Guidewire Announces Third Quarter Fiscal Year 2022 Financial Results

June 07, 2022 at 16:15 PM EDT

Guidewire (NYSE: GWRE) today announced its financial results for the fiscal quarter ended April 30, 2022.

“In the third quarter, we exceeded our outlook for revenue and ARR driven by continued momentum for Guidewire Cloud, closing another eight cloud deals in the quarter,” said Mike Rosenbaum, chief executive officer, Guidewire. “This momentum is a result of the terrific progress we are making with Guidewire Cloud and also the resilience and durability of our customer base and the industry we serve.”

Third Quarter Fiscal Year 2022 Financial Highlights

Revenue

Total revenue for the third quarter of fiscal year 2022 was $197.4 million, an increase of 20% from the same quarter in fiscal year 2021. Subscription and support revenue was $86.9 million, an increase of 34%; services revenue was $56.7 million, an increase of 18%; and license revenue was $53.9 million, an increase of 6%.
Annual recurring revenue, or ARR, was $637 million as of April 30, 2022, compared to $582 million as of July 31, 2021. ARR results for interim quarterly periods in fiscal year 2022 are measured on a constant currency basis, using the actual currency rates at the end of fiscal year 2021 throughout the year.

Profitability

GAAP loss from operations was $62.4 million for the third quarter of fiscal year 2022, compared with $46.8 million for the same quarter in fiscal year 2021.
Non-GAAP loss from operations was $24.9 million for the third quarter of fiscal year 2022, compared with $16.3 million for the same quarter in fiscal year 2021.
GAAP net loss was $57.4 million for the third quarter of fiscal year 2022, compared with $36.6 million for the same quarter in fiscal year 2021. GAAP net loss per share was $0.69, based on diluted weighted average shares outstanding of 83.7 million, compared with $0.44 for the same quarter in fiscal year 2021, based on diluted weighted average shares outstanding of 83.6 million.
Non-GAAP net loss was $21.8 million for the third quarter of fiscal year 2022, compared with $13.2 million for the same quarter in fiscal year 2021. Non-GAAP net loss per share was $0.26, based on diluted weighted average shares outstanding of 83.7 million, compared with $0.16 for the same quarter in fiscal year 2021, based on diluted weighted average shares outstanding of 83.6 million.

Liquidity

The Company had $1.1 billion in cash, cash equivalents, and investments at April 30, 2022, compared to $1.3 billion at July 31, 2021. The Company used $121.5 million in cash from operations during the first nine months of fiscal year 2022 and $43.8 million for the acquisition of HazardHub during the first quarter of fiscal year 2022.

Business Outlook

Guidewire is issuing the following outlook for the fourth quarter of fiscal year 2022 based on current expectations:

ARR between $668 million and $674 million
Total revenue between $226 million and $232 million
Operating income (loss) between $(37) million and $(31) million
Non-GAAP operating income (loss) between $(2) million and $4 million

Guidewire is issuing the following updated outlook for fiscal year 2022 based on current expectations:

ARR between $668 million and $674 million
Total revenue between $794 million and $800 million
Operating income (loss) between $(205) million and $(199) million
Non-GAAP operating income (loss) between $(53) million and $(47) million
Operating cash flow between $10 million and $20 million

Conference Call Information

What:		Guidewire Third Quarter Fiscal Year 2022 Financial Results Conference Call
When:		Tuesday, June 7, 2022
Time:		2:00 p.m. PT (5:00 p.m. ET)
Live Call:		(877) 704-4453, Domestic
Live Call:		(201) 389-0920, International
Replay:		(844) 512-2921, Passcode 13730098, Domestic
Replay		(412) 317-6671, Passcode 13730098, International
Webcast:		http://ir.guidewire.com/ (live and replay)

The webcast will be archived on Guidewire’s website (www.guidewire.com) for a period of three months.

Non-GAAP Financial Measures and Other Metrics

This press release contains the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP income tax provision (benefit), non-GAAP net income (loss) per share, and free cash flow. Non-GAAP gross profit and non-GAAP income (loss) from operations exclude stock-based compensation, amortization of intangibles, the COVID-19 Canada Emergency Wage Subsidy benefit, and acquisition consideration holdback. Non-GAAP net income (loss), non-GAAP income tax provision (benefit), and non-GAAP net income (loss) per share also exclude the amortization of debt discount and issuance costs from our convertible notes and the related tax effects of the non-GAAP adjustments. Free cash flow consists of net cash flow provided by (used in) operating activities less cash used for purchases of property and equipment and capitalized software development costs. These Non-GAAP measures enable us to analyze our financial performance without the effects of certain non-cash items such as amortization, stock-based compensation, and changes in fair value of strategic investments.

