Guidewire Software (GWRE) 1 Jun 232023 Q3 Earnings call transcript

Greetings, and welcome to Guidewire's Third Quarter Fiscal 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Alex Hughes, Vice President of Investor Relations. Mr. you, Thank now may Hughes, begin. you

release Officer. Thanks, Comal. Relations. on and press as President today section our the of Financial Form Investor Investor our our Hughes, me Alex Jeff results today be Chief both Officer; Vice of well the website. With furnished Executive Relations is of Chief disclosure I'm to in Mike SEC, in which can related issued complete found A as X-K are Cooper, available our of Rosenbaum,

and risks, matters. being call subject representing be the upon based other are include operations, our results, Today's on call. a today as are available and financial following recorded, relied demand, call of is business and Statements uncertainties, impact replay date. of assumptions management's the should forward-looking any statements this the to current on our expectations as customer views will and ones local, of regarding conclusion These on national events be of and products, not geopolitical our made subsequent and

and XX-Q to be with annual factors XX-K refer the our Form report release on most with risk including to press the file on and documents recent reports quarterly and filed the SEC, and Please Form we our SEC. filed

on in statements. such the that may materially forth set cause and information risks, For assumptions differ uncertainties those actual results from to

also All the to in otherwise. a to our non-GAAP refer website. in non-GAAP will on a press A is investors. information also to profitability, data We of commentary measures additional provided of additional on and measures certain GAAP reconciliation financial stated are reconciliation are release, provide posted margins, non-GAAP unless IR supplemental basis on our expenses to

Mike. turn I'll over With that, call to the

and led XX% a Thank third ARR growth. highlighted you, subscription software InsuranceSuite revenue We with quarter sustained strong had us thanks We by Cloud Good demand and both were joining pleased profitability exceeding overall for Alex. by for today. guidance. and afternoon revenue

revenue engagements, services was due below in to few of primarily we complex the address which expectations, later timing a call. However, will revenue from the

to and which We see the more thrilled were improvement gross in services support shortfall. than margins, continued offset subscription

Our cloud eight drove raise strong operating and quarter sales highlights cloud year relating of and to outlook our income. full quarter. us solid outperformance margin our gives confidence trajectory A seasonally deals for that income corporate where main of ahead to operating closed we few gross momentum remains the objectives fourth our

also go-lives And support above across finishing the cloud Cloud strong personal efficiency improved deployments eight lines. with drive we continue in subscription to with X quarter were commercial and expectations. points and both margins, gross

into make Before I more let comments insurance a about couple the detail, me just P&C go of industry.

the projects and value. addresses complex industry and with that requirements complex for production, deployment a sometimes system also ensures when core deploy establish providing relationship agility arduous, lengthy, greater a and while but win are The significant in customer we and successfully we durable lifetime a a we and customer and use well service requires platform securely innovation. reliably case and business cycles Sales

the have and our hard with execution of clearly in I and cloud ecosystem believe our Cloud our work as platform us demonstrated Guidewire market established have leader the growth

this help of our position, well insurers depth and world. us the decision carriers scale. to that and to breadth to improve the insurance expand and serve drive positioned in will innovation top From the we solutions continue ecosystem

budgets. expense to profitability is is on has impact scrutiny like and generally would customers. about resilient The causing an environment to in I economic our industry point it had many the its second near-term driven investments The on is not macroeconomic increase insurance but The the cycles, and on impact immune. of is and inflation P&C make claims companies

deals strategic backdrop, this we pleased Given we our confident continue our on are to outlook. see remain sales progress, and and momentum in projects to

ever adept market increasingly the with managing and Our industry the the customers. on undercurrent cycle. platform of of for cycle has as strategic strengthens cycles being our The the innovation its need market, value clear carriers and is increasing positioning which navigate at our is agility in current

So while well, are this we I'd to appropriate navigating it environment acknowledge pressures are through that expense say is present.

more let handing before to financials. our cover in to the Jeff With discussing said, results that turn over detail to me QX it a little

deals, were cloud As I for strong was with said it which InsuranceSuite. quarter earlier, a seven eight of

insurers addition are a and validation modernized the we development systems, starting is to investment Cloud previously interest Guidewire very us we've to made Platform. replacing an which positive modernize market great systems, seeking the mainframe In on-prem for in in of legacy see to increased a

in Deal well two logos, three three expansions. and with was migrations, new volume QX balanced

systems. achieve via First, them InsuranceSuite through headquartered and our wins. to performance walk capabilities and on let Farm ensure Waco, Cloud new selected excellence, technical fall Cloud current operational a customer We me to updates. forward their Texas, look improve core X and Bureau, Guidewire Texas helping staying in existing portfolio legacy Tier on-prem system of functional modernize

insurer transform Guidewire's long-term and marketplace billing, will also across Guidewire claims, retire to use to welcome fortunate Guidewire as experiences. X improving rapidly to Tier core InsuranceSuite of partner selected and extensive were policy, and a advantage systems the offerings up digital, operations and and carrier Cloud We Taking customer their agent data. This legacy community. coming and commercial

