts receivable, net	81,591		49,491
Prepaid expenses and other current assets	48,560		45,989
Total current assets	1,368,964		1,343,218
Long-term investments	228,795		300,771
Unbilled accounts receivable, net	34,695		34,737
Property and equipment, net	73,130		65,235
Operating lease assets	103,706		103,797
Intangible assets, net	27,061		39,708
Goodwill	340,877		340,877
Deferred tax assets, net	122,659		101,565
Other assets	35,844		34,944
TOTAL ASSETS	$	2,335,731	$	2,364,852
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	23,593	$	22,634
Accrued employee compensation	64,249		58,547
Deferred revenue, net	97,510		118,311
Other current liabilities	25,371		25,706
Total current liabilities	210,723		225,198
Lease liabilities	121,770		119,408
Convertible senior notes, net	336,922		330,208
Deferred revenue, net	11,075		14,685
Other liabilities	10,578		18,585
Total liabilities	691,068		708,084
STOCKHOLDERS’ EQUITY:
Common stock	8		8
Additional paid-in capital	1,559,473		1,499,050
Accumulated other comprehensive income (loss)	(5,023)		(5,246)
Retained earnings	90,205		162,956
Total stockholders’ equity	1,644,663		1,656,768
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,335,731	$	2,364,852


	Three Months Ended January 31,				Six Months Ended January 31,
	2021		2020		2021		2020
Revenue:
Subscription and support	$	59,563	$	49,550	$	117,529	$	98,581
License	77,912		76,520		143,195		130,883
Services	42,587		47,388		89,140		101,004
Total revenue	180,062		173,458		349,864		330,468
Cost of revenue:
Subscription and support	40,158		28,212		77,164		53,145
License	2,834		2,904		5,771		5,461
Services	48,910		52,480		99,934		105,846
Total cost of revenue	91,902		83,596		182,869		164,452
Gross profit:
Subscription and support	19,405		21,338		40,365		45,436
License	75,078		73,616		137,424		125,422
Services	(6,323)		(5,092)		(10,794)		(4,842)
Total gross profit	88,160		89,862		166,995		166,016
Operating expenses:
Research and development	53,194		49,954		105,809		96,450
Sales and marketing	39,216		37,339		75,860		70,355
General and administrative	22,820		20,599		44,000		41,838
Total operating expenses	115,230		107,892		225,669		208,643
Income (loss) from operations	(27,070)		(18,030)		(58,674)		(42,627)
Interest income	2,015		6,958		4,804		14,594
Interest expense	(4,651)		(4,462)		(9,271)		(8,891)
Other income (expense), net	6,805		(182)		9,373		(433)
Income (loss) before provision for (benefit from) income taxes	(22,901)		(15,716)		(53,768)		(37,357)
Provision for (benefit from) income taxes	(14,249)		4,228		(24,926)		(2,422)
Net income (loss)	$	(8,652)	$	(19,944)	$	(28,842)	$	(34,935)
Net income (loss) per share:
Basic	$	(0.10)	$	(0.24)	$	(0.34)	$	(0.42)
Diluted	$	(0.10)	$	(0.24)	$	(0.34)	$	(0.42)
Shares used in computing net income (loss) per share:
Basic	83,830,624		82,725,641		83,737,889		82,543,267
Diluted	83,830,624		82,725,641		83,737,889		82,543,267


	Common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance as of July 31, 2020	83,461,925	$	8	$	1,499,050	$	(5,246)	$	162,956	$	1,656,768
Net income (loss)	—	—		—		—		(20,190)		(20,190)
Issuance of common stock upon exercise of stock options	39,169	—		1,716		—		—		1,716
Issuance of common stock upon vesting of Restricted Stock Units (“RSUs”)	339,759	—		—		—		—		—
Stock-based compensation	—	—		28,394		—		—		28,394
Repurchase and retirement of common stock	(48,997)	—		—		—		(5,000)		(5,000)
Foreign currency translation adjustment	—	—		—		(694)		—		(694)
Unrealized gain (loss) on available-for-sale securities, net of tax	—	—		—		(1,480)		—		(1,480)
Reclassification adjustment for realized gain (loss) on available-for-sale securities, included in net income (loss)	—	—		—		347		—		347



