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5 days ago
- Business
- Yahoo
GWRE Q1 Earnings Call: Cloud Platform Drives Growth, Misses Revenue Expectations, Raises Guidance
Insurance industry-focused software maker Guidewire (NYSE:GWRE) fell short of the market's revenue expectations in Q1 CY2025, but sales rose 22% year on year to $293.5 million. Its non-GAAP EPS of $0.88 per share was 88.1% above analysts' consensus estimates. Is now the time to buy GWRE? Find out in our full research report (it's free). Revenue: $293.5 million (22% year-on-year growth) Adjusted EPS: $0.88 vs analyst estimates of $0.47 (88.1% beat) Adjusted Operating Income: $46.06 million vs analyst estimates of $39.63 million (15.7% margin, 16.2% beat) Revenue Guidance for Q2 CY2025 is $336 million at the midpoint, above analyst estimates of $332.2 million Operating Margin: 1.5%, up from -6.9% in the same quarter last year Annual Recurring Revenue: $960 million at quarter end, up 15.9% year on year Billings: $289.3 million at quarter end, up 27.8% year on year Market Capitalization: $18.3 billion Guidewire's first quarter results reflected significant customer adoption of its cloud platform and broad-based momentum across the property and casualty insurance industry. CEO Mike Rosenbaum highlighted, 'We closed 17 cloud deals, 14 for at least one of our InsuranceSuite applications, and three for InsuranceNow.' Management attributed the progress to strong execution, particularly among large insurers, and pointed to international traction in Canada, Asia Pacific, and Europe. In addition to robust cloud migrations and expansions, the company's recent acquisition of Quanti was cited as a strategic move to enhance its pricing and rating technology capabilities. The quarter also saw notable customer go-lives, including Cincinnati Insurance Company and Santa Lucia, further validating Guidewire's cloud strategy. Looking ahead, Guidewire's increased guidance is underpinned by expectations for continued growth in annual recurring revenue and accelerated adoption of its cloud offerings. Management believes that investments in product innovation, such as Guidewire Industry Intelligence and generative AI use cases, will expand the platform's relevance for both large and smaller insurers. CFO Jeff Cooper stated the company expects to maintain upper-teens annual recurring revenue growth, driven by larger, longer-term customer commitments and record-low attrition. CEO Rosenbaum emphasized the importance of international markets, with a $60 million investment planned for Japan, signaling a long-term commitment to global expansion. However, management acknowledged that execution in the upcoming quarter is critical, given the high concentration of sales activity and variability in large deal timing. Management attributed the quarter's performance to strength in cloud adoption, successful execution in large and international markets, and early traction with advanced analytics products. Cloud adoption momentum: Guidewire continued to see increased demand for its cloud platform, with 17 new cloud deals and a strong mix of migrations, expansions, and net new wins. Management emphasized that Tier 1 and Tier 2 insurers are increasingly replacing legacy systems to enable faster product launches and business agility. Expansion of InsuranceNow: The company reported three net new InsuranceNow wins, including two of the largest ever on the product. CEO Rosenbaum attributed this success to improvements in the product and closer integration with Guidewire's cloud platform, making it more competitive in the lower tiers of the insurance market. International growth and investment: Guidewire highlighted notable cloud expansion in Canada, APAC, and EMEA, and announced a $60 million investment in Japan over five years to deepen local operations and partnerships. Management views this as a strategic move to capture growing demand from Japanese insurers amid evolving regulations and market dynamics. Advanced analytics and AI initiatives: The first sale of Guidewire Industry Intelligence, a predictive analytics model embedded in the claims workflow, was positioned as an initial step toward monetizing cloud-based industry data. Management also discussed generative AI use cases in claims processing, underwriting, and developer productivity, as key areas of customer interest. Quanti acquisition integration: The addition of Quanti's pricing and rating technology is expected to enhance Guidewire's ability to support more agile actuarial and pricing strategies. The integration is underway, with management noting its applicability for both large and small insurers looking to modernize pricing processes. Guidewire's outlook is shaped by expectations for continued cloud deal momentum, product innovation, and international expansion, tempered by execution risks in large deal timing and ongoing investments. Cloud platform expansion: Management expects sustained demand for Guidewire Cloud Platform, especially as more insurers pursue core system modernization to improve agility. The company sees ongoing migrations and expansions as a key source of recurring revenue growth. Product innovation and analytics: Guidewire plans to broaden adoption of Industry Intelligence and AI-driven tools, aiming to create value for insurers lacking in-house data resources. The rollout of new predictive models and integration of Quanti's capabilities are expected to differentiate Guidewire's platform and drive incremental revenue opportunities. International market commitments: The company's investment in Japan and expansion across Europe and Asia-Pacific are intended to capture market share as global insurers seek compliant, modern technology solutions. However, management cautioned that large deal timing and the pace of international adoption could cause variability in quarterly results. In the coming quarters, the StockStory team will monitor (1) continued growth in annual recurring revenue as Guidewire targets the $1 billion milestone, (2) customer adoption and expansion of Guidewire Industry Intelligence and other analytics tools, and (3) execution of the $60 million investment in Japan and resulting traction with local insurers. We will also track the integration of Quanti's technology and progress in cloud deal momentum globally. Guidewire currently trades at a forward price-to-sales ratio of 14.4×. At this valuation, is it a buy or sell post earnings? Find out in our full research report (it's free). The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025. While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
Yahoo
5 days ago
- Business
- Yahoo
Guidewire Software Inc (GWRE) Q3 2025 Earnings Call Highlights: Record ARR and Strong Cloud ...