progressive to and represents streamline for selected so a analytics mid and effectively this fought win company key deal growth it and can they markets efficiently Guidewire and insurance market differentiator this line key that property aspirations. operations commercial a support Edward growth in as across Canada. Prince expand Island a growing And Predictive the Cloud was platform has substantial in us, competitive carrier carrier Canadian hard product of their casualty

they saw commercial upgrade Tier And also reinsurance focused and cloud. country commercial of Guidewire lines business. PolicyCenter insurance carrier their selecting for A to migrate provider platform states across and will and Cloud system mutual additional personal a lines. Cloud on Guidewire its ClaimCenter footprint to Turning expanded to of their PolicyCenter migrations, XX X Tier elected a to and expand cloud agricultural the we on lines X to on-prem

product designer to Cloud growth incomplete to net a capability key And Home for safety defective their building in strategy. Compensation Australia will or agility differentiator provider Advanced the of homeowners a PolicyCenter are Fund, with insurance was support and migrate Building within faced who Cloud. work InsuranceSuite increase

ClaimsCenter for of Guidewire top the insurer additional brings the commercial to carrier Finally, lines. for at to XX Tier support expansions, expanded include expanded in CNA, now additional based platform commercialized looking in year. lines to investment investment and a X Cloud This their a insurance Chicago Cloud their the wins total number XX

this taken I to Over XX% support and total proportion ensure the of customer of validates success system we demanding through X a provide have the X customers was our most the base. a X insurers, that customers really can as the suited we of Tier approach to X in world significant the with well which Tier up as think make

lines. of activity the platforms live we improving increased to of the go maturity nearly with our bringing healthy added in lives. of on In in number cloud also platform reflected deployments, commercial customers Guidewire QX, eight is total Cloud The personal cadence another and XX both production cloud

since with Cloud Southern deployments with included the member Guidewire of XX Guidewire In members customer went largest personal InsuranceSuite the XXXX, and of Auto AAA some million of on Club lines, live the federation platform. California, the

GWCP. a ClaimCenter and addition, XX,XXX the insurer million and with large year day X on In with performing across Nordics new policies BillingCenter claims customers PolicyCenter, per over and per live X,XXX went

with Carolina Guidewire Lines, of processing Commercial agents went to in Platform and further Cloud to South provider a a respect With XX commercial on drive specialty some and deployments reduce times customers, industries of across claims GWCP, ClaimCenter the commercial to PolicyCenter automate efficiencies scale, and innovation operational and deployed multiple trucking on claims lines adjustments to costs. insurer and based states included live for

of X.X insurer on Texas million customer workers satisfaction. over deployed and GWCP an improve excellence BillingCenter PolicyCenter, further ClaimCenter and operational to And

service by our customers' and these our All project incredible ecosystem our represent deployments work teams, of partners. Guidewire teams

of that Guidewire leading as April, XX% As critical deployments, prospects. to the is increasingly SIs number X,XXX. is a it over expand. this and year-over-year. partner important consultants to to are end These cloud I'm of because predictability helps I a earlier, XX% continue up because stats ever-increasing now have also increased consultants to the pleased Moreover, ecosystem healthy cost approximately XX,XXX it mentioned community certified customers see but providing of year-over-year efficiency and to is drive cloud our and customer success, to

to enabling coordination total with This inevitably will are to required integrator slowing services cloud of SIs Guidewire SIs and projects. focus services revenue growth to us strategically model of drives retains that serve expert to projects. the on in prime products scaled the the to growth a committed as services increasingly for and lead the more allows ecosystem relative services and on delivery new important scale the We

approach with the both more This fee shortfall Earlier actually SIs deliver this. to complex we the model. ecosystem. our SI provide service journey, saw arrangements The This services we we where profitable took quarter will importance subcontractors. revenue durable fuel of but us to in work on and in to speaks the as was the a leveraged cloud fixed also cloud

role cloud and into year arrangements, past projects. fee most the step and DSIs going subcontracting we limiting are we fixed For seeing forward, prime and are the on

services the will burden of early with margin customers cloud these portfolio completed associated and lessen. are this early As projects

better solution areas innovation grow as providing in XXX have risk partners collection total applications accurate to platform for Guidewire we six powerful and Turning we also our customers in continued a data such and for have amplifies now added property differentiator marketplace. We scoring number serves partner workflow and granular automation on of new speed. marketplace of for the and our more as our us. solution integrated the solution ecosystem, partners greater This and enabling the partners to

