Q1 2020 Earnings Call
Greetings and welcome to the guide wires first quarter 2020 financial results Conference call.
At this time, all participants Arnie listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like turn conference over to your presenter Mr. Curtis Smith, Chief Financial Officer. Please go ahead Sir.
Good afternoon, and welcome to Guidewire Software's earnings conference call for the first fiscal quarter.
Fiscal year 2020.
Which ended on October 31st 2019.
My name is Curtis Smith, I am a chief financial officer of Guidewire and with me on the call, It's Mike Rosenbaum, Guidewires Chief Executive Officer.
Complete disclosed disclosure of