Guidewire Software, Inc. Debt jumped on 45.1% and Net Debt / EBITDA surged on 1.3x from 1.5x to 2.9x
09/02/2020 • About Guidewire Software, Inc. (
$GWRE) • By InTwits
Guidewire Software, Inc. reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- Guidewire Software, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2016-FY2020 was 6.9% while average EBITDA Margin was 5.6% for the sames years
- Guidewire Software, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.7%. At the same time it's a lot of higher than industry average of 3.0%.
- CAPEX is quite volatile: $21m in FY2020, $45m in FY2019, $9m in FY2018, $6m in FY2017, $7m in FY2016
- The company has unprofitable business model: ROIC is -0.9%
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 3.2%. During FY2016-FY2020 Revenue growth topped in FY2018 at 28.5% and was decelerating since that time. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 1.4 pp from 5.8% to 4.4% in FY2020.
Gross Margin showed almost no change in FY2020. Gross Margin stuck to a declining trend at -2.7 pp per annum in FY2016-FY2020. SG&A as a % of Revenue increased on 2.1 pp from 28.5% to 30.7% in FY2020. During the last 5 years SG&A as a % of Revenue bottomed in FY2019 at 28.5%.
Net Income margin decreased on 6.5 pp from 2.9% to -3.7% in FY2020.
Investments (CAPEX, working capital and M&A)
In FY2020 Guidewire Software, Inc. had CAPEX/Revenue of 2.9%. Guidewire Software, Inc.'s CAPEX/Revenue increased slightly on 1.7 pp from 1.1% in FY2017 to 2.9% in FY2020. Average CAPEX/Revenue for the last three years was 3.5%. Guidewire Software, Inc. invested a large share of EBITDA (65.6%) to CAPEX.
Return on investment
The company operates at negative ROIC (-0.9%) and ROE (-1.7%). ROIC decreased slightly on 0.99 pp from 0.081% to -0.91% in FY2020. ROE decreased on 3.1 pp from 1.4% to -1.7% in FY2020.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.9x and Debt / EBITDA is 14.1x. Net Debt / EBITDA jumped on 1.3x from 1.5x to 2.9x in FY2020. Debt surged on 45.1% while cash surged on 44.4%. Net Debt/EBITDA stuck to a growing trend at 3.1x per annum in the last 5 years.
Guidewire Software, Inc. has no short term refinancing risk: cash is higher than short term debt (3,355.6%).
Management team
Guidewire Software, Inc.'s CEO Michael Rosenbaum "Mike" has spent 1 year with the company. The company's CFO is Jeff Cooper. Jeff Cooper has 9 months years tenure at the company.
Financial and operational results
FY ended 07/31/2020
Guidewire Software, Inc. ($GWRE) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 424.4 | 514.3 | 661.1 | 719.5 | 742.3 | 3.2% |
| Gross Profit | 272.6 | 322.7 | 364.4 | 395.2 | 404.3 | 2.3% |
| SG&A | 143.7 | 165.8 | 200.0 | 205.2 | 227.6 | 10.9% |
| EBITDA | 25.3 | 45.3 | 28.3 | 41.4 | 32.6 | -21.3% |
| EBIT | 16.4 | 26.6 | -7.3 | | | |
| Tax | 5.8 | 12.1 | 19.7 | | | |
| Net Income | 15.0 | 21.2 | -19.7 | 20.7 | -27.2 | -231.2% |
| Stock Based Compensation | 59.0 | 62.7 | 89.6 | | | |
Balance Sheet
|
|---|
| Cash | 223.6 | 263.2 | 437.1 | 254.1 | 367.0 | 44.4% |