We from are recent innovation of good where is on its over integration customers this time frictionless greater platform enable friction. a example strategic technology platform cloud layer strong One one more where more Inc., with where and to partnership to building innovation and momentum customers. a incorporate experience our showing seeing for An payment will powerful easily on less are with we accept their can a interest insurers

like and and I models AI industry. their generative discuss insurance to briefly language exciting for potential would Guidewire and the large also

consideration will are take insurers and important to that modernization relates shift. is systems the They first evaluate advantage if as to and think most to processes First key technology of begin their to that step. is this Guidewire look realize it at equipped I they a

this modernized positioned legacy reconsidering could will systems support that have be Those to systems believe core take believe initiatives. be who be will technology who justify of relying back this already to held the advantage will on approach, their modernization efforts provides. insurers potential dramatically still We better and are that I and

has turn generative make potential more efficient Second, to which developers implementation projects productive, and product AI the in more drive will innovation. improved

that XX development and will execution. likely in in our organization leverage and of models most it's support SI months, to able internally think software XX to developers and course I to language ecosystem, our large in the services project be

Third, of value logical our cloud will expect will gains generative offer product an product solution we like in software companies large of companies on this. working ecosystem, product of are a cloud-based embracing Broad-based incorporating the outcome should to suite our we products a partner suite productivity that many the lot that AI, into the language and our model-driven enhance we enabler our of be enhancements be and customers. of

has our to taking a months AI in in we positive years to forward adopts come. the tremendous how to look Overall, industry the position and have generative AI and leadership on potential impact mission, generative a

to Chief let happy industry, organization. strategy lead led addition for product veteran as spend I Finally, Howe at Systems leadership product Guidewire. was the product a Product insurance very Officer. is the of Applied in a technology announce decade. at team the me as and over to a Michael Michael minute marketing will Guidewire on He long-time having the here

and platform Michael Diego focus build our and de a progress solutions of product and in our the product our will innovation engineering our made position to with Vale team We are the alignment optimize on tremendous core. InsuranceSuite now establishing increase have help and data and us the on releases. cloud in analytics

to do. else continues growth, platform and everything scale, Diego is all to performance While lead we foundational which

it turn to Jeff discuss financials. over that, With the I'll to

topics Thanks through financial the want few results the Mike. I highlight a quarter. walk to in I as

be to wins are strong. Mike as momentum and customer continues First, noted, modernization we sales seeing new notably, new programs. And more

ensure evaluate us. We their to or with replace that they seeing are insurers is want have also they them. is exciting in some the an put core and cloud This to place development and looking a for systems to investing as strategies last two over grow innovate decade partner

steeper activity same in reasons ARR outlook ramps At the year. are seeing the preserved. is last year, the year, with ARR higher time, into which we the not initial is primary fully sales of ramped the lower This first healthy combined than for but new are activity macro a sales is translating impact ARR means backdrop the

momentum, combined cost controls of cloud and sales execution efficiency are initiatives ahead continued Second, on 'XX with margins our better-than-planned FY expectations. driving

subscription support earnings in trajectory gross model. Our power confidence margin operating and long-term of us increased our gives the

the of of the couple had quarter A arrangements approximately of business, a we are timing changes vis-à-vis forecast $X system modernization the complex our programs in are revenue. impact core impact number bid adverse where our of in services revenue plan services million. fixed programs. an portion A through Third, services on by of in very can working project handful these the

cash a In turning Valley payments outstanding is Bank XX from collections slower cadence, bank we model. over coming have our of last Bank receivable by flow, to of than resolved. shifted brief year over we our the from in to XX% quarter, this collections Finally, but that incremental seeing days. which over also $XX operating we QX is are ARR America, to Silicon disruption our Accounts and grew for now account expected did million

we've of our the the adjusted collections slower five Day. generation flow on our have Analyst no the expectations This timing of we we all to year, year. combined at has adjustment you fact impact due with cash cash that fiscal collections Given in discussed the $XXX our approximately million with days collections, for in assumptions last long-term have

turning Now results for to quarter. the the

Third were due below product than constant XX% components line of quarter our million finished a ahead our in or was ARR services year-over-year growth outlook $XXX.X represents This expectations. with better on basis. of This revenue revenue Total revenue ended at million. expectations. to All currency our results. $XXX either

within X% grew up be $XX.X Cloud million. License $XX.X year-over-year. subscription -- revenue, revenue XX% to continues support strength visible $XXX.X was million, and revenue revenue was Subscription down Services million, million, $XX.X XX% down was subscription with year-over-year year-over-year. XX% to year-over-year. which revenue

as to when revenue recognition was As previously, compared outlook mentioned an lead project an time $X lines we a to programs two result, approximately I had in the Guidewire with adjustment This adjustment an where replanning impact last our the and resulted million timing. quarter.

