Guidewire Software, Inc. CAPEX surged on 378% and Revenue increased on 8.8%
09/05/2019 • About Guidewire Software, Inc. (
$GWRE) • By InTwits
Guidewire Software, Inc. reported FY2019 financial results today. Here are the key drivers of the company's long term financial model:
- Guidewire Software, Inc. is a fast growth stock: FY2019 revenue growth was 8.8%, 5 year revenue CAGR was 15.5% at FY2019 ROIC 0.081%
- Guidewire Software, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2015-FY2019 was 9.6% while average EBITDA Margin was 6.3% for the sames years
- Guidewire Software, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.4%. At the same time it's a lot of higher than industry average of 3.5%.
- CAPEX is quite volatile: $45m in FY2019, $9m in FY2018, $6m in FY2017, $7m in FY2016, $6m in FY2015
- The company has potentially unprofitable business model: ROIC is 0.1%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.5x while industry average is -2.1x
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 increased on 8.8%. During the last 5 years Revenue growth topped in FY2018 at 28.5%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 10.3 pp from 65.0% to 54.7% in FY2019.
Gross Margin showed almost no change in FY2019. During the last 5 years Gross Margin topped in FY2016 at 64.2% and was declining since that time. SG&A as a % of Revenue decreased slightly on 1.7 pp from 30.3% to 28.5% in FY2019. SG&A as a % of Revenue stuck to a declining trend at -1.1 pp per annum in FY2015-FY2019.
Net Income margin increased on 5.9 pp from -3.0% to 2.9% in FY2019.
Investments (CAPEX, working capital and M&A)
Guidewire Software, Inc.'s CAPEX/Revenue was 6.2% in FY2019. Guidewire Software, Inc.'s CAPEX/Revenue increased on 4.6 pp from 1.7% in FY2016 to 6.2% in FY2019. It's average level of CAPEX/Revenue for the last three years was 2.9%. Guidewire Software, Inc. investments to CAPEX were large: 108% of EBITDA.
Return on investment
The company operates at low ROIC (0.1%) and ROE (1.4%). ROIC increased slightly on 0.64 pp from -0.56% to 0.081% in FY2019. ROE increased on 3.1 pp from -1.7% to 1.4% in FY2019.
Leverage (Debt)
Debt level is 1.5x Net Debt / EBITDA and 7.7x Debt / EBITDA. Net Debt / EBITDA surged on 6.2x from -4.7x to 1.5x in FY2019. Debt increased on 4.0% while cash dropped on 41.9%. Net Debt/EBITDA followed a growing trend at 2.2x per annum in the last 5 years.
The company has no short term refinancing risk: short term debt is zero.
Valuation and dividends
The company's trades at EV/EBITDA 211.7x and P/E 420.0x.
Management team
Michael Rosenbaum "Mike" is a the company's CEO. Michael Rosenbaum "Mike" is a founder and has spent 1 year with the company.
Financial and operational results
FY ended 07/31/2019
Guidewire Software, Inc. ($GWRE) key annual financial indicators| mln. $ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 380.5 | 424.4 | 514.3 | 661.1 | 719.5 | 8.8% |
| Gross Profit | 233.4 | 272.6 | 322.7 | 364.4 | 395.2 | 8.5% |
| SG&A | 123.4 | 143.7 | 165.8 | 200.0 | 205.2 | 2.6% |
| EBITDA | 28.8 | 25.3 | 45.3 | 28.3 | 41.4 | 46.5% |
| EBIT | 16.5 | 16.4 | 26.6 | -7.3 | | |
| Tax | 6.9 | 5.8 | 12.1 | 19.7 | | |
| Net Income | 9.9 | 15.0 | 21.2 | -19.7 | 20.7 | |
| Stock Based Compensation | 47.8 | 59.0 | 62.7 | 89.6 | | |
Balance Sheet
|
|---|
| Cash | 212.4 | 223.6 | 263.2 | 437.1 | 254.1 | -41.9% |
| Accounts Receivable | 62.1 | 62.8 | 79.4 | 124.8 | | |
| Accounts Payable | 8.8 | 9.9 | 13.4 | 30.6 | | |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 305.1 | 317.3 | 4.0% |
Cash flow
|
|---|
| Capex | 6.3 | 7.1 | 5.9 | 9.4 | 44.9 | 378.0% |
| Acquisitions | | 39.5 | 187.6 | 130.1 | | |
Ratios
|
|---|
| Revenue growth | 8.6% | 11.5% | 21.2% | 28.5% | 8.8% | |