| Accounts Receivable | 62.8 | 79.4 | 124.8 | | | |
| Accounts Payable | 9.9 | 13.4 | 30.6 | | | |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 10.9 | |
| Long Term Debt | 0.0 | 0.0 | 305.1 | 317.3 | 449.6 | 41.7% |
Cash flow
|
|---|
| Capex | 7.1 | 5.9 | 9.4 | 44.9 | 21.4 | -52.4% |
| Acquisitions | 39.5 | 187.6 | 130.1 | | | |
Ratios
|
|---|
| Revenue growth | 11.5% | 21.2% | 28.5% | 8.8% | 3.2% | |
| EBITDA growth | -12.3% | 79.3% | -37.6% | 46.5% | -21.3% | |
|
|---|
| Gross Margin | 64.2% | 62.8% | 55.1% | 54.9% | 54.5% | -0.5% |
| EBITDA Margin | 6.0% | 8.8% | 4.3% | 5.8% | 4.4% | -1.4% |
| EBIT Margin | 3.9% | 5.2% | -1.1% | | |
| SG&A, % of revenue | 33.9% | 32.2% | 30.3% | 28.5% | 30.7% | 2.1% |
| SBC, % of revenue | 13.9% | 12.2% | 13.6% | | |
| Net Income Margin | 3.5% | 4.1% | -3.0% | 2.9% | -3.7% | -6.5% |
| CAPEX, % of revenue | 1.7% | 1.1% | 1.4% | 6.2% | 2.9% | -3.4% |
|
|---|
| ROIC | 2.2% | 3.2% | -0.6% | 0.1% | -0.9% | -1.0% |
| ROE | 2.0% | 2.5% | -1.7% | 1.4% | -1.7% | -3.1% |
| Net Debt/EBITDA | -8.8x | -5.8x | -4.7x | 1.5x | 2.9x | 1.3x |
People
|
|---|
| Insider ownership | 0.1% | 0.1% | 0.1% | | | |
| Employees | 1,536 | 1,893 | 2,292 | | | |
| Revenue/Employee, th. $ | 276 | 272 | 288 | | | |
Guidewire Software, Inc. ($GWRE) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 157 | 173 | 168 | 244 | | - | - | - | - |
| EBITDA | -10 | -4 | -12 | 58 | | - | - | - | - |
| Net Income | -15 | -20 | -31 | 39 | | - | - | - | - |
Balance Sheet
|
|---|
| Cash | 179 | 218 | 294 | 367 | | - | - | - | - |
| Short Term Debt | 6 | 10 | 10 | 11 | | - | - | - | - |
| Long Term Debt | 426 | 426 | 426 | 450 | | - | - | - | - |
Ratios
|
|---|
| Gross Margin | 48.5% | 51.8% | 49.0% | 64.0% | | - | - | - | - |
| EBITDA Margin | -6.5% | -2.2% | -6.9% | 23.9% | | - | - | - | - |
| Net Income Margin | -9.5% | -11.5% | -18.5% | 15.9% | | - | - | - | - |
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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 14.8% | 15.1% | 19.5% | 14.7% |
|---|
| Guidewire Software, Inc. ($GWRE) | - | 21.2% | 28.5% | 8.8% | 3.2% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
| |
|---|
| Median (89 companies) | 63.8% | 64.6% | 66.0% | 68.4% | 70.6% |
|---|
| Guidewire Software, Inc. ($GWRE) | 64.2% | 62.8% | 55.1% | 54.9% | 54.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| |
|---|
| Median (89 companies) | -5.3% | -4.2% | -3.3% | 2.7% | 7.7% |
|---|
| Guidewire Software, Inc. ($GWRE) | 6.0% | 8.8% | 4.3% | 5.8% | 4.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 3.0% | 2.3% | 2.4% | 2.9% | 2.5% |
|---|
| Guidewire Software, Inc. ($GWRE) | 1.7% | 1.1% | 1.4% | 6.2% | 2.9% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
| |
|---|
| Median (92 companies) | -9.8% | -11.8% | -10.6% | -4.5% | -2.2% |
|---|
| Guidewire Software, Inc. ($GWRE) | 2.2% | 3.2% | -0.6% | 0.1% | -0.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (53 companies) | -0.9x | -0.8x | -0.6x | 0.4x | 0.0x |
|---|
| Guidewire Software, Inc. ($GWRE) | -8.8x | -5.8x | -4.7x | 1.5x | 2.9x |