that scrutiny has resulted lower-cost and Additionally, pushing caused $X or $X of for quarter, million to the there million. work been to which accounted services increased lower-than-expected on in services statements some approximately partners, more work this billings has of scope streamlining in

year was was million. discuss for and a will profit profitability to which XX% margin basis. gross ago. Turning on a we $XXX.X was the non-GAAP Gross Overall gross XX%. quarter, Subscription compared margin to support XX%

ahead of are to track margin, We gross continues and expectations. the progress our support thrilled making with subscription on which we're

negative Services positive a with X% gross compared margin X% year finished ago. at

expecting but in headwinds revenue the QX, positive in quarter. impacted have margin margins We been

our return to We continue beyond. be to confident services the profitability in fourth in quarter to strategy and

our million, services loss gross and quarter. the expectations profit in operating factors These strong margin and costs. support $XX.X Operating was lower-than-expected better due of the than more to than impact shortfall offset subscription

X% up three the up QX cash, ended million. in $XX $XXX was compensation stock-based with compensation was XXXX. and We year-over-year cash year-over-year investments. in X% of quarters equivalents first the million Stock-based expense and Overall through quarter

settled the repurchases in the in the shares an As which share under XXX,XXX additional stock, end of common with program accelerated delivery per share. price X.X was XXX,XXX QX, total an of in repurchased resulted share. repurchase we of of the Also shares purchase price at per million shares an $XX.XX full average of additional average QX, of an ASR $XX.XX at of

year our to full Turning fiscal outlook for the XXXX.

We $XXX to our $XXX outlook are million million. adjusting ARR to

we ramps previously I of are mentioned, seeing first expect ARR seeing sales the QX, but year are arrangements. steeper This continue sales in we new healthy this As results in and year. in activity this less to

preserving are terms ARR attractive fully in we these arrangements. However, still ramped

approximately expected at at be XX%. is ARR the ramped to to I XX% midpoint, expect growth to fully grow while XX% this ARR So year

a fully We as on on more basis. this also annual provide discuss ramped is will detail metric year-end at an we ARR

negative same current dollar. would we assumes as our adjustment reminder, outlook year-end the ARR versus expect million as exchange were at at a the last to a of rate the year, $X the If end negative the currency stay fiscal ARR and update foreign dollar year, then As exchange largely rates by rates exchange then $XX Last of year-end driven Canadian rates exchange the million. we strengthening rates, year-end. adjustments

respect With revenue. subscription subscription, we and are our expectations for support license to and increasing revenue,

$XXX are adjustment subscription adjusting We million, of a revenue $X to million. positive approximately

We approximately are $X positive a approximately million license positive approximately adjusting $XXX million, and to of adjustment of adjustment million, we a million. to adjusting to revenue subscription and $X are support $X million, revenue $XXX

are by million to $XX our We $XX services million. revenue lowering expectations

is our total $X at million, $XXX As outlook a million revenue to adjustment $XXX million result, for midpoint. the a

Turning which points expect an to when the for X non-GAAP and compared a of be our on to basis, XX% profitability, QX X and subscription we quarter X we XX% from increase last support percentage percentage outlook gross between the to and points margins year, and discuss will margins call. to

be to bid We fixed expect year. ongoing that breakeven assumes the implies This of completion services improvement a for around gross margins arrangements. the successful QX

margins XX% result, year. overall a As for approximately gross of we now the expect

expect profit we fiscal loss a between million $X operating operating for income, million the year. operating $X to respect With and a

compensation representing year-over-year. be $XXX growth X% stock-based million, expect We approximately to

shares repurchase this active fiscal this, X program, impact decline with the share program expect combined our year. we repurchase accelerated approximately shares diluted fully by and Given to our million of

operations flow million. $XX expectations we million between $XX are adjusting and mentioned As our to above, from cash

to ahead it wait until discussing to year look expectations. before our fourth ARR after we XXXX, fiscal we as is feel growth quarter Finally, prudent

to operating and X% With XX% or or GAAP higher demonstrate respect to of operating margins committed better. profitability, we are of negative non-GAAP margins

We targets our expect that our capture will income we continue monitor measure the compensation. cost and to to both associated ultimately stock-based of metrics. But hitting non-GAAP operating shareholders with success in and real GAAP Guidewire

open questions. call for let's that, With the

Dylan first Please question. Blair. Becker [Operator your comes from question William Our proceed Instructions] with with

I migration on-prem get those I release shift of here. of for think, some maybe framework widening side Mike, question cloud. versus kind and updated kind -- think the much talked that a seeing type certainly that perspective customers of that gap of and upgrade two, versus And accelerated now is Maybe, of three of customers product functional product appreciate releases validate existing the annually wonder go-live noted the the from I versus you, function I how the the the on-prem that guys a more you services capabilities can that here maybe having kind of of activity. you to, garbage update are about? those versus have

question, for topics, to I insight. Thanks the those in certainly the helps. know, discuss Dylan. don't which addition I'd briefly. It I I'll appreciate say