| EBITDA growth | 14.5% | -12.3% | 79.3% | -37.6% | 46.5% | |
|
|---|
| Gross Margin | 61.3% | 64.2% | 62.8% | 55.1% | 54.9% | -0.2% |
| EBITDA Margin | 7.6% | 6.0% | 8.8% | 4.3% | 5.8% | 1.5% |
| EBIT Margin | 4.3% | 3.9% | 5.2% | -1.1% | |
| SG&A, % of revenue | 32.4% | 33.9% | 32.2% | 30.3% | 28.5% | -1.7% |
| SBC, % of revenue | 12.6% | 13.9% | 12.2% | 13.6% | |
| Net Income Margin | 2.6% | 3.5% | 4.1% | -3.0% | 2.9% | 5.9% |
| CAPEX, % of revenue | 1.7% | 1.7% | 1.1% | 1.4% | 6.2% | 4.8% |
|
|---|
| ROIC | 2.5% | 2.2% | 3.2% | -0.6% | 0.1% | 0.6% |
| ROE | 1.5% | 2.0% | 2.5% | -1.7% | 1.4% | 3.1% |
| Net Debt/EBITDA | -7.4x | -8.8x | -5.8x | -4.7x | 1.5x | 6.2x |
People
|
|---|
| Insider ownership | 0.1% | 0.1% | 0.1% | 0.1% | | |
| Employees | 1,341 | 1,536 | 1,893 | 2,292 | | |
| Revenue/Employee, th. $ | 284 | 276 | 272 | 288 | | |
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 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| 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 ($INS) | 14.2% | 71.0% | 12.2% | 119.0% | |
| |
|---|
| Median (152 companies) | 13.9% | 14.4% | 14.8% | 15.1% | 10.5% |
|---|
| Guidewire Software, Inc. ($GWRE) | | | 21.2% | 28.5% | 8.8% |
Top companies by Gross margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 97.4% | 98.0% | 97.6% | 96.5% | |
| hopTo Inc ($HPTO) | 87.8% | 95.9% | 98.2% | 95.4% | |
| Aware, Inc. ($AWRE) | 87.2% | 90.3% | 94.6% | 92.3% | |
| Alteryx, Inc. ($AYX) | 80.5% | 81.3% | 83.4% | 91.0% | |
| Aspen Technology, Inc. ($AZPN) | 88.7% | 89.7% | 90.2% | 89.9% | |
| |
|---|
| Median (151 companies) | 63.0% | 63.8% | 64.6% | 66.0% | 47.7% |
|---|
| Guidewire Software, Inc. ($GWRE) | | 64.2% | 62.8% | 55.1% | 54.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Aspen Technology, Inc. ($AZPN) | 42.2% | 46.0% | 45.2% | 43.3% | |
| ANSYS, Inc. ($ANSS) | 45.8% | 45.1% | 41.9% | 41.4% | |
| Paycom Software, Inc. ($PAYC) | 19.5% | 35.1% | 34.4% | 35.9% | |
| j2 Global, Inc. ($JCOM) | 40.6% | 41.7% | 36.5% | 35.7% | |
| Adobe Inc. ($ADBE) | 25.9% | 31.2% | 34.2% | 35.3% | |
| |
|---|
| Median (153 companies) | -10.7% | -5.3% | -4.2% | -3.3% | 15.6% |
|---|
| Guidewire Software, Inc. ($GWRE) | | 6.0% | 8.8% | 4.3% | 5.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| TimefireVR Inc ($TFVR) | 350.5% | 4.3% | | 1,021.9% | |
| MGT Capital Investments Inc ($MGTI) | 36.5% | 221.4% | 129.8% | 344.5% | |
| Integrated Ventures Inc ($INTV) | | | | 199.9% | 15.2% |
| ShotSpotter, Inc. ($SSTI) | 18.3% | 28.9% | 27.1% | 24.3% | |
| Ellie Mae, Inc. ($ELLI) | 20.6% | 16.7% | 21.1% | 19.4% | |
| |
|---|
| Median (154 companies) | 2.8% | 3.0% | 2.3% | 2.4% | 3.0% |
|---|
| Guidewire Software, Inc. ($GWRE) | | 1.7% | 1.1% | 1.4% | 6.2% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| InsPro Technologies Corp ($ITCC) | | | | 127.4% | |
| Manhattan Associates, Inc. ($MANH) | 78.7% | 99.3% | 102.5% | 80.9% | |
| Intuit Inc. ($INTU) | 23.7% | 52.1% | 72.6% | 66.8% | |
| Aspen Technology, Inc. ($AZPN) | | | | 58.1% | |
| Paycom Software, Inc. ($PAYC) | 30.5% | 75.4% | 51.1% | 47.5% | |
| |
|---|
| Median (180 companies) | -12.2% | -9.8% | -11.8% | -10.6% | 10.4% |
|---|
| Guidewire Software, Inc. ($GWRE) | | 2.2% | 3.2% | -0.6% | 0.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Upland Software, Inc. ($UPLD) | | 16.4x | 115.6x | 16.7x | |
| Nuance Communications, Inc. ($NUAN) | 5.7x | 5.3x | 7.1x | 15.2x | |
| Asure Software Inc ($ASUR) | 4.5x | 3.6x | 9.5x | 14.5x | |
| SS&C Technologies Holdings, Inc. ($SSNC) | 7.3x | 4.6x | 3.1x | 8.5x | |
| Avaya Holdings Corp. ($AVYA) | | | | 7.4x | |
| |
|---|
| Median (69 companies) | -0.8x | -0.9x | -0.8x | -0.6x | -0.9x |
|---|
| Guidewire Software, Inc. ($GWRE) | | -8.8x | -5.8x | -4.7x | 1.5x |
