ab3fbfff06e262320a6fd90659691bdee79867503fc599ed31f07dc382384418

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1. Your subscription and support gross margins increased to 70% this quarter  **[GWRE_3410971_9]** ; however, you expect them to decrease in the next quarter  **[GWRE_3410971_9]** ; was there a one-time uplift contributing to this increase, and what factors might prevent maintaining this margin level going forward?

2. Can you discuss the dynamics behind your services revenue growth and whether you have reached the ideal balance between work performed by your internal teams versus that done by partners?  **[GWRE_3410971_10]** 

3. Given the industry's urgent demand for agility and speed in AI adoption  **[GWRE_3410971_15]** , how are you ensuring that your customers, particularly Tier 2 and Tier 3 insurers, can swiftly adopt AI capabilities, and does the maturity of your cloud platform meet these needs?  **[GWRE_3410971_14]** 

4. With your goal of migrating 100% of your customers to the cloud  **[GWRE_3410971_6]** , are there any changes in your visibility over the next 3 to 5 years regarding the pacing of these migrations, especially following the feedback from Connections, and how are you addressing potential delays or resistance?  **[GWRE_3410971_11]** 

5. Regarding the global framework agreement with Zurich, can you quantify its significance in terms of near-term financial impact versus medium to long-term benefits, and how does this agreement influence your overall approach to securing deals with other Tier 1 global insurers?  **[GWRE_3410971_8]** 

aa3ae23d7a0da7a27d62ec253692c93deb06884c29c89e11ffe512082b40487f

| Name           | Position                                                                 | Start Date       | Short Bio                                                                                                                                                                                                                                                                                                                                 |
|----------------|--------------------------------------------------------------------------|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Mike Rosenbaum | Chief Executive Officer                                                  | August 2019      | **Mike Rosenbaum** has been the CEO of Guidewire Software, Inc. since **August 2019**. Previously, he was the Executive Vice President of Product at Salesforce, contributing significantly to the company's product achievements. He also worked at Siebel Systems and served as a submarine officer in the U.S. Navy  **[0001528396-24-000144_gdwre-20241022.htm:16]** **[0001528396-24-000148_gdwre-20241101.htm:16]** **[0001528396-23-000123_gdwre-20231102.htm:16]** .                                                |
| John Mullen    | President                                                                | February 2022    | **John Mullen** has served as the President of Guidewire Software, Inc. since **February 2022**. He was previously the Chief Revenue Officer. Before joining Guidewire, he held leadership positions at Capgemini and began his career at Accenture  **[0001528396-24-000144_gdwre-20241022.htm:43]** **[0001528396-24-000148_gdwre-20241101.htm:43]** .                                                                                                                   |
| Jeff Cooper    | Chief Financial Officer                                                  | June 2020        | **Jeff Cooper** has been the CFO of Guidewire Software, Inc. since **June 2020**. He was the interim CFO starting from March 5, 2020, and served as Vice President of Finance since 2017. Before Guidewire, he was the CFO of GoodData and held finance positions at Rally Software and Deutsche Bank Securities  **[0001528396-24-000144_gdwre-20241022.htm:43]** **[0001528396-24-000148_gdwre-20241101.htm:43]** **[0001528396-23-000123_gdwre-20231102.htm:49]** .                                                        |
| Winston King   | Chief Administrative Officer, General Counsel, and Secretary             | June 2018        | **Winston King**, aged 53, has served as the Chief Administrative Officer, General Counsel, and Secretary at Guidewire Software, Inc. since **June 2018**. He has been with the company as General Counsel and Secretary since January 2013. Before Guidewire, he worked at Infogroup, Inc. and practiced law at WilmerHale  **[0001528396-24-000144_gdwre-20241022.htm:43]** **[0001528396-24-000148_gdwre-20241101.htm:43]** **[0001528396-23-000123_gdwre-20231102.htm:50]** .                                          |

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Guidewire Software, Inc. is a technology company that provides a comprehensive platform designed to support the core operations of property and casualty (P&C) insurance carriers. The company's platform integrates core operations, digital engagement, analytics, machine learning, and artificial intelligence (AI) applications to enhance insurance operations such as underwriting, policy administration, claim management, and billing. Guidewire primarily sells its products through subscription services, term licenses, and professional services, focusing on cloud-based solutions and strategic partnerships to drive growth and innovation  **[0001528396-24-000105_gwre-20240731.htm:109]** **[0001528396-24-000162_gwre-20241031.htm:6]** **[0001528396-24-000105_gwre-20240731.htm:78]** **[0001528396-24-000162_gwre-20241031.htm:28]** .