I experience our just repeatedly and and these something running our programs getting the lag going weekends special it's we're now, record track at. think live important go the better that thing, most better over scale at

customers, think in and the is it the the overall a is -- just confidence I year, it also so, it's helps. to think And ecosystem, great releases The three building shift I of helping us. community in P&C

is and important that have execute confidence more most updates in the think we into seamlessly. read more can is what we that should thing that these I you

that is for world the Now potential think experience our different customers. customer and it it a throughout of But base couple the customers offers. are us P&C those with especially journey are whole on that the this about changing, we it been that changing of is now ecosystem, very seeing our are years have we're I it. a way and the with that and all the and still the in new excited approach this operates This that entirety working cloud with through

we put commented and little out I very, the under these to is I I continued AI. cloud them and just know has Guideware drive much the then shipped forward a get personally, on idea that very updates -- turn we're different think years. on. them model customers hopefully bit where operating changes industry have XX that than the to been very can looking seamlessly, production operating for the into we operating is It's a am customers Just activity they generative seeing. us literally and sales under, last has helping can And it just that been I

thanks question. for So the

made sense. optionality can and could help around elevated risk some connectivity and role of more makes play future And data around risk comment of wondering lot well side. with help predict claims. obviously think, then core Yes, you of again, holistic data the then the this, the mitigation. as a digital real-time of insurance think in total a kind carrier But analysis what address kind there's modernization carriers view, I maybe like pressures evolution Would to and twins maybe a preventative of even maybe on

that I and top to and platform question, strategic think deep ability modernization roll a things so right new far about products that cycle agile I'm of take sure an That's innovative say mind sort that those characteristics go out of I'd carriers we're like as to connectivity core IoT provides of that the think not would it you're as getting to of and Yes. a now. is prevented the describing. advantage some IoT-enabled in have

to able between replacement the has to this -- disconnect the there a I of impact costs. that premiums through. feeling inflation actually, support that be if will just just that I policies claims is that of impact that of normal think lots versus support in the you're be sort and sense you're readjust to adjust a risk and feeling -- there being by inflation, cycle. inflation the jumped industries guess, in and surprise, has and the worked up caught It's normal

industry around companies about to But the certainly, general services to the risk, providing of risk the actually the there breakage, and sort is of modernization the expense actually for ability things that to insurance that in as paying break, a opposed somewhat the relationship using reduce perils. industry for lot in and controlling just and reposition it mitigation of and prevent prevent overall excitement risk that mishaps

And And more Todd, core equation, analytics exciting do. is we the system to to makes of I which part an models possible. so and these the what think, equation that data

love So, question part it's story to what I and the and definitely the customers. selling of we're

Thank you.

next Peter Our with Davidson. your proceed is question. from D.A. Please question Heckmann with

With the live the to you ACO talk about can cloud. how lives of quarter, what committed live percentage this And modules have? many to you either ARR is or now migrate

last again, Say in clause sentence, I it. the your missed

Sure, sure.

trying and of of -- range about either in just cloud? the mean migrate live to ARR think or percentage So what the something XX%, I to is now XX%. to committed

Okay.

So instance, to included -- have instances. like many me Jeff going in things are there's to each they're the live. about of to pivot say that couple have I one let statistics. We a a second. sometimes Within in just number want talk oftentimes, but are customer, of that let me customers we'll the

certain it's with will line for of you the there ClaimCenter actual be often live dig So PolicyCenter or say, production. of, right? whether or of instances business, on of new number depending or carry of might for line that a that in an it then business or and established DWP, particular PolicyCenter carrier when multiple of into those, line is And a are of not a instances amount each business

that that have or implementation immediately, for cloud deployed -- the on BillingCenter ClaimCenter production when cloud. fully to of a the DWP the have terms on PolicyCenter, a like scale our in operating go-lives on-prem, biggest and all the you are then And on instance So cloud instance. us we very you moved

of is as factory, -- in is cloud. the with of to associated But or can the the the the count. than Company has larger that it ARR the predominance certainly, sense this. at do And now of at give now momentum a price ARR ARR the the terms Guidewire. much non-cloud as Jeff is majority you Cloud In with of point

ARR we that we way go cloud is measure customer Pete, into ARR And cloud once in a that the to count our calculation. commits them path,

to of last end our you're from And range we said we'll the in. from we'd expectation update be XX% coming that of were year. expectations. of line ARR. cloud Analyst that our with that cloud overall as fiscal was particular over that XX% total at in we of ARR our ARR think just is on XX% this in coming I Day So that's the And still metric year, But

I in pay very we don't just would live, head we obviously is this something internally, But closely Yes. we percentage go right? it's talk We a obviously or that add, the this. like still ARR but to project live know that in very of is or about script not -- obviously my to. close that's it's my in because not we publicly, something attention that very, track

this That's will the we is to that Guidewire. And look, have good that of promise part successfully that production. very we make. brand And record of I Company, is commitment XXX% the very, the track as of and at the culture a think get

shoulder making eventually complicated live that being and and partners production. and projects customers these XXX% is with standing Despite to are hard, these sure of we in shoulder

year culturally than intention but the is Sometimes longer the price get because all and complicated, it or that live. at is takes the it least a all -- we commitment does is will

like lead higher All on growth underwriting And that in for sense. of potentially right. a further to carriers, premium something the billion nationwide losses $XX two DWP losses years. underwriting for could to the of price couple to But last then that your insurance next then lead over That increases in makes won't point years?

