Guidewire Software Inc (NYSE:GWRE) ARR rose 16%

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Guidewire Software Inc (NYSE:GWRE) stock fell 8.03% (As on Dec 3, 11:52:03 AM UTC-4, Source: Google Finance) after the company posted better than expected results for the first quarter of FY 22. ARR ended the quarter at $594 million, ahead of the expectations and up 16% year-over-year. The ongoing Cloud strength is also visible in the subscription revenue, which was $57.1 million, up 53% year-over-year. Subscription and support revenue was $79 million, up 36% year-over-year. License revenue was $40.2 million, down $25 million or 38% when compared to Q1 last year. The company expects term license to decline as it has successfully upgraded on-premise customers to the cloud, the decline in Q1 was also due to $15 million of incremental revenue from term license deals that deviated from our standard contract terms in Q1 last year. Services revenue was $46.8 million. This was lower than the expectations due to three complex customer engagements, two of which are cloud migrations where revenue recognition is tied to project percent complete assumptions rather than the typical time and materials arrangements.

GWRE in the first quarter of FY 22 has reported the adjusted loss per share of 21 cents, beating the analysts’ estimates for the adjusted loss per share of 24 cents, according to Zacks Investment Research. The company had reported the adjusted revenue growth of 35.9 percent to $165.9 million in the first quarter of FY 22, beating the analysts’ estimates for revenue of $164.7 million. On a non-GAAP basis, gross profit was $73.9 million. Overall gross margin was 45% down from 54% last year. Subscription and support gross margin was 43%, down from 48% a year ago. This decline was due to large investments the company had made to support the current and future cloud customers. Additionally, accelerating cloud activity in Q1 led to higher-than-expected cloud infrastructure costs. Services gross margin was 4%, up from 2% a year ago.

In addition, the company has ended the quarter with $1.1 billion in cash, cash equivalents and investments. The company has invested $26 million on the repurchase of 226,000 shares in the quarter.

For the second quarter ending in February, Guidewire Software expects revenue to be in the range of $195 million to $199 million. Analysts surveyed by Zacks had expected revenue of $189.6 million. The company expects full-year revenue in the range of $780 million to $790 million.

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