1. **Subscription and Support** - Offers subscription services for its platform and cloud-delivered products, generally sold with an initial term of three to five years, with optional annual renewals  **[0001528396-24-000105_gwre-20240731.htm:78]** **[0001528396-24-000162_gwre-20241031.htm:28]** .
2. **License** - Provides term licenses for self-managed products, primarily to existing on-premise customers, with revenue recognized when the software is made available  **[0001528396-24-000105_gwre-20240731.htm:78]** **[0001528396-24-000162_gwre-20241031.htm:28]** .
3. **Services** - Delivers professional services to help customers deploy, migrate, and utilize Guidewire's platform, often billed monthly on a time and materials basis  **[0001528396-24-000105_gwre-20240731.htm:78]** **[0001528396-24-000162_gwre-20241031.htm:28]** .

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1ad02cadd70d0c137833fb8f3e3b1ee03d2e62cb0d02bfd793ff3607a8b73fe9

- **Strong Cloud Adoption and Customer Demand:** Guidewire is experiencing strong demand for its cloud platform, with a record of **11 cloud deals** in the quarter, including **3 net new customers** and **3 migrations**, and is confident in their pipeline and win rates for future growth.  **[GWRE_3377025_15]** **[GWRE_3377025_5]** **[GWRE_3377025_21]** **[GWRE_3377025_19]**
- **Increased ARR Guidance and Confidence in $1 Billion ARR Target:** Guidewire has increased its ARR guidance to between **$852 million and $862 million**, and remains confident in achieving the **$1 billion ARR** target by fiscal **2025**, supported by strong visibility into their pipeline and backlog from previous deals.  **[GWRE_3377025_5]**
- **Improved Cloud Gross Margins and Operating Cash Flow:** Guidewire is seeing improved cloud gross margins, with subscription and support gross margin increasing to **65%**, an **8-point improvement** year-over-year, leading to better-than-expected operating income and higher cash flow from operations, allowing them to raise their cash flow outlook for the fiscal year to between **$120 million and $140 million**.  **[GWRE_3377025_16]** **[GWRE_3377025_11]**

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- **Guidewire is experiencing strong demand and pipeline growth**, with **momentum and confidence building**, leading to a **great Q3** and **optimism for Q4 and beyond**.  **[GWRE_3391509_18]**
- **Subscription and support gross margins are tracking ahead of targets**, with the company **already ahead of next year's goals**, allowing for **continued investment in the platform while achieving operating margin targets**.  **[GWRE_3391509_11]**
- The **maturity of Guidewire's cloud solution** is **driving faster demand**, as customers are **staying closer to the latest releases**, benefiting from **improved update processes**, and enhancing their overall experience.  **[GWRE_3391509_19]**

270177eb298b84b5099180896895b24afdfa5fc2b45962c231d12dc18de507d2

- **Sales cycles for Guidewire remain very long**, often stretching over multiple years, which could lead to potential delays in revenue recognition and slower growth pace compared to peers.  **[GWRE_3391509_23]**
- **Growth in ARR includes an incremental percentage or percentage and a half from increases in Direct Written Premiums (DWP) due to inflation**, which may not be sustainable long-term and does not necessarily reflect new business growth.  **[GWRE_3391509_11]**
- **Emerging technologies like Large Language Models (LLMs) and AI could enable nimble upstarts to capture market share by providing similar capabilities at a fraction of the cost**, posing a potential threat to Guidewire's position in the insurance software market.  **[GWRE_3391509_25]**

