Guidewire Software, Inc. EBITDA dropped on 37.6% while Revenue jumped on 28.5%
09/05/2018 • About Guidewire Software, Inc. (
$GWRE) • By InTwits
Guidewire Software, Inc. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Guidewire Software, Inc. is a fast growth stock: FY2018 revenue growth was 28.5%, 5 year revenue CAGR was 17.1% at FY2018 ROIC -0.56%
- Guidewire Software, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 is 12.6%. Average EBITDA Margin for the same period was 6.6%. In FY2018 SBC/Revenue was even higher: 13.6%
- Guidewire Software, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.5%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $515m in 2018, $396m in 2017, $213m in 2016, $272m in 2015, $202m in 2014
- In the last 5 years the company invested considerably less than D&A: $34m vs. $82m. In FY2018 this situation was still the same: CAPEX was 9 while D&A was 36
- The company has unprofitable business model: ROIC is -0.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Guidewire Software, Inc.'s Revenue surged on 28.5%. Revenue growth showed acceleration in FY18Q4 - it increased 37.3% YoY. During the last 5 years Revenue growth bottomed in FY2015 at 8.6% and was accelerating since that time. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 5.7 pp from 30.8% to 25.1% in FY2018.
Gross Margin decreased on 7.6 pp from 62.8% to 55.1% in FY2018. During FY2014-FY2018 Gross Margin topped in FY2016 at 64.2% and was declining since that time. SG&A as a % of Revenue decreased slightly on 2.0 pp from 32.2% to 30.3% in FY2018. During the last 5 years SG&A as a % of Revenue topped in FY2016 at 33.9% and was declining since that time. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 1.4 pp from 12.2% to 13.6% in FY2018.
Net Income margin decreased on 7.1 pp from 4.1% to -3.0% in FY2018.
Investments (CAPEX, working capital and M&A)
Guidewire Software, Inc.'s CAPEX/Revenue was 1.4% in FY2018. The company showed almost no change in CAPEX/Revenue from FY2015 to FY2018. For the last three years the average CAPEX/Revenue was 1.4%.
Accounts receivable as a % of Revenue increased on 3.4 pp from 15.4% to 18.9% in FY2018. Accounts payable as a % of Revenue increased on 3.3 pp from 7.0% to 10.3% in FY2018.
Guidewire Software, Inc. has spent
$130m on M&A in FY2018 which accounts for 19.7% of revenue.
Return on investment
The company operates at negative ROIC (-0.6%) and ROE (-1.7%). ROIC decreased on 3.7 pp from 3.2% to -0.56% in FY2018. ROE decreased on 4.2 pp from 2.5% to -1.7% in FY2018.
Leverage (Debt)
Debt level is -4.7x Net Debt / EBITDA and 10.8x Debt / EBITDA. Debt surged while cash surged on 66.1%.
The company has no short term refinancing risk: short term debt is zero.
Management team
The company's CEO is Marcus S Ryu. Marcus S Ryu is a founder and has 8 years tenure with the company. CEO total compensation was
$11,210,472 in FY2018 which included
$530,000 salary. The company's CFO Curtis H Smith has spent 1 year with the company.
Insider ownership is 0.15%. Insider ownership didn't change in 2018.
At the end of financial year the company had 2,292 employees. The number of employees surged on 21.1%. Average revenue per employee in FY2018 was
$288,424 and it increased on 6.2%.