Annual recurring revenue ("ARR") is used to quantify the annualized recurring value outlined in active customer contracts at the end of a reporting period. ARR includes the annualized recurring value of term licenses, subscription agreements, support contracts, and hosting agreements based on customer contracts, which may not be the same as the timing and amount of revenue recognized. All components of the licensing and other arrangements that are not expected to recur (primarily perpetual licenses and professional services) are excluded. In some arrangements with multiple performance obligations, a portion of recurring license and support or subscription contract value is allocated to services revenue for revenue recognition purposes, but does not get allocated for purposes of calculating ARR. This allocation only impacts the initial term of the contract. This means that as we increase arrangements with multiple performance obligations that include services at discounted rates, more of the total contract value will be recognized as services revenue, but our reported ARR amount will not be impacted. During the nine months ended April 30, 2022, the recurring license and support or subscription contract value recognized as services revenue was $16.1 million.

Guidewire believes that these non-GAAP financial measures and other metrics provide useful information to management and investors regarding certain financial and business trends relating to Guidewire’s financial condition and results of operations. The Company’s management uses these non-GAAP measures and other metrics to compare the Company’s performance to that of prior periods for trend analysis, for purposes of determining executive and senior management incentive compensation, and for budgeting and planning purposes. The Company believes that the use of these non-GAAP financial measures and other metrics provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other software companies, many of which present similar non-GAAP financial measures and other metrics to investors.

Management of the Company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. Guidewire urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which it includes in press releases announcing quarterly financial results, including the financial tables at the end of this press release, and not to rely on any single financial measure to evaluate the Company’s business.

About Guidewire

Guidewire is the platform P&C insurers trust to engage, innovate, and grow efficiently. We combine digital, core, analytics, and AI to deliver our platform as a cloud service. More than 450 insurers, from new ventures to the largest and most complex in the world, run on Guidewire.

As a partner to our customers, we continually evolve to enable their success. We are proud of our unparalleled implementation track record, with 1,000+ successful projects, supported by the largest R&D team and partner ecosystem in the industry. Our marketplace provides hundreds of applications that accelerate integration, localization, and innovation.

For more information, please visit www.guidewire.com and follow us on twitter: @Guidewire_PandC.

NOTE: For information about Guidewire’s trademarks, visit https://www.guidewire.com/legal-notices.

Cautionary Language Concerning Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our financial outlook and our future business momentum regarding our cloud sales, product enhancements and cloud migration, and our associated cloud leadership, vision and strategy. These forward-looking statements are made as of the date they were first issued and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Guidewire’s control. Guidewire’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in Guidewire’s most recent Forms 10-K and 10-Q filed with the Securities and Exchange Commission as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission. In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: quarterly and annual operating results may fluctuate more than expected; the impact of the COVID-19 pandemic, inflation, and other global events, such as the conflict between Russia and Ukraine, on our employees and our business and the businesses of our customers, system integrator ("SI") partners, and vendors; seasonal and other variations related to our customer agreements and related revenue recognition may cause significant fluctuations in our results of operations and cash flows; our reliance on sales to and renewals from a relatively small number of large customers for a substantial portion of our revenue; our ability to successfully manage any changes to our business model, including the transition of our products to cloud offerings and the costs related to cloud operations; our products or cloud-based services may experience data security breaches; we face intense competition in our market; our services revenue produces lower gross margins than our license, subscription and support revenue; our product development and sales cycles are lengthy and may be affected by factors outside of our control; changes in accounting guidance, such as revenue recognition, which have and may cause us to experience greater volatility in our quarterly and annual results; assertions by third parties that we violate their intellectual property rights; weakened global economic conditions may adversely affect the P&C insurance industry including the rate of information technology spending and the amount of direct written premiums; general political or destabilizing events, including war, conflict or acts of terrorism; our ability to sell our products is highly dependent on the quality of our professional services and SI partners; the risk of losing and hiring sufficient key employees; the challenges of international operations, including changes in foreign exchange rates; and other risks and uncertainties. Past performance is not necessarily indicative of future results. The forward-looking statements included in this press release represent Guidewire’s views as of the date of this press release. The Company anticipates that subsequent events and developments will cause its views to change. Guidewire undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing Guidewire’s views as of any date subsequent to the date of this press release.

