Guidewire Software Inc (GWRE)

Short-term

Turnover ratios

The activity ratios of Guidewire Software Inc, derived from the provided data, reveal the company's operational efficiency over the analyzed periods.

Inventory Turnover:
The inventory turnover ratio is largely absent for most periods, indicating minimal or no inventory holdings, which is characteristic of a software company with negligible physical inventory. Exceptions are noted in the periods ending April 30, 2023 (32.29), July 31, 2023 (40.24), and April 30, 2024 (22.30), where the ratios suggest some inventory or similar asset turnover, possibly reflecting short-term adjustments or product inventory considerations. These spikes indicate periods where inventory management or related assets were more actively engaged, contrasting sharply with the earlier periods where data was unavailable.

Receivables Turnover:
The receivables turnover figures fluctuate within a range of approximately 3.42 to 4.70 times. The lowest activity is observed during April 30, 2023 (3.42), suggesting longer collection periods, whereas the highest occurs on October 31, 2022 (4.70), indicating more efficient receivables collection during that interval. Overall, the ratios suggest a relatively stable and moderate efficiency in managing accounts receivable, with slight improvements visible in some periods, notably in late 2023, where the ratio increased to 4.53.

Payables Turnover:
This ratio exhibits considerable variability, with notable peaks, such as 21.82 on October 31, 2023, and relatively lower values earlier, such as 10.94 on July 31, 2022. The high payables turnover in October 2023 indicates shorter periods to settle payables, reflecting potentially improved cash management or strategic payment timing. Conversely, lower ratios imply extended payment cycles, possibly for strategic supplier relations or cash flow management. The fluctuations highlight dynamic management of payables, corresponding with operational or market adjustments.

Working Capital Turnover:
The working capital turnover ratios demonstrate an overall upward trend from around 0.65–0.70 in 2020–2021 to peaks above 2.55 in April 2024, initially indicating enhanced utilization of working capital in generating sales or cash flows. Some fluctuations are observed, for example, a dip to 1.01 in October 2024 before rising again to 1.25. The increase over time suggests improved efficiency in managing working capital relative to sales, although the ratios consistently remain below 3, reflecting the company's operational scale and capital management approaches.

Summary:
Guidewire's activity ratios, particularly receivables and working capital turnover, exhibit general stability with periods of increased efficiency, notably in late 2023 and early 2024. The inventory turnover data is limited but suggests key phases of inventory activity that may align with strategic product launches or internal process shifts. The variability in payables turnover ratios further indicates active management of creditor terms, reflecting a flexible approach to working capital and cash flow optimization. Overall, these ratios collectively portray a company with steady operational activity, adjusting its working capital strategies in response to internal and external factors over the analyzed periods.

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Average number of days

Guidewire Software Inc’s activity ratios, specifically the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables, demonstrate notable trends and fluctuations over the periods analyzed.

Starting with Days of Inventory on Hand, data indicates that for most of the reported periods, the company either did not hold significant inventory or did not report these figures until recently. The only notable figures appear from January 31, 2022, onward, with inventories averaging approximately 11.30 to 16.37 days. This relatively low and stable DOH suggests that Guidewire manages inventory efficiently, likely due to the nature of its software-focused operations which do not require extensive inventory holdings.

Regarding Days of Sales Outstanding (DSO), the period from October 2020 through July 2023 shows fluctuations between approximately 79.58 days and a peak of 106.70 days in April 2023. The DSO remained generally in the high 80s to low 90s, indicating that the company, on average, collects receivables after around 80 to 106 days. The spike in April 2023 suggests a period of elongated collection times, which may reflect changes in customer payment terms or results of specific contractual arrangements. Following this peak, DSO decreased to approximately 79.94 days by October 2023, returning closer to earlier levels, implying potential improvements in collection processes or customer credit management.

The Number of Days of Payables reflects the period the company takes to fulfill its own obligations to suppliers. This ratio exhibits variability, with early periods showing payables around 22.91 to 27.08 days. Notably, there was a significant reduction to 16.73 days as of October 2023, indicating a trend toward faster settlement of liabilities. This reduction could be driven by strategic payment timing, improvements in cash management, or negotiations with suppliers for shorter payment terms.

In summary, the activity ratios suggest that Guidewire Software maintains a lean inventory position, with inventory levels remaining minimal and stable since early 2022. Its receivable collection cycle has experienced fluctuations but generally remains within a high-80s to low-90s day range, with a recent improvement that indicates better receivables management. The company’s payables cycle has shortened over time, reflecting potentially more aggressive or efficient payment strategies. Overall, these ratios point towards active management of operational liquidity and efficient working capital practices consistent with a software company with limited inventory needs.

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Long-term

The analysis of Guidewire Software Inc.’s long-term activity ratios reveals several noteworthy trends across the reporting periods.

Starting with the Fixed Asset Turnover ratio, there is significant fluctuation observed over the analyzed timeframe. The ratio was relatively high at 11.20 as of October 31, 2020, indicating efficient utilization of fixed assets to generate sales. However, a marked decline occurred by July 31, 2021, dropping to 4.19, reflecting reduced efficiency in managing fixed assets during that period. Subsequently, the ratio exhibited variability, with notable increases such as reaching 16.42 on April 30, 2023, suggesting periods of enhanced fixed asset utilization, followed by subsequent declines to 8.68 by October 31, 2023. This pattern indicates episodic efficiency gains, possibly due to strategic asset management or investment cycles.

The Total Asset Turnover ratio generally demonstrates a modest upward trend over time, starting from approximately 0.32 on October 31, 2020, and gradually increasing to 0.48 as of October 31, 2023. This gradual improvement indicates enhancements in the overall efficiency of asset utilization, with the company generating more revenue per dollar of total assets as time progresses. Despite some fluctuations—such as dips to 0.40 in October 2024—the overarching trend suggests a positive trajectory in asset management efficiency.

Overall, the data indicates that Guidewire Software Inc. experienced periods of variable efficiency in utilizing fixed assets, with notable peaks and troughs, but with a relatively steady improvement in total asset utilization over the analyzed period. These variations could be attributed to operational shifts, investment strategies, or changes in asset base management, reflecting dynamic strategic responses rather than consistent efficiency levels.