- GWRE trades at a premium valuation because of its combination of growth and consistency. The growth is real but the consistency is mostly the fruit of a well-designed accounting playbook.
- Management has de-risked the quarterly earnings report in a way that is not obvious to investors by embracing an accounting treatment that is not widely used in the software industry.
- Guidewire’s business model trades cash flow for GAAP revenue visibility.
- Operating performance is difficult to judge by its quarterly earnings report as a sizable portion of license revenue is derived from the financial backlog of payments due under existing contracts.
- Guidewire entered the current July quarter with its lowest license coverage percentage since it came public.