Financial and operational results
FY ended 07/31/2018
Guidewire Software, Inc. ($GWRE) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 350.2 | 380.5 | 424.4 | 514.3 | 661.1 | 28.5% |
| Gross Profit | 201.3 | 233.4 | 272.6 | 322.7 | 364.4 | 12.9% |
| SG&A | 106.7 | 123.4 | 143.7 | 165.8 | 200.0 | 20.7% |
| EBITDA | 25.2 | 28.8 | 25.3 | 45.3 | 28.3 | -37.6% |
| EBIT | 18.4 | 16.5 | 16.4 | 26.6 | -7.3 | -127.5% |
| Tax | 5.2 | 6.9 | 5.8 | 12.1 | 19.7 | 63.3% |
| Net Income | 14.7 | 9.9 | 15.0 | 21.2 | -19.7 | -192.7% |
| Stock Based Compensation | 35.5 | 47.8 | 59.0 | 62.7 | 89.6 | 42.9% |
Balance Sheet
|
|---|
| Cash | 148.1 | 212.4 | 223.6 | 263.2 | 437.1 | 66.1% |
| Accounts Receivable | 49.8 | 62.1 | 62.8 | 79.4 | 124.8 | 57.2% |
| Accounts Payable | 7.0 | 8.8 | 9.9 | 13.4 | 30.6 | 128.3% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 305.1 | |
Cash flow
|
|---|
| Capex | 5.0 | 6.3 | 7.1 | 5.9 | 9.4 | 59.7% |
| Acquisitions | 0.2 | | 39.5 | 187.6 | 130.1 | -30.7% |
Ratios
|
|---|
| Revenue growth | 16.5% | 8.6% | 11.5% | 21.2% | 28.5% | |
| EBITDA growth | -27.2% | 14.5% | -12.3% | 79.3% | -37.6% | |
|
|---|
| Gross Margin | 57.5% | 61.3% | 64.2% | 62.8% | 55.1% | -7.6% |
| EBITDA Margin | 7.2% | 7.6% | 6.0% | 8.8% | 4.3% | -4.5% |
| EBIT Margin | 5.3% | 4.3% | 3.9% | 5.2% | -1.1% | -6.3% |
| SG&A, % of revenue | 30.5% | 32.4% | 33.9% | 32.2% | 30.3% | -2.0% |
| SBC, % of revenue | 10.1% | 12.6% | 13.9% | 12.2% | 13.6% | 1.4% |
| Net Income Margin | 4.2% | 2.6% | 3.5% | 4.1% | -3.0% | -7.1% |
| CAPEX, % of revenue | 1.4% | 1.7% | 1.7% | 1.1% | 1.4% | 0.3% |
|
|---|
| ROIC | 4.2% | 2.5% | 2.2% | 3.2% | -0.6% | -3.7% |
| ROE | 3.4% | 1.5% | 2.0% | 2.5% | -1.7% | -4.2% |
| Net Debt/EBITDA | -5.9x | -7.4x | -8.8x | -5.8x | -4.7x | 1.1x |
People
|
|---|
| Insider ownership | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% | 0.0% |
| Employees | 1,183 | 1,341 | 1,536 | 1,893 | 2,292 | 21.1% |
| Revenue/Employee, th. $ | 296 | 284 | 276 | 272 | 288 | 6.2% |
Guidewire Software, Inc. ($GWRE) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 108 | 164 | 142 | 249 | | 14.9% | 41.7% | 15.2% | 37.3% |
| EBITDA | -26 | 9 | -19 | 65 | | | -21.7% | -1,383.0% | 36.1% |
| Net Income | -9 | -46 | -31 | 83 | | | -1,246.3% | | 209.8% |
Balance Sheet
|
|---|
| Cash | 255 | 205 | 476 | 437 | | 94.9% | -8.9% | 164.3% | 66.1% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 302 | 305 | | | | | |
Ratios
|
|---|
| Gross Margin | 41.9% | 58.6% | 46.8% | 63.1% | | -13.5% | -6.1% | -11.5% | -5.3% |
| EBITDA Margin | -24.1% | 5.5% | -13.4% | 26.0% | | -7.9% | -4.5% | -14.6% | -0.2% |
| Net Income Margin | -8.2% | -27.8% | -21.9% | 33.6% | | 0.1% | -31.3% | -20.4% | 18.7% |
Peers in Application Software
Below we provide Guidewire Software, Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 14.0% | 14.3% | 14.8% | 15.2% |
|---|
| Guidewire Software, Inc. ($GWRE) | | 8.6% | 11.5% | 21.2% | 28.5% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (149 companies) | 63.4% | 61.9% | 63.8% | 64.6% | 66.0% |
|---|
| Guidewire Software, Inc. ($GWRE) | 57.5% | 61.3% | 64.2% | 62.8% | 55.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (151 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| Guidewire Software, Inc. ($GWRE) | 7.2% | 7.6% | 6.0% | 8.8% | 4.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| Guidewire Software, Inc. ($GWRE) | 1.4% | 1.7% | 1.7% | 1.1% | 1.4% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (178 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -9.8% |
|---|
| Guidewire Software, Inc. ($GWRE) | 4.2% | 2.5% | 2.2% | 3.2% | -0.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.2x | -0.9x | -0.9x | -0.8x | -0.6x |
|---|
| Guidewire Software, Inc. ($GWRE) | -5.9x | -7.4x | -8.8x | -5.8x | -4.7x |
