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URL:  https://boards.fool.com/thanks-swift-for-that-excellent-summary-of-34115129.aspx

Subject:  Re: Guidewire: Deep Dive Date:  1/21/2019  1:57 PM
Author:  SaulR80683 Number:  50719 of 56013

Thanks Swift, for that excellent summary of Guidewire. My thoughts are that this will be a 20% to 25% grower for a long time, with a deep moat and very little risk of losing any of its current clients to competition. However, it is locked in a restricted silo (or vertical if you wish), it has a very, VERY, long sales cycle, and it will never be a hyper-growth, or even really fast growth company. It would be good for a secondary position in ones portfolio, if they wanted a conservative anchor. Compare it to Alteryx, Twilio, Okta, Zscaler, who potentially sell to every enterprise on the planet. They have admittedly more risk, but what a wildly greater opportunity!


Look at this from the 2018 fiscal year end report:

Total revenue was $661 million, up 29% yoy. Of this:

License revenue was $316 million, up 16%
Services revenue was $268 million, up 54%
Maintenance revenue was $77 million, up 13%


Just look at that carefully!
License revenue (the good stuff with high margins) was only up 16%.
Services revenue with only about a 10% gross margin was up 54% - probably because of the need to help clients adapt to the new accounting standard, which skewed so many things. Without that, total revenue would have been up a lot less than 29%.
Maintenance revenue was up 13%


Their outlook for this fiscal year was
Total revenue up only 13% !!!!!


And License Revenue up just 17% !!!
And Service Revenue up just 10% !!! After that artificial 54% last year.
And Maintenance Revenue up just 4% !!!

That 29% total revenue growth last year was a mirage. This is a 15% to 20% growth company, at most, helped probably by their cloud offering.

Why would I put my investing dollars here instead of a hyper growth company? Nope, I don't see it.

Best,

Saul
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