ARR (Annual Recurring Revenue): $960 million, with a full-year outlook raised to exceed $1 billion. Total Revenue: $294 million, up 22% year-over-year. Subscription and Support Revenue: $182 million, reflecting 32% year-over-year growth. Services Revenue: $54 million, benefiting from strong services bookings. Gross Profit: $192 million on a non-GAAP basis. Subscription and Support Gross Margin: 71%, compared to 66% a year ago. Services Gross Margin: 13%, compared to 10% a year ago. Operating Profit: $46 million on a non-GAAP basis. Operating Cash Flow: $32 million, ahead of expectations. Cash Equivalents and Investments: Over $1.2 billion. Fiscal Year 2025 Revenue Outlook: Between $1.178 billion and $1.186 billion. Fiscal Year 2025 Subscription Revenue Outlook: Approximately $660 million. Fiscal Year 2025 Subscription and Support Revenue Outlook: $724 million. Fiscal Year 2025 Services Revenue Outlook: Approximately $215 million. Fiscal Year 2025 Non-GAAP Operating Income Outlook: Between $187 million and $195 million. Fiscal Year 2025 Cash Flow from Operations Outlook: Between $255 million and $275 million. Warning! GuruFocus has detected 6 Warning Sign with CRWD. Release Date: June 03, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Guidewire Software Inc (NYSE:GWRE) achieved a record ARR of $960 million, indicating strong market demand and allowing the company to raise its full-year outlook. The company closed 17 cloud deals, including significant wins with tier 1 and tier 2 insurers, showcasing the robustness and maturity of its platform. International momentum is building with significant cloud expansions in Canada, APAC, and EMEA, highlighting global growth potential. Guidewire Software Inc (NYSE:GWRE) reported a 22% year-over-year increase in total revenue, with subscription and support revenue growing by 32%, reflecting strong cloud momentum. The acquisition of Quanti enhances Guidewire Software Inc (NYSE:GWRE)'s pricing and rating technology, potentially broadening its product offerings and market reach. Despite strong performance, the company acknowledges the risks and uncertainties associated with geopolitical events and market conditions that could impact future results. The company's gross margin improvements are partly attributed to temporary credits from cloud service providers, which may not be sustainable long-term. Guidewire Software Inc (NYSE:GWRE) faces challenges in maintaining its momentum, particularly as Q4 is critical for achieving fully ramped ARR results. The integration of Quanti and the associated increase in stock-based compensation could impact profitability in the short term. The company is still working towards its long-term subscription gross margin target of 80%, indicating room for improvement in operational efficiency. Q: Jeff, could you share your thoughts on the fully ramped ARR outlook for this year? A: Jeffrey Cooper, CFO: We feel confident about maintaining fully ramped ARR growth at levels consistent with recent years, around the upper 10s. However, Q4 is critical as it involves larger, multi-year commitments, which can be binary in nature. Achieving this growth for three consecutive years would be a tremendous outcome. Q: Mike, what is driving your success in the Japanese market, and how are customers there viewing your software? A: Michael Rosenbaum, CEO: Our success in Japan is due to our commitment to the market. We are investing significantly to ensure our platform meets the needs of Japanese insurers for the long term. Our dedication to delivering a fit-for-purpose platform and ensuring successful cloud deployments is key to our strategy in Japan. Q: Was there any pull forward from Q4 in your Q3 results, or was it just stronger demand? A: Michael Rosenbaum, CEO: Q3 was strong across all tiers and components of the business. We executed well, and while some deals were expected to slide into Q4, our sales team ensured they closed in Q3. There was no significant pull forward; it was more about strong execution. Q: How are your conversations evolving around being a singular end-to-end vendor for insurers? A: John Mullen, President and CRO: With successful cloud deployments, we are earning the right to broaden conversations with insurers. We are seeing momentum in becoming part of the strategic fabric of carriers' planning, allowing us to engage in discussions about expanding our reach across lines of business and geographies. Q: How do you view the opportunity for Guidewire to help narrow the coverage gap in the insurance industry? A: Michael Rosenbaum, CEO: Agility is key. By providing insurers with the ability to quickly adapt their products and pricing, we enable them to better address coverage gaps. Our platform reduces IT risk, allowing insurers to focus on executing their business strategies effectively. Q: What is driving the record low attrition and high ramping activity in your core market? A: Michael Rosenbaum, CEO: The ramp activity is due to the success of prior years and the follow-through of agreements. Customer success is paramount, and our maturing cloud operations and customer success teams are working closely with clients to ensure successful outcomes, which drives financial performance. Q: Can you discuss the potential of generative AI in your product suite? A: Michael Rosenbaum, CEO: We are taking a broad approach to integrating generative AI across our products. Key areas include improving claims process efficiency, underwriting processes, and developer productivity. We are receiving positive feedback from customers and developers on these initiatives. Q: How do you see Guidewire Industry Intelligence impacting your pricing strategy and customer engagement? A: Michael Rosenbaum, CEO: Guidewire Industry Intelligence offers predictive models that can benefit smaller insurers lacking extensive data. It also helps larger insurers entering new lines or territories. This product line opens new conversations with C-suite executives, focusing on insurance results rather than just operational outcomes. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus.