the order systems, in and over of thresholds will ways of complicated core on equation into trigger Yes. And we balance is both that operate profitably. crossed That's that sides to the and time, overall need TWP be expectation. growth It that and system should. went can for bands equal to contract variety system in the based The increases. barriers and those flow our Guidewire on

causing, But term, run, being the a think generally, continues long like I able and heading script, with the Guidewire issue short-term think this facilitates maybe us around I to say, is solid the to agility is into scrutiny of a the or reasons better bit I like But deal and let's we said, yes. as industry headache, a sales the short working for carriers -- why little the to system of equipped providing expenditures. in in And this. a in This said quarter. of activity bit be this. this one fourth innovation And through absorb

you. Thank

Please from Sachs. Our question. next question with is proceed with your Kevin Goldman Kumar

us types structures on the you is click how double in or you're that to years? years? of maybe the And ramp compared the kind historical levels? is year to deal a And headwind to maybe that of of wanted of closing? steep I multiyear help kind how frame it ramp prior initial And how Jeff, ramp activity. much can compares deal

we in a bit It's and activity smaller a interesting kind more QX a And it's good because a Yes. ramp more of starts grow bit question. that fashion. last saw little would less organic

portfolio interestingly, new also customer bit little activity. more year wins deal seeing modernization versus towards than are a So programs a expected a migrations. bit bit surprised new our higher skew ramp And to see this we and we

ARR a steep incremental of Guidewire. added kind we because had booking elements to attached And the that's migration's count being to always them ramp fairly as

license already get fee, to sometimes, in and a the cloud. a while and takes term ARR live And they're it and paying and running little up

associated migration. with a not uplift so And oftentimes, big associated with ARR there's

big little pattern. path of It bit fact multiyear this So but an willing interesting prospects both and this a and year customers that commitments Guidewire to seeing means Guidewire. is to make with are fact pattern, positive higher a ramps

raise the endpoint bit saw committed So, growth the steeper year. of ramps, starting we the point -- those to means we are little prior that seeing a in to what is than kind bigger ramps the used we which

a prior shallower And little the year terms smaller all We was overall in saw of commitments. notably bit the activities. rather than some big starts ramp

new events. see, some surprised especially see mix. exciting So wins we're general, in to we was a very even little for it's see But healthy a -- to seeing It's customer ramped pleased us displacements, competitive and that. are fully is I ARR bit to which and

appetite capturing are for on first that or pressures of of ARR. the think But But kind base existing spend to cost-conscious we're impact a bit insurer little sign in two. some the certainly fully their of I installed is attractive the an over new do year near-term up ramped having

there? cost billion the the Obviously, out incremental just about with $X on higher ARR a how then and nice margin. And function guide than costs? reach you feeling gave. kind the Is support a And gross helpful of in there, discipline cloud then anything context. That's infrastructure ability minimal are outperformance maybe continued subscription and you'd else that just investments to kind call of of you

Yes.

overall we infrastructure So the us the our has manage very we're work cloud pleased of in with The gains efficiency done seeing to help costs. lot platform. are team engineering a

is continuing so And positive. big our that to a exceed which is expectations,

this of cloud in area little we point is COGS push out. bit upgrade costs journey at Another and the of cloud cloud And costs. those did a updates see

percentage X tend points bit if efficiency points, percentage So core when getting about We and pushed I the to expectations, out. think X.X this about the just work to think vis-à-vis a in very work was related model our the conservatively. other this outperformance of was little gains about you quarter,

not that of but the a work we're quarter. drivers was coming was that in unforecasted, into of the a outperformance the primary quarter So surprised by lot

Thank you.

with from proceed next Our with Oppenheimer. question. question is Please Ken Wong your

Mike. first the one for Maybe

in would the products? kind edges how scrutiny not sales sense IT that on guess, may that IT conversations, for or materialize. Or I that of more I for spend And hit pullback? broad materialized impacting terms may budgets, get of that actually love versus how if of is just a systems? to your of has has Guidewire the is Just core that

Yes.

sense are say the the one not I quarter-to-quarter would thinking duration is this would to about doing as they the what are for which Guidewire of say duration, I XX-year XX day-to-day, this immune that is -- investment much a the Guidewire Five-year we quarter, is very I for more than is -- years. had legitimate people about next my Thanks I Guidewire cash thinking strategically. think question. very okay? conversation company flow in as about project Okay. most, think

you general does it So spend. immune so this IT than ability in just the it little it deals, the a more conservatism it's ability up manufacture for I set to for to things budget, the bit is accelerate us as to relates But up -- probably it right? us bring makes exist, general, most man And climate in Guidewire's because bring like where to a it it harder.

