Guidewire Software Inc (GWRE)

Short-term

Turnover ratios

The activity ratios of Guidewire Software Inc over the specified fiscal years reveal notable trends in inventory management, accounts receivable and payable efficiency, and overall working capital utilization.

Inventory Turnover:
The inventory turnover ratio experienced significant fluctuations during the period. Starting at 14.52 in July 2021, data for July 2022 is unavailable, but it sharply increased to 40.24 by July 2023, indicating a substantial improvement in inventory management and a faster turnover of inventory assets. However, by July 2024, the ratio declined to 22.30, suggesting a reduction in inventory turnover speed, though still higher than the 2021 level. The ratio is not available for July 2025. The sharp increase followed by a decrease implies periods of more efficient inventory utilization, potentially reflecting strategic adjustments or market conditions affecting inventory levels.

Receivables Turnover:
The receivables turnover ratio exhibits a steady upward trend, starting at 3.85 in July 2021, decreasing slightly to 3.57 in 2022, and maintaining a similar level in 2023 at 3.53. From 2023 onward, the ratio increases to 4.05 in 2024 and further to 4.43 in 2025. This upward movement indicates an improvement in collection efficiency, suggesting that the company is becoming more effective at converting receivables into cash, which positively impacts liquidity.

Payables Turnover:
The payables turnover ratio shows an overall increasing trend, rising from 12.71 in 2021 to 12.91 in 2023, a slight increase pointing to stable or marginally improved payment cycles. Notably, a substantial jump occurs in 2024 to 26.11, indicating that the company is paying its suppliers more frequently, possibly driven by better cash flow or strategic vendor management. In 2025, the ratio declines to 15.64, suggesting a moderation in payment speed but still remaining higher than earlier years. This fluctuation reflects dynamic management of vendor payables, balancing cash outflows with operational needs.

Working Capital Turnover:
This ratio demonstrates progressive improvement over the period. From 0.70 in 2021, it advances to 0.89 in 2022, then to 1.25 in 2023. The ratio peaks at 2.14 in 2024, indicating more effective utilization of working capital to support sales activity. However, in 2025, the ratio decreases to 1.25, aligning with the 2023 level. The trend suggests enhanced operational efficiency in deploying working capital over time, with a peak in 2024 possibly reflecting optimal asset utilization during that period.

Overall, the activity ratios indicate that Guidewire Software Inc has taken steps toward improving efficiency in receivable collections and working capital management. Inventory management experienced a significant boost in 2023 but showed signs of moderation thereafter. The fluctuations in payables suggest tactical adjustments in supplier payments. The combined trend reflects ongoing efforts to optimize asset utilization and operational efficiency within the company's financial structure.

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Average number of days

The activity ratios for Guidewire Software Inc, as reflected in the provided data, demonstrate notable fluctuations over the analyzed period, indicative of shifts in operational efficiency and working capital management.

Starting with the Days of Inventory on Hand (DOH), the data shows a significant decrease from 25.14 days as of July 31, 2021, to 9.07 days in July 31, 2023. This reduction suggests an improvement in inventory management, likely due to more streamlined production processes or a shift toward a just-in-time inventory approach. However, the DOH then increases to 16.37 days by July 31, 2024, indicating a potential accumulation of inventory or adjustment in inventory policies, before the data for July 31, 2025, is unavailable.

In terms of Days of Sales Outstanding (DSO), the period elongates from 94.74 days in 2021 to 103.41 days in 2023. This trend suggests that customers are taking longer to settle their accounts, which could impact liquidity and cash flow management. Notably, the DSO begins to decrease after 2023, reaching 90.15 days by July 31, 2024, and further to 82.44 days by July 31, 2025. This decline reflects an improvement in receivables collection efficiency.

Regarding the Number of Days of Payables, there is an increase from 28.72 days in 2021 to 33.90 days in 2022, indicating an extension in the period taken to pay suppliers. This could signify an intentional delay in payments to optimize cash flow. Subsequently, the payable days decline sharply to 28.27 days in 2023 and further to 13.98 days in 2024, suggesting a shortening of payment periods, possibly due to changes in supplier agreements or cash conservation strategies. The subsequent increase to 23.34 days in 2025 marks a partial recovery in payable periods.

Overall, the activity ratios reveal a pattern of operational adjustments, with improvements in inventory and receivables management in later years, alongside variability in payables periods. These shifts can influence the company's working capital cycle and liquidity profile, reflecting strategic responses to operational requirements and market conditions.

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Long-term

The analysis of Guidewire Software Inc.'s long-term activity ratios reveals notable trends over the periods from July 31, 2021, to July 31, 2023, with projections unavailable for subsequent years.

Fixed Asset Turnover Ratio:
The fixed asset turnover ratio demonstrates a significant upward trajectory from 4.19 in 2021 to 4.75 in 2022, culminating at 8.47 in 2023. This indicates a marked improvement in the efficiency with which Guidewire utilizes its fixed assets to generate sales during this period. The substantially higher ratio in 2023 suggests that the company has considerably enhanced its fixed asset productivity, potentially through better asset management, technological advancements, or operational efficiency gains. The absence of data beyond July 2023 precludes assessment of whether this upward trend continued in subsequent periods.

Total Asset Turnover Ratio:
The total asset turnover ratio reflects a steady but more modest increase from 0.32 in 2021 to 0.36 in 2022, and then to 0.45 in 2023. Such progression signifies an incremental improvement in overall asset utilization to produce revenue. The ratios for 2024 and 2025 are projected to stabilize at approximately 0.44, indicating a plateauing of asset efficiency. This stabilization may suggest the company has reached an optimal level of asset utilization relative to its scale of operations or that further efficiency improvements are limited under current operational strategies.

Overall Observation:
The combined analysis points to a substantial enhancement in fixed asset utilization efficiency between 2021 and 2023, while the total asset turnover also exhibits consistent, albeit less dramatic, improvement over the same period. The sustained increase in these ratios underscores progress in operational efficiency, particularly in the effective deployment of fixed assets, which can contribute positively to profitability and asset management effectiveness. The plateauing projections for the latter years imply that asset utilization levels might have stabilized, possibly reflecting mature operational practices or optimal asset deployment levels.