Balance as of October 31, 2020	83,791,856	$	8	$	1,529,160	$	(7,073)	$	137,766	$	1,659,861
Net income (loss)	—	—		—		—		(8,652)		(8,652)
Issuance of common stock upon exercise of stock options	9,415	—		104		—		—		104
Issuance of common stock upon vesting of RSUs	283,454	—		—		—		—		—
Stock-based compensation	—	—		30,209		—		—		30,209
Repurchase and retirement of common stock	(309,562)	—		—		—		(38,909)		(38,909)
Foreign currency translation adjustment	—	—		—		2,726		—		2,726
Unrealized gain (loss) on available-for-sale securities, net of tax	—	—		—		(996)		—		(996)
Reclassification adjustment for realized gain (loss) on available-for-sale securities, included in net income (loss)	—	—		—		320		—		320



Balance as of January 31, 2021	83,775,163	$	8	$	1,559,473	$	(5,023)	$	90,205	$	1,644,663


Computer hardware						3 years
Purchased software						3 years
Equipment and machinery						3 to 5 years
Furniture and fixtures						5 years
Leasehold improvements						Shorter of 10 years or remaining lease term


	Three Months Ended January 31, 2021
	Subscription and support		License		Services		Total
Geography:
United States	$	39,865	$	39,438	$	28,295	$	107,598
Canada	7,862		8,606		2,653		19,121
Other Americas	1,112		188		1,517		2,817
Total Americas	48,839		48,232		32,465		129,536
United Kingdom	1,650		6,449		848		8,947
Other EMEA	4,694		11,282		6,691		22,667
Total EMEA	6,344		17,731		7,539		31,614
Total APAC	4,380		11,949		2,583		18,912
Total revenue	$	59,563	$	77,912	$	42,587	$	180,062


	Three Months Ended January 31, 2020
	Subscription and support		License		Services		Total
Geography:
United States	$	33,679	$	37,987	$	34,731	$	106,397
Canada	4,511		8,237		1,468		14,216
Other Americas	1,133		2,180		2,453		5,766
Total Americas	39,323		48,404		38,652		126,379
United Kingdom	1,715		9,444		1,270		12,429
Other EMEA	4,395		6,480		3,897		14,772
Total EMEA	6,110		15,924		5,167		27,201
Total APAC	4,117		12,192		3,569		19,878
Total revenue	$	49,550	$	76,520	$	47,388	$	173,458


	Six Months Ended January 31, 2021
	Subscription and support		License		Services		Total
Geography:
United States	$	78,878	$	80,415	$	60,655	$	219,948
Canada	15,004		19,359		3,790		38,153
Other Americas	2,225		423		3,363		6,011
Total Americas	96,107		100,197		67,808		264,112
United Kingdom	3,680		14,748		2,163		20,591
Other EMEA	9,814		12,085		13,669		35,568
Total EMEA	13,494		26,833		15,832		56,159
Total APAC	7,928		16,165		5,500		29,593
Total revenue	$	117,529	$	143,195	$	89,140	$	349,864


	Six Months Ended January 31, 2020
	Subscription and support		License		Services		Total
Geography:
United States	$	67,325	$	65,454	$	72,059	$	204,838
Canada	9,056		17,227		2,718		29,001
Other Americas	2,218		2,414		4,622		9,254
Total Americas	78,599		85,095		79,399		243,093
United Kingdom	3,795		14,984		3,584		22,363
Other EMEA	8,736		7,206		9,946		25,888
Total EMEA	12,531		22,190		13,530		48,251
Total APAC	7,451		23,598		8,075		39,124
Total revenue	$	98,581	$	130,883	$	101,004	$	330,468


