Guidewire Software, Inc.
Lead Plaintiff Deadline: 09/22/2020
SUMMARY OF CASE:
A securities class action has been filed against Guidewire Software, Inc. (GWRE) on behalf of all persons or entities that purchased or otherwise acquired Guidewire common stock between March 6, 2019 through March 4, 2020. This case has been filed in the USDC – N.D.CA.
The Complaint alleges that during the Class Period, Defendants represented to investors that Guidewire was well-positioned to capitalize on a shift in the P&C insurance industry away from on-premise software systems to software systems provided over the cloud. Defendants touted the “robust” demand that existed for
Guidewire’s cloud-based products and assured investors that customer demand was “enduring and broad-based across most or all segments of the market.” Defendants emphasized that the Company had “demonstrated particular success with our cloud and digital initiatives,” and that “100% of Guidewire customers will make the decision to move to the Guidewire Cloud.”
Defendants further touted the demand for Guidewire’s cloud offering by reporting, at the end of each quarter, that cloud sales represented a substantial and growing percentage of the Company’s overall sales. At the start of the Class Period, Guidewire told investors that cloud sales represented between 55% to 75% of the Company’s total sales; by the end of the Class Period, Guidewire had increased the range to 70% to 80%. The Company also issued highly favorable revenue and Annual Recurring Revenue (“ARR”) guidance, a financial metric Guidewire created “to provide more insight to [the Company’s] business dynamic through this cloud transition” that was held out by Defendants to be “the best indicator of the overall health of [the Company’s] business.”
In addition to touting strong demand for Guidewire’s cloud offerings, Defendants assured investors that customer demand remained strong across the Company’s entire product offering – i.e., including its legacy on-premise business – underscoring that “there still is considerable interest in our self-managed platform.”
These statements were materially false and misleading. As Defendants knew but concealed from investors, the demand for Guidewire’s cloud products was weak and the Company’s transition to the cloud was not going well because Guidewire’s cloud-based products needed to be significantly improved to meet customer needs and catch-up with rival systems. Further, Guidewire’s failed transition to the cloud was damaging the Company’s traditional on-premise business, as customers delayed purchasing decisions or declined to renew existing licenses. As a result, Guidewire’s revenue guidance, including guidance modeled on strong and increasing demand for Guidewire’s cloud-based systems, was baseless and unattainable.
On March 4, 2020, investors began to learn the truth when Guidewire announced its financial results for the second quarter of fiscal 2020 and slashed its full year revenue guidance by $57 million, from a range of $759 million to $771 million to only $702 million to $714 million. In addition, Guidewire cut its ARR guidance from a range of 14% to 16%, down to 11% to 12% for the third quarter of 2020. During the accompanying earnings conference call, Defendants indicated that Guidewire’s cloud products needed to be improved in order to meet customer needs and successfully compete against rival systems. Defendants also revealed that a large swath of Guidewire customers no longer wanted the Company’s traditional on-premise products and had not adopted the Company’s cloud products. On this news, Guidewire’s share price plummeted 17% in one day, wiping out over $1.5 billion in market capitalization.
As a result of Defendants’ wrongful acts and omissions and the precipitous decline in the market value of the Company’s common stock, Plaintiff and other Class members have suffered significant damages.