726d6499a255b8ade33f5d9ee2a0db08e23c92264c53439b4a75b6e1068235a7

- **Guidewire lowered its total revenue outlook for fiscal year 2024 by $19 million at the midpoint, driven by a $20 million downward adjustment to services revenue expectations, indicating potential challenges in generating services revenue.**  **[GWRE_3377025_4]**
- **The accelerated shift of implementation work to system integrator partners is occurring faster than anticipated, impacting services revenue and gross profit, and may take more time to build a backlog of Guidewire-owned programs to offset the decline.**  **[GWRE_3377025_3]** **[GWRE_3377025_4]** **[GWRE_3377025_11]**
- **Services gross margins are under pressure and are expected to be lower this year, with a recovery to pre-cloud margin levels potentially taking time, suggesting ongoing profitability challenges in the services segment.**  **[GWRE_3377025_11]**

6e0fc60095a9690b414371f34e5a81f21782c81dc6e38f044f29a3e59b68eca5

- **Subscription and support gross margins reached 70%** in Q1, ahead of expectations, indicating operational efficiency and potential for future profitability.  **[GWRE_3410971_9]**
- **Strong demand from Tier 1 insurers**, with **5 new Tier 1 customers** adopting their cloud solutions, and an aspiration to convert **100% of the customer base to the cloud**, enhancing growth prospects.  **[GWRE_3410971_6]** **[GWRE_3410971_12]**
- **Opportunity for expansion in the Workers' Compensation market**, with **122 customers** already running Workers' comp on their platform, potentially unlocking new sales activity and enhancing product offerings.  **[GWRE_3410971_17]**

aa11553869d5bf6d5a52ca2f105ef7c706703f3783167e8e209105d4351d4038

- **Limited cross-enterprise adoption among Tier 1 customers**: The company's largest customers are still making decisions on a line-of-business basis rather than standardizing across all lines of business, which could limit growth potential with these customers.  **[GWRE_3400893_20]**
- **Management cautious on M&A, focusing on organic development which takes longer**: The company prefers building products organically, acknowledging that "**it will take us a little while**", potentially slowing innovation compared to competitors pursuing acquisitions.  **[GWRE_3400893_10]**
- **Intense competition requiring fierce efforts to win deals**: Despite successes, management admits they are "**still a competitive market, and we still compete fiercely for every single deal**", suggesting future growth could be impacted if they cannot maintain their edge.  **[GWRE_3400893_17]**

a5daf4c74b32bfc005b33c06ccd4dd2438ab05d73654a94880d111c7b10825a4

- **Guidewire anticipates a decrease in subscription and support gross margins due to increased customer usage and higher operational costs as more customers go live.** CFO Jeffrey Cooper noted that the current 70% gross margin is not expected to sustain, impacted by reallocating engineers from R&D to cloud operations, which shifts expenses to cloud cost of goods sold (COGS).  **[GWRE_3410971_19]** **[GWRE_3410971_9]**
- **Guidewire's lack of transparency regarding fully ramped ARR growth levels could signal uncertainties in ARR growth.** When asked about the convergence of headline ARR and ramped ARR, CFO Jeffrey Cooper declined to provide specifics, stating they only comment on fully ramped ARR on an annual basis.  **[GWRE_3410971_18]**
- **The migration of all customers to Guidewire's cloud platform may take longer than expected, potentially delaying anticipated benefits from cloud adoption.** CEO Mike Rosenbaum acknowledged that moving 100% of the customer base to the cloud "is going to take a long time".  **[GWRE_3410971_6]**

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- **Guidewire achieved a 19% year-over-year growth in fully ramped Annual Recurring Revenue (ARR)**, surpassing prior expectations. This growth was driven by customers making larger commitments and adopting full-suite cloud solutions upfront, reflecting increased confidence in their cloud platform.  **[GWRE_3400893_20]** ,  **[GWRE_3400893_15]**
- There is a **steady and growing momentum in cloud migration activity**, with customers expanding their use of Guidewire's cloud platform due to its demonstrated success and reliability, leading to healthy expansion within the cloud installed base.  **[GWRE_3400893_17]** ,  **[GWRE_3400893_13]**
- Guidewire benefits from strong industry tailwinds, as the **Property and Casualty (P&C) insurance industry is durable with rising premiums**, contributing to ARR growth; moreover, Guidewire is **distancing itself from competitors due to a strong track record of success with cloud products**.  **[GWRE_3400893_9]**

e928a7313623033b1aee5956dd3e7344fe5bece1da1ee69be14eb77faed14415

Guidewire Software Inc (GWRE)

Financials