	January 31, 2021	July 31, 2020
Unbilled accounts receivable, net	116,286	$	84,228
Contract costs, net	35,391	34,809

Deferred revenue, net	108,585	132,996


	January 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Government agency securities	$	180,916	$	115	$	(37)	$	180,994
Commercial paper	304,059		—		—		304,059
Corporate bonds	397,727		1,517		(25)		399,219
U.S. Government bonds	147,582		258		—		147,840
Asset-backed securities	44,095		94		—		44,189
Foreign government bonds	7,445		10		—		7,455
Certificates of deposit	76,724		—		—		76,724
Money market funds	119,632		—		—		119,632
Strategic convertible debt investment*	1,000		—		—		1,000
Total	$	1,279,180	$	1,994	$	(62)	$	1,281,112


	January 31, 2021
	Less Than 12 Months		12 Months or Greater		Total
U.S. Government agency securities	$	152,144	$	28,850	$	180,994
Commercial paper	304,059		—		304,059
Corporate bonds	276,220		122,999		399,219
U.S. Government bonds	127,551		20,289		147,840
Asset-backed securities	488		43,701		44,189
Foreign government bonds	—		7,455		7,455
Certificates of deposit	72,223		4,501		76,724
Money market funds	119,632		—		119,632
Strategic convertible debt investment	$	—	$	1,000	$	1,000
Total	$	1,052,317	$	228,795	$	1,281,112


	January 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Commercial paper	$	—	$	108,540	$	—	$	108,540

U.S. Government bonds	—		9,300		—		9,300
Money market funds	119,632		—		—		119,632

Total cash equivalents	119,632		117,840		—		237,472
Short-term investments:
U.S. Government agency securities	—		152,144		—		152,144
Commercial paper	—		195,519		—		195,519
Corporate bonds	—		276,220		—		276,220
U.S. Government bonds	—		118,251		—		118,251
Asset-backed securities	—		488		—		488

Certificates of deposit	—		72,223		—		72,223
Total short-term investments	—		814,845		—		814,845
Long-term investments:
U.S. Government agency securities	—		28,850		—		28,850

Corporate bonds	—		122,999		—		122,999
U.S. Government bonds	—		20,289		—		20,289
Asset-backed securities	—		43,701		—		43,701
Foreign government bonds	—		7,455		—		7,455
Certificates of deposit	—		4,501		—		4,501
Strategic convertible debt investment	—		—		1,000		1,000
Total long-term investments	—		227,795		1,000		228,795
Total	$	119,632	$	1,160,480	$	1,000	$	1,281,112


	Six Months Ended January 31,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(28,842)	$	(34,935)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	20,971		21,644
Amortization of debt discount and issuance costs	6,715		6,354

Stock-based compensation	57,980		51,294

Changes to allowance for credit losses and revenue reserves	118		878
Deferred income tax	(20,294)		(4,361)
Amortization of premium (accretion of discount) on available-for-sale securities, net	3,128		(2,012)

Other non-cash items affecting net income (loss)	800		572
Changes in operating assets and liabilities:
Accounts receivable	22,368		36,259
Unbilled accounts receivable	(32,058)		(17,018)
Prepaid expenses and other assets	1,914		(3,527)
Operating lease assets	91		4,493
Accounts payable	(4,312)		(4,032)
Accrued employee compensation	3,844		(28,794)
Deferred revenue	(24,411)		(23,583)
Lease liabilities	2,669		241
Other liabilities	(13,059)		(2,137)
Net cash provided by (used in) operating activities	(2,378)		1,336
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities	(523,601)		(601,403)
Sales of available-for-sale securities	85,553		67,942
Maturities of available-for-sale securities	456,198		508,807
Purchases of property and equipment	(5,517)		(11,254)
Capitalized software development costs	(4,884)		(2,210)
Acquisition of strategic investments	(2,000)		—

