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Guidewire (GWRE) Q3 Loss Narrower Than Expected, Revenues Up

Guidewire Software (GWRE) reported non-GAAP loss of 8 cents per share in third-quarter fiscal 2023 (ended Apr 30), which was narrower than the Zacks Consensus Estimate of a loss of 13 cents and year-ago quarter’s non-GAAP loss of 26 cents.

The company reported revenues of $207.5 million, rising 5% year over year. However, the top line missed the Zacks Consensus Estimate by 3.1%.

Guidewire Cloud continued to gain momentum in the reported quarter with eight deal wins.

Guidewire Software, Inc. Price, Consensus and EPS Surprise

Guidewire Software, Inc. Price, Consensus and EPS Surprise
Guidewire Software, Inc. Price, Consensus and EPS Surprise

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

Quarter in Detail

Subscription and support segment’s revenues (51.8% of total revenues) soared 24% from the year-ago quarter’s levels to $107.5 million, owing to higher subscription revenues. Subscription revenues gained 34.1% year over year to $89.1 million. Support revenues declined 9.9% year over year to $18.4 million.

License’s revenues (24.4%) were down 6% year over year to $50.6 million.

Services’ revenues (23.8%) fell 13% year over year to $49.4 million.

Annual recurring revenues (ARR) were $722 million as of Apr 30, up 13.3% (rose 17% on constant currency basis) year over year.

Non-GAAP gross margin expanded 410 basis points (bps) on a year-over-year basis to 51.9%.

Subscription and support segments’ gross margin expanded 870 bps on a year-over-year basis to 55.2%, due to increased cloud infrastructure efficiency. Services’ non-GAAP gross margin was (2.1%) against a gross margin of 3.5% in the year-ago reported quarter.

Total operating expenses increased 7.1% year over year to $156.7 million. Non-GAAP operating loss was $12.2 million compared with a loss of $24.9 million reported in the year-ago quarter.

Financial Details

As of Apr 30, cash and cash equivalents and short-term investments were $806.9 million compared with $714.7 million as of Jan 31.

Guidewire used $48.6 million in cash from operations during the quarter under review, with a free cash outflow of nearly $52.1 million.

Outlook

For fourth-quarter fiscal 2023, revenues are expected in the range of $255-$265 million. ARR is projected to be between $745 million and $755 million. GAAP operating income (loss) is anticipated to be between $(7) million and $3 million. Non-GAAP operating income is estimated to be between $29 million and $39 million.  

For fiscal 2023, the company expects total revenues to be between $890 million and $900 million. ARR is projected in the range of $745-$755 million.

Non-GAAP operating income (loss) is estimated to be between $(4) million and $6 million. Cash flow from operations is anticipated in the range of $10-$40 million.

Zacks Rank & Stocks to Consider

At present, Guidewire carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology space are Dropbox DBX, Badger Meter BMI and Blackbaud BLKB. Dropbox and Badger Meter sport a Zacks Rank #1 (Strong Buy) whereas Blackbaud carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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The Zacks Consensus Estimate for Dropbox’s 2023 earnings has increased 10.1% in the past 60 days to $1.85 per share. The long-term earnings growth rate is anticipated to be 12.3%.

Dropbox’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 10.4%. Shares of DBX have gained 1.6% in the past year.

The Zacks Consensus Estimate for Badger Meter’s 2023 earnings has improved 4.7% in the past 60 days to $2.69 per share.

Badger Meter’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 5.3%. Shares of BMI have surged 75.2% in the past year.

The Zacks Consensus Estimate for Blackbaud’s 2023 earnings has risen 9.3% in the past 60 days to $3.75 per share.

Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 10.4%. Shares of BLKB have increased 12.1% in the past year.

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