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)

	April 30, 2022			July 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	326,861		$	384,910
Short-term investments		481,086			734,517
Accounts receivable, net		85,703			104,068
Unbilled accounts receivable, net		104,359			79,061
Prepaid expenses and other current assets		58,260			52,729
Total current assets		1,056,269			1,355,285
Long-term investments		281,069			227,164
Unbilled accounts receivable, net		17,626			24,361
Property and equipment, net		80,079			80,061
Operating lease assets		89,438			97,447
Intangible assets, net		24,148			19,743
Goodwill		372,189			340,877
Deferred tax assets, net		184,910			138,428
Other assets		51,607			38,479
TOTAL ASSETS	$	2,157,335		$	2,321,845
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	30,257		$	27,830
Accrued employee compensation		67,939			102,137
Deferred revenue, net		111,685			138,699
Other current liabilities		27,217			31,648
Total current liabilities		237,098			300,314
Lease liabilities		105,735			115,374
Convertible senior notes, net		354,544			343,825
Deferred revenue, net		3,809			7,237
Other liabilities		6,499			10,201
Total liabilities		707,685			776,951
STOCKHOLDERS’ EQUITY:
Common stock		8			8
Additional paid-in capital		1,721,241			1,617,204
Accumulated other comprehensive income (loss)		(18,647	)		(6,218	)
Retained earnings (accumulated deficit)		(252,952	)		(66,100	)
Total stockholders’ equity		1,449,650			1,544,894
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,157,335		$	2,321,845

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except share and per share data)

	Three Months Ended April 30,						Nine Months Ended April 30,
	2022			2021			2022			2021
Revenue:
Subscription and support	$	86,851		$	64,836		$	250,138		$	182,365
License		53,894			50,937			163,845			194,132
Services		56,703			48,195			154,032			137,335
Total revenue		197,448			163,968			568,015			513,832
Cost of revenue⁽¹⁾:
Subscription and support		54,758			41,284			155,654			118,448
License		1,951			1,991			6,544			7,762
Services		63,779			48,790			169,453			148,724
Total cost of revenue		120,488			92,065			331,651			274,934
Gross profit:
Subscription and support		32,093			23,552			94,484			63,917
License		51,943			48,946			157,301			186,370
Services		(7,076	)		(595	)		(15,421	)		(11,389	)
Total gross profit		76,960			71,903			236,364			238,898
Operating expenses⁽¹⁾:
Research and development		64,049			54,155			184,378			159,964
Sales and marketing		48,142			40,879			142,940			116,739
General and administrative		27,173			23,695			76,284			67,695
Total operating expenses		139,364			118,729			403,602			344,398
Income (loss) from operations		(62,404	)		(46,826	)		(167,238	)		(105,500	)
Interest income		1,000			1,559			2,373			6,363
Interest expense		(4,885	)		(4,698	)		(14,512	)		(13,969	)
Other income (expense), net		(6,932	)		5,259			(13,794	)		14,632
Income (loss) before provision for (benefit from) income taxes		(73,221	)		(44,706	)		(193,171	)		(98,474	)
Provision for (benefit from) income taxes		(15,777	)		(8,073	)		(43,770	)		(32,999	)
Net income (loss)	$	(57,444	)	$	(36,633	)	$	(149,401	)	$	(65,475	)
Net income (loss) per share:
Basic and diluted	$	(0.69	)	$	(0.44	)	$	(1.79	)	$	(0.78	)
Shares used in computing net income (loss) per share:
Basic and diluted		83,689,429			83,600,327			83,440,231			83,693,045

⁽¹⁾

Amounts include stock-based compensation expense as follows:

	Three Months Ended April 30,				Nine Months Ended April 30,
	2022		2021		2022		2021
	(unaudited, in thousands)
Stock-based compensation expense:
Cost of subscription and support revenue	$	4,051	$	2,780	$	11,172	$	8,336
Cost of license revenue		170		183		541		579
Cost of services revenue		5,879		5,395		17,597		16,516
Research and development		9,293		6,930		27,340		21,781
Sales and marketing		7,529		6,587		25,843		19,370
General and administrative		6,006		6,348		20,540		19,621
Total stock-based compensation expense	$	32,928	$	28,223	$	103,033	$	86,203