Net cash provided by (used in) investing activities	5,749		(38,118)
CASH FLOWS FROM FINANCING ACTIVITIES:


		January 31, 2021						July 31, 2020
	Remaining Weighted-Average Useful Life (in years)	Cost		Accumulated Amortization		Net Book Value		Cost		Accumulated Amortization		Net Book Value
Intangible assets:
Acquired technology	1.6	$	93,600	$	82,244	$	11,356	$	93,600	$	73,191	$	20,409
Customer contracts and related relationships	3.5	35,700		21,466		14,234		35,700		18,500		17,200
Partner relationships	4.2	200		107		93		200		96		104
Trademarks	3.8	2,500		1,161		1,339		2,500		982		1,518
Order backlog	0.1	8,700		8,661		39		8,700		8,223		477
Total	2.7	$	140,700	$	113,639	$	27,061	$	140,700	$	100,992	$	39,708


Fiscal year ending July 31,
2021 (remainder of fiscal year)	$	7,318
2022	11,143
2023	3,799
2024	2,379
2025	1,938
Thereafter	484
Total	$	27,061


	January 31, 2021		July 31, 2020
Bonus	$	22,105	$	20,188
Commission	2,875		7,201
Vacation	21,943		20,637
Salaries, payroll taxes, and benefits	17,326		10,521
Accrued employee compensation	$	64,249	$	58,547


Balance as of July 31, 2020	$	1,276
Net changes to credit losses	—
Net changes to revenue reserves	118
Write-offs, net	(2)
Balance as of January 31, 2021	$	1,392


	January 31, 2021		July 31, 2020
Prepaid expenses	$	16,579	$	16,969
Contract costs	10,768		9,588
Deferred costs	8,165		8,399
Deposits and other receivables	13,048		11,033
Prepaid expenses and other current assets	$	48,560	$	45,989


	January 31, 2021		July 31, 2020
Principal	$	400,000	$	400,000
Less unamortized:
Debt discount	56,431		62,508
Debt issuance costs	6,647		7,284
Net carrying amount	$	336,922	$	330,208


Fiscal Year Ending July 31,
2021 (remainder of fiscal year)	$	7,194
2022	18,067
2023	16,791
2024	16,565
2025	16,957
Thereafter	85,783
Total future lease payments	161,357
Less imputed interest	(28,344)
Total lease liability balance	$	133,013


	Unrecognized Expense		Weighted Average Expected Recognition Period
	(in thousands)		(in years)
Stock options	$	144	0.3
Stock Awards	272,195		2.7
	$	272,339


	Stock Awards Outstanding
	Number of Stock Awards Outstanding	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)(1)
Balance as of July 31, 2020	2,445,698	$	99.34	$	287,761
Granted	1,231,094	$	112.48
Released	(623,213)	$	94.42	$	71,793
Canceled	(169,013)	$	102.05
Balance as of January 31, 2021	2,884,566	$	105.86	$	330,975
Expected to vest as of January 31, 2021	2,884,566	$	105.86	$	330,975


	Stock Options Outstanding
	Number of Stock Options Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value (1)
				(in years)	(in thousands)
Balance as of July 31, 2020	80,332	$	29.80	5.2	$	7,058
Granted	—
Exercised	(48,584)	$	37.47		$	3,534
Canceled	(1,122)	$	11.24
Balance as of January 31, 2021	30,626	$	18.31	5.3	$	2,953
Vested and expected to vest as of January 31, 2021	30,626	$	18.31	5.3	$	2,953
Exercisable as of January 31, 2021	28,354	$	18.88	5.2	$	2,718


	January 31, 2021	July 31, 2020
Exercise of stock options to purchase common stock	30,626	80,332
Vesting of stock awards	2,884,566	2,445,698
Shares available under stock plans	5,068,549	23,460,234
Total common stock reserved for issuance	7,983,741	25,986,264


