Mixed Results for Guidewire, but Our Thesis Stands

Guidewire reported $661 million in revenue and the firm now has 380 total customers (up from 328 last year), aided by 15 new customer wins in the quarter. Color from the conference call indicated that the vast majority of these wins were in Europe, where the firm has been strategically focusing on penetrating the fickle European P&C insurance market. European customers have historically bought from regional software vendors and look to partner with vendors with referenceable customers in similar geographies. Thus, we believe Guidewire's traction in Europe today will lead to easier incremental wins ahead. Our valuation thesis remains very simple, while Tier 1 P&C insurer penetration remains robust, as the firm had 28 of the 70 Tier 1 Insurers, wallet share remains much lower. Tier 1 insurers write more than $5 billion in direct written premiums, representing the largest market opportunity, but oftentimes Guidewire sells only one or two products to these customers.

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