Guidewire Software (NYSE: GWRE) reported Q3 EPS of $0.09, $0.14 better than the analyst estimate of ($0.05). Revenue for the quarter came in at $168.2 million versus the consensus estimate of $152.63 million.

Third Quarter Fiscal Year 2020 Financial Highlights

• Revenue
• Total revenue for the third quarter of fiscal year 2020 was $168.2 million, an increase of 3% from the same quarter in fiscal year 2019. License and subscription revenue was $93.2 million, an increase of 22%; services revenue was $54.3 million, a decrease of 17%; and maintenance revenue was $20.7 million, which remained relatively flat.
• Annual recurring revenue, or ARR, was $483 million as of April 30, 2020, up from $460 million as of July 31, 2019. Quarterly ARR results for fiscal year 2020 are based on actual currency rates at the end of fiscal year 2019, held constant throughout the year.

Profitability

• GAAP loss from operations was $25.6 million for the third quarter of fiscal year 2020, compared with $15.8 million for the comparable period in fiscal year 2019.
• Non-GAAP income from operations was $5.8 million for the third quarter of fiscal year 2020, compared with $12.6 million for the comparable period in fiscal year 2019.
• GAAP net loss was $31.0 million for the third quarter of fiscal year 2020, compared with less than $0.1 million for the comparable period in fiscal year 2019. GAAP net loss per share was $0.37, based on diluted weighted average shares outstanding of 83.0 million, compared with less than $0.01 for the comparable period in fiscal year 2019, based on diluted weighted average shares outstanding of 81.6 million.
• Non-GAAP net income was $7.7 million for the third quarter of fiscal year 2020, compared with $15.2 million for the comparable period in fiscal year 2019. Non-GAAP net income per share was $0.09, based on diluted weighted average shares outstanding of 83.5 million, compared with $0.18 for the comparable period in fiscal year 2019, based on diluted weighted average shares outstanding of 82.6 million.

Liquidity

• The Company had $1.3 billion in cash, cash equivalents, and investments at April 30, 2020, the same as at July 31, 2019. The Company generated $5.9 million in cash from operations and had negative free cash flow of $16.3 million during the nine months ended April 30, 2020.

“We delivered strong financial results in the third quarter highlighted by 105% year-over-year growth in subscription revenue that, along with total revenue and profitability, exceeded our guidance ranges," said Mike Rosenbaum, chief executive officer, Guidewire Software. "I am very proud of how our team and community have responded to the headwinds caused by COVID-19. During our third quarter, we made significant progress on our Guidewire Cloud Platform release, closed a new InsuranceSuite Cloud deal with Aviva Italia, and added three new Cyence customers."

GUIDANCE:

Guidewire Software sees Q4 2020 EPS of $0.41-$0.49, versus the consensus of $0.52. Guidewire Software sees Q4 2020 revenue of $204.9-212.9 million, versus the consensus of $212.15 million.

Guidewire Software sees FY2020 EPS of $0.84-$0.92, versus the consensus of $0.82. Guidewire Software sees FY2020 revenue of $703.5-711.5 million, versus the consensus of $696.27 million.

Leadership Announcements

The Company today announced that chief sales officer Steve Sherry plans to retire next fiscal year and that Frank O’Dowd has been named his successor. Additionally, the Company announced the permanent appointment of Jeff Cooper to the chief financial officer role, after serving in an interim capacity, as well as the promotion of Priscilla Hung to president, chief operating officer.

After nearly 15 years as a sales leader at Guidewire, which was preceded by an extraordinary career in enterprise software, Steve Sherry has decided to retire. “Guidewire is incredibly indebted to Steve for the contribution and leadership he provided during his tenure at Guidewire. He is an incredible sales leader and has built a truly first class sales division here at Guidewire,” said Mr. Rosenbaum. The Company today announced Mr. Sherry’s successor, Frank O’Dowd, who joins Guidewire from Oracle, where he was most recently group vice president and a member of the sales team for over 21 years. “While Steve’s retirement is bittersweet, we are incredibly excited to welcome Frank O’Dowd to the leadership team here at Guidewire,” said Mr. Rosenbaum. Mr. O’Dowd will join Guidewire on June 15, working with Mr. Sherry and the sales team through the end of the fiscal year, before taking over the leadership role. Mr. Sherry will continue with the Company as senior vice president, strategic accounts into the Company’s next fiscal year, to ensure a complete and seamless transition, after which he plans to retire.

After conducting an extensive and thorough search, Guidewire determined that Jeff Cooper was the best individual to lead the finance organization, resulting in the Board of Directors appointing him permanently to the chief financial officer role, after his service in an interim capacity. “Jeff’s command of the very detailed and complex cloud business model transition, combined with the trust he has engendered and the leadership shown during this interim period, clearly demonstrated Jeff is the right chief financial officer for Guidewire,” said Mr. Rosenbaum.

Guidewire also announced that Priscilla Hung, who has been with Guidewire since 2005, including serving as chief operating officer since June 2017, has been promoted to president, chief operating officer. “Priscilla has been a key leader of the organization, embodying the grit, determination, and resilience of our culture. I’m excited to continue to partner with her as we drive the next chapter for Guidewire, Guidewire Cloud and our partner ecosystem,” said Mr. Rosenbaum. “Through most of Guidewire's history, Priscilla has been an essential leader, driving many of our most important initiatives and finding a way to succeed for our customers. The Board and I look forward to her continued leadership in her new role,” said Marcus Ryu, chairman of the board.

For earnings history and earnings-related data on Guidewire Software (GWRE) click here.