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

	Three Months Ended April 30,						Nine Months Ended April 30,
	2022			2021			2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(57,444	)	$	(36,633	)	$	(149,401	)	$	(65,475	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		8,766			8,057			25,745			29,028
Amortization of debt discount and issuance costs		3,623			3,428			10,719			10,143
Amortization of contract costs		3,410			3,143			9,720			8,498
Stock-based compensation		32,928			28,223			103,033			86,203
Changes to allowance for credit losses and revenue reserves		2,550			(108	)		2,707			10
Deferred income tax		(17,208	)		(10,000	)		(47,457	)		(30,294	)
Amortization of premium (accretion of discount) on available-for-sale securities, net		1,300			1,794			4,615			4,922
Other non-cash items affecting net income (loss)		(7	)		(55	)		221			745
Changes in operating assets and liabilities:
Accounts receivable		23,470			21,007			15,530			43,375
Unbilled accounts receivable		(18,002	)		(15,829	)		(18,450	)		(47,887	)
Prepaid expenses and other assets		(329	)		(1,146	)		(13,664	)		(4,587	)
Operating lease assets		2,342			2,893			8,009			2,984
Accounts payable		5,998			4,194			4,287			(118	)
Accrued employee compensation		15,068			12,607			(32,255	)		16,451
Deferred revenue		(13,392	)		(13,670	)		(31,218	)		(38,081	)
Lease liabilities		(3,074	)		(2,641	)		(9,891	)		28
Other liabilities		(1,479	)		347			(3,782	)		(12,712	)
Net cash provided by (used in) operating activities		(11,480	)		5,611			(121,532	)		3,233
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities		(138,892	)		(234,621	)		(506,006	)		(758,222	)
Sales of available-for-sale securities		14,385			41,778			64,746			127,331
Maturities of available-for-sale securities		212,262			229,361			627,527			685,559
Purchases of property and equipment		(986	)		(6,895	)		(7,976	)		(12,412	)
Capitalized software development costs		(2,990	)		(2,735	)		(9,187	)		(7,619	)
Acquisition of strategic investments		—			—			(10,521	)		(2,000	)
Acquisition of business, net of acquired cash		—			—			(43,830	)		—
Net cash provided by (used in) investing activities		83,779			26,888			114,753			32,637
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock upon exercise of stock options		18			102			116			1,922
Repurchase and retirement of common stock		—			(79,898	)		(37,451	)		(122,577	)
Net cash provided by (used in) financing activities		18			(79,796	)		(37,335	)		(120,655	)
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash		(2,834	)		358			(5,641	)		2,264
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		69,483			(46,939	)		(49,755	)		(82,521	)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period		265,672			331,387			384,910			366,969
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period	$	335,155		$	284,448		$	335,155		$	284,448

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Measures
(unaudited, in thousands)

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP financial measures for the periods indicated below:

	Three Months Ended April 30,						Nine Months Ended April 30,
	2022			2021			2022			2021
Gross profit reconciliation:
GAAP gross profit	$	76,960		$	71,903		$	236,364		$	238,898
Non-GAAP adjustments:
Stock-based compensation		10,100			8,358			29,310			25,431
Amortization of intangibles		1,905			2,303			5,754			11,355
COVID-19 Canada Emergency Wage Subsidy benefit ⁽¹⁾		—			(951	)		—			(1,919	)
Non-GAAP gross profit	$	88,965		$	81,613		$	271,428		$	273,765

Income (loss) from operations reconciliation:
GAAP income (loss) from operations	$	(62,404	)	$	(46,826	)	$	(167,238	)	$	(105,500	)
Non-GAAP adjustments:
Stock-based compensation		32,928			28,223			103,033			86,203
Amortization of intangibles		3,770			3,921			11,294			16,567
COVID-19 Canada Emergency Wage Subsidy benefit ⁽¹⁾		—			(1,623	)		—			(3,309	)
Acquisition consideration holdback ⁽²⁾		809			—			2,318			—
Non-GAAP income (loss) from operations	$	(24,897	)	$	(16,305	)	$	(50,593	)	$	(6,039	)

Net income (loss) reconciliation:
GAAP net income (loss)	$	(57,444	)	$	(36,633	)	$	(149,401	)	$	(65,475	)
Non-GAAP adjustments:
Stock-based compensation		32,928			28,223			103,033			86,203
Amortization of intangibles		3,770			3,921			11,294			16,567
Amortization of debt discount and issuance costs		3,623			3,429			10,719			10,143
COVID-19 Canada Emergency Wage Subsidy benefit ⁽¹⁾		—			(1,623	)		—			(3,309	)
Acquisition consideration holdback ⁽²⁾		809			—			2,318			—
Tax impact of non-GAAP adjustments ⁽³⁾		(5,510	)		(10,532	)		(22,641	)		(33,907	)
Non-GAAP net income (loss)	$	(21,824	)	$	(13,215	)	$	(44,678	)	$	10,222

