Guidewire Is on a Roll With Go-Lives Stepping Up and Upside All Around

Wide-moat Guidewire GWRE continues to report good results in its fiscal second quarter for key measures, including revenue and non-GAAP operating profit. The firm went live with nine installations, including one Tier-1 customer and five Tier-2 customers. Full-year guidance was raised slightly for revenue and operating profit, as management sees momentum with go-lives and new deals, as well as gross margin progression. During the quarter the company repurchased 3.2 million shares for $200 million under its recently approved authorization. Based on results and guidance, we made only minor tweaks to our model and are therefore maintaining our fair value estimate of $95 per share. We continue to see Guidewire as the primary winner as the property-casualty, or P&C, insurance industry continues to modernize and see consistent momentum in Tier-1 insurers selecting the platform. Like for much of our coverage, we view the stock as attractive for long-term investors.

Second-quarter revenue grew 14% as reported year over year to $233 million, compared with the high end of guidance of $226 million. We see indications of a steady demand environment. Deals from prior quarters ramped a little faster than anticipated. Guidewire remains a model transition story so the focus is on subscriptions and support, which grew 25% year over year, with subscriptions growing 37% to $86 million. Relative to our model, subscription and support was in line, services were ahead, and license was well ahead. Annual recurring revenue, or ARR, grew 17% in constant currency year over year to $707 million. Guidewire signed two new cloud deals, added three cloud migrations, and inked three InsuranceSuite expansions. Management also noted international strength.