	January 31, 2021		July 31, 2020
Americas	$	431,489	$	440,291
EMEA	8,289		4,021
APAC	1,290		1,508
Total	$	441,068	$	445,820


	Three Months Ended January 31,
	2021		As a % of total revenue		2020		As a % of total revenue
	(in thousands, except percentages)
Revenue:
Subscription and support	$	59,563	33	%	$	49,550	29	%
License	77,912		43		76,520		44
Services	42,587		24		47,388		27
Total revenue	180,062		100		173,458		100
Cost of revenue:
Subscription and support	40,158		22		28,212		17
License	2,834		2		2,904		1
Services	48,910		27		52,480		30
Total cost of revenue	91,902		51		83,596		48
Gross profit:
Subscription and support	19,405		11		21,338		12
License	75,078		41		73,616		43
Services	(6,323)		(3)		(5,092)		(3)
Total gross profit	88,160		49		89,862		52
Operating expenses:
Research and development	53,194		30		49,954		28
Sales and marketing	39,216		22		37,339		22
General and administrative	22,820		13		20,599		12
Total operating expenses	115,230		65		107,892		62
Income (loss) from operations	(27,070)		(16)		(18,030)		(10)
Interest income	2,015		1		6,958		4
Interest expense	(4,651)		(3)		(4,462)		(3)
Other income (expense), net	6,805		4		(182)		—
Income (loss) before provision for (benefit from) income taxes	(22,901)		(14)		(15,716)		(9)
Provision for (benefit from) income taxes	(14,249)		(8)		4,228		2
Net income (loss)	$	(8,652)	(6)	%	$	(19,944)	(11)	%


Tax impact of non-GAAP adjustments (1)	9,912		(6,765)		43,012		(3,820)


Non-GAAP tax provision (benefit)	$	5,983	$	3,402	$	(1,551)	$	5,664

Net income (loss) per share reconciliation:
GAAP net income (loss) per share — diluted	$	(0.10)	$	(0.24)	$	(0.34)	$	(0.42)
Non-GAAP adjustments:
Stock-based compensation	0.36		0.32		0.70		0.62
Amortization of intangibles	0.08		0.08		0.16		0.17
Amortization of debt discount and issuance costs	0.04		0.04		0.08		0.08

COVID-19 Canada Emergency Wage Subsidy benefit(3)	(0.02)		—		(0.02)		—
Tax impact of non-GAAP adjustments (1)	(0.24)		0.01		(0.28)		(0.10)
Non-GAAP dilutive shares excluded from GAAP net income (loss) per share calculation (2)	(0.01)		—		(0.02)		(0.01)
Non-GAAP net income (loss) per share — diluted	$	0.11	$	0.21	$	0.28	$	0.34

Shares used in computing Non-GAAP income (loss) per share amounts:
GAAP weighted average shares — diluted	83,830,624		82,725,641		83,737,889		82,543,267
Non-GAAP dilutive shares excluded from GAAP income (loss) per share calculation (2)	1,007,573		842,001		859,492		854,608
Pro forma weighted average shares — diluted	84,838,197		83,567,642		84,597,381		83,397,875



	January 31, 2021		July 31, 2020
Cash, cash equivalents, and investments	$	1,375,027	$	1,434,267
Working capital	$	1,158,241	$	1,118,020


Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number Of Shares Purchased As Part Of Publicly Announced Plans Or Programs (1)	Approximate Dollar Value (in millions) of Shares That May Yet Be Purchased Under The Plans or Programs (1)



November 1, 2020 - November 30, 2020	42,633	$116.23	91,630	$190.0
December 1, 2020 - December 31, 2020	113,162	$127.55	204,792	$175.6
January 1, 2021 - January 31, 2021	153,767	$126.95	358,559	$156.1


Date:	March 4, 2021	GUIDEWIRE SOFTWARE, INC.

		By:	/s/ JEFF COOPER
			Jeff Cooper
			Chief Financial Officer (Principal Financial and Accounting Officer)