Tax provision (benefit) reconciliation:
GAAP tax provision (benefit)	$	(15,777	)	$	(8,073	)	$	(43,770	)	$	(32,999	)
Non-GAAP adjustments:
Stock-based compensation		10,534			(5,566	)		27,429			(19,719	)
Amortization of intangibles		1,206			(773	)		3,083			(4,071	)
Amortization of debt discount and issuance costs		1,159			(676	)		2,925			(2,403	)
COVID-19 Canada Emergency Wage Subsidy benefit ⁽¹⁾		—			320			—			(139	)
Acquisition consideration holdback ⁽²⁾		259			—			618			—
Tax impact of non-GAAP adjustments ⁽³⁾		(7,648	)		17,227			(11,414	)		60,239
Non-GAAP tax provision (benefit)	$	(10,267	)	$	2,459		$	(21,129	)	$	908

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Measures
(unaudited, in thousands except per share amounts)

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP financial measures for the periods indicated below:


	Three Months Ended April 30,						Nine Months Ended April 30,
	2022			2021			2022			2021

Net income (loss) per share reconciliation:
GAAP net income (loss) per share — diluted	$	(0.69	)	$	(0.44	)	$	(1.79	)	$	(0.78	)
Non-GAAP adjustments:
Stock-based compensation		0.39			0.34			1.23			1.04
Amortization of intangibles		0.05			0.05			0.15			0.21
Amortization of debt discount and issuance costs		0.04			0.04			0.12			0.12
COVID-19 Canada Emergency Wage Subsidy benefit ⁽¹⁾		—			(0.02	)		—			(0.04	)
Acquisition consideration holdback ⁽²⁾		0.01			—			0.03			—
Tax impact of non-GAAP adjustments ⁽³⁾		(0.06	)		(0.13	)		(0.27	)		(0.41	)
Non-GAAP dilutive shares excluded from GAAP net income (loss) per share calculation ⁽⁴⁾		—			—			—			(0.02	)
Non-GAAP net income (loss) per share — diluted	$	(0.26	)	$	(0.16	)	$	(0.53	)	$	0.12

Shares used in computing Non-GAAP net income (loss) per share amounts:
GAAP weighted average shares — diluted		83,689,429			83,600,327			83,440,231			83,693,045
Non-GAAP dilutive shares excluded from GAAP net income (loss) per share calculation ⁽⁴⁾		—			—			—			807,361
Pro forma weighted average shares — diluted		83,689,429			83,600,327			83,440,231			84,500,406

(1)		Effective the second quarter of fiscal year 2021, the COVID-19 Canada Emergency Wage Subsidy benefit has been included as a non-GAAP adjustment. Prior to the second quarter of fiscal year 2021, this program was unavailable. Beginning with the first quarter of fiscal year 2022, we have not and do not expect to receive a subsidy under the COVID-19 Canada Emergency Wage Subsidy.
(2)		Effective the first quarter of fiscal year 2022, the acquisition consideration holdback that is earned and recognized as expense over a post-acquisition service period has been included as a non-GAAP adjustment. Prior to the first quarter of fiscal year 2022, there was no acquisition consideration holdback in any periods presented.
(3)		Adjustments reflect the impact on the tax benefit (provision) from all non-GAAP adjustments.
(4)		Due to the occurrence of a net loss on a GAAP basis, potentially dilutive securities were excluded from the calculation of GAAP net income (loss) per share, as they would have an anti-dilutive effect. However, these shares have a dilutive effect on non-GAAP net income (loss) per share and, therefore, are included in the non-GAAP net income (loss) per share calculation.

	Nine Months Ended April 30,
	2022			2021
Free cash flow:
Net cash provided by (used in) operating activities	$	(121,532	)	$	3,233
Purchases of property and equipment		(7,976	)		(12,412	)
Capitalized software development costs		(9,187	)		(7,619	)
Free cash flow	$	(138,695	)	$	(16,798	)

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Outlook

The following tables reconcile the specific items excluded from GAAP outlook in the calculation of non-GAAP outlook for the periods indicated below:

(in $ millions)	Fourth Quarter Fiscal Year 2022			Fiscal Year 2022
Income (loss) from operations outlook reconciliation:
GAAP income (loss) from operations	$(37)	—	$(31)	$(205)	—	$(199)
Non-GAAP adjustments:
Stock-based compensation	32	—	32	135	—	135
Amortization of intangibles	2	—	2	14	—	14
Acquisition consideration holdback	1	—	1	3	—	3
Non-GAAP income (loss) from operations	$(2)	—	$4	$(53)	—	$(47)

View source version on businesswire.com: https://www.businesswire.com/news/home/20220607006005/en/

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