QX. The already we've confidence up is outlook a provided few were continuing and progress, us things it has But a last the past. for place much that are it months bit it and give in in plans that more the is to in were the already in of coming than flight and headwind, does the in

thought I And so worth mentioning. it was

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helps a you So of give sense hopefully, you things. that

hopefully How out of just Yes, all side the appreciate then, kind there. And is super into Jeff, to nature, just flow byproduct versus pushed really top thoughtful little maybe the wanted the of that I future what you reduction. of bit dig can color line, in the cash recapture on trimming because much quarters? a was ARR guys services collection, maybe of which that helpful. a of things timing, lower the

was and of putting we're environment our that billed invoiced majority vis-à-vis The what's in given that be the to talked to, more the a seeing Mike it bit QX. some just collections going of dynamics conservatism into assumptions just Yes. in

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in and hoops in through we to having certainly, to the quarter and a We vendor those payments bank bureaucracy account and revalidation didn't are make was in place through that jump large everything had to process make of operating are more in bit the shift insurers lot go before seeing help kind sure a they that our of as we're putting order.

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Thank you.

is your with from proceed Please question Jaluria with question. RBC. next Rishi Our

back AI go to glad about it. way hear the I'm the generative theme. I Mike, to Wonderful. wanted to really you're talking of kind

even then a change for And the got right? way to interact P&C budget And some And Guidewire, they the view do actually catch of want But the what's what of on kind it cloud. impact overall of to quick and that it insurers do customers? the modernize I've with about only business some and importantly, the industry does they the the for Guidewire? think itself, to transformational migrate as maybe drivers spending the think peak to on way up have of environment that I effects to Not sort the force and potential the impact more follow-up. you pertains for can

for Thanks the Yes. question.

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this. about excited very I'm So

of even on we productize months, do think the to whole to of excited over out implementation and We're people just to, it. I start about five excited it. very I industry how start few minutes touched lot the think talk I and in roll for a this are the side And about maybe, it. haven't next

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dynamics in wanted Yes. then go back the bit Got year. of the a you whatever it. -- if ramped there. you we smaller the thoughts That's I maybe this of lands year, what's for some that a bit seeing as ARR around renewal, want call see kind And and little to And from versus or opinion, I a those saw And last a of that with to it, come about ARR. lead as helpful. it appreciate of potential we shallower think last that should that kind up potential uptick about that really our all little smaller some kind of maybe know you surprise lands in lands upside models change ARR -- to those be your an driver put But driving, acceleration? in I might of the talked of behavior? to

this environment that in Yes. said, insurers contract with we're it's an large Guidewire. agreements. values mean, total investments tackling pattern are that in exciting support I that commitments I seeing in making I as And these ramped and the think programs big strategic

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ARR relevant time, term of that does growing outpace the period have confidence that would because some is little -- more seeing relevant. then But a year, that us a which For and buying a less this are fully think through thought fashion of through we just be as we're we're metric a manage background smaller about expectations. as fade we to again, long ARR create in but I executing bit the insurers gives dynamics ramped metrics growth once into bit organic metric may if

second -- What there of the part the was another was question?

No.

guys. covered much. Really so you appreciate You everything. Thank

you. Thank

next your Our VanVliet is with BTIG. question Matt question. from with Please proceed

years more for of the on guess, implementation guess next on of of think mix we, services How the higher fully fully staffing then sort from over SIs the the needs just I one or overall about of I ramped both that group, in more that should push a and ramped deals. to ARR backlog general? related to perspective especially side as you couple

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to of services the flow Guidewire organization just to Guidewire. just expect it more don't say, that growth I to grow will our overall And and think implementations partners, flow of want down will I manpower the the in economy as I SI to go to

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it's great Yes, a question.

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and I overall, good predictions general, good a just industry industry the activating business IT good and at at but at not think of of making is pretty change. not sort pretty the predictions the making those And as this insurance, is in causing world and and analytics analytics

customer producing use And excited users that is of turn better to to decisions project. and go the here either that now the bigger what reason claims, better algorithms risks end or it's we'll with Guidewire that to make able and a makes bigger decision and decisions And a what make part useful to of part and about predictions processing these about, will so customers the that's practical and able story into them underwriting be the are a about we're take be exciting.

supported, augment to the So just that's told of see, model predictive and exciting it our my fit about and generative analytics same hope continue language capabilities. AI, -- to we'll improve but see, and kind that capabilities is right story into large expectation I will I you

you. Thank

Robert question. question Vruwink proceed W. with is Joe next Our Please from Baird. your with

What differentiator the A through little that bit are to with X But more something segment of when for themes on analytics. in like on? Tier some on just you the through X the analytics the competitive seem late. brought X you're you of would topic up outside mid-market a since Or X that you to new or broader last winning logo Guidewire point carrier, win bit Tier finding X catching is Tier be there? maybe does

the themes. Yes, I'll great question. give you

So claims, across capacity billing, different right? policy it's carriers consistent different I is we for have that be valuable complete important think, think bring the number solution there one, is tolerate more that able that horsepower, I cases. more to systems a maybe to probably use larger

approach stack, smaller whole But limited very important. vendor, insurance with to with a configuration, data, full the whole integration, analytics, platform process IT cleanly. more That's companies, consistent the one one business these suite, operating the organizations,

the that being think very these customers. that valuable I is also equation the for vendor of and to responsible predictive part one analytics

track The just success just that it's -- on and other before, coming thing record this we've is I of touched that's of got. up kind

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of been question I these at in Like think as And this. seeing systems is I have we wanted on package has seen and deployed. about Guidewire and to say mentally being nobody I main this displacement something in replaced asked actually that like my quarter, this years we're four conversations the because surprised this yet, I'm been Jeff frame competitive touched not

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behind a is Guidewire. lot reasons I of you with think that tier gave I And market why reasoning do to about all the that interest the interested the has just in

-- I So all it all strengths now. our to it to think plays right plays

on up that And last I'll follow point. just quickly

I like global to the past, XX% said in DWP. XX% think you

You remainder of manage that on that of what mainframe remains half is system. a

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Yes.

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Thank you.

with Fargo. from is Wells question proceed Turrin next with Our Michael your question. Please

one Just for me.

the other Going just some back comments. of to

wait to ahead deals. ARR between range. and that's prelim there? also tightening characterizing for what's you fiscal further of Any you're QX historically as So what the context to in wanting second is QX before impact the the of full fiscal was growth year to is framing And you process macro Or this prior expected? the is The the just helpful. previously around But quarter appreciate is turn ramp more some driving call the guide. more not into that came of being what's driving XQ QX the I outlook that important difference compared half have? last decision a the a is the decision there,

was thought it something about to thinking there process. I was that models when there, mean what I prior we and front analyst get That's that years in the I out felt also think we we wait in was assess it the like fiscal think you're looked given our prudent if exactly had we right. critical would was that. QX that kind right framework of establishing we next But it for of where felt of visibility that do year, we how into, kind for to the to are is is completed. until try critical and at

Thank you.

with Our next question Please is Stifel. Lane proceed Parker from question. your with

they the as in I'll the interest just the you see wondering migrations talk project about carry of was of I share ask part general Mike, could one appetite time. that expansion you the and the if trying are the a for journey on successful cloud have and to scope of they're hit ground the embarking cloud running either that sure just migration what customers or make widen to achieve?

the the something the do conversation we modernize it, the let's let's of that which upgrade well. projects it dynamic, existing as have a causes to about, implementation noticed. very is modernization often, also This is the, call And cloud question. Super

it's that around where modernization version or Sometimes talking upgrade, the lines conversation about another of new core a component or other we're causes system. way of a and business upgrade about around the the cloud

But they what They deals related compelling events. business triggers projects for us. need They like these that the and things deal need this, the -- drive are triggers. objectives need can

times, got modern that. X, of Y, a do I initiative like business. Z system in said, this a We so our to an And to we've hey, lot do is, need

we're Guidewire and Okay, happy. that claims already, we for have

let's And so about talk policy.

And the also? And way Should we to the about and migration we different in but claims? created should events those going that's how that those and goes variety results to then do can an ways that of it upgrade. well, business evolves compelling move a cloud, we're conversation And these on there's and policy conversations and that think happen, cloud the just driven are objectives. by

absolutely And so it. that continuing are that's and excited dynamic just a about we're now right seeing

that suite can very offering, very a do for like also everything fact where the there this kind you idea are to a like in we consistent full solution it's it of relates a good so And way.

these -- one And that a policy big vendor, and end-to-end to across part approach core partners approach One and data approach configuration, one value prop a integration, one marketplace it's systems, analytics consistency just claims, to the and having a process. and to billing facilitates better the provided. insurance really we've

these like haven't -- And for in It's all through even perspective, all -- Guidewire. kind of have products in bolted been of InsuranceSuite the unique it's that not competitors, P&C but core like landscape organically at from pretty built systems just together or They acquisition. acquired these been of Guidewire. the --

and been our years engineers, by many, XXXs of at built has many great Guidewire crafted this over implementations. that's course It's of great a like And part users of of success. and teams big the

the in the driving definitely insight the a things these right of it's of appreciate I now. lot one and deals question So

Rosenbaum There are over CEO, this questions closing I at comments. the back to turn you. for no further Thank time. would floor like Mike to

Thanks very much.

Tier everybody today. I thrilled existing call X continued improvement. with and Tier insurers, the also and margin new momentum customers, thank while want We're to obviously cloud participating in So the across for driving X just

the huge a happy of particularly hard work. see in here and a happen, that Company margins. at was the validation make this to There's was effort great that to continued been I improvement

we're quarter everybody great to our very excited of talking the forward to call. end a at we next about have fourth look Very so QX, And our excited again and the at to future.

much. very thanks So

Thank concludes today's you. This teleconference.

may You Thank lines this for your time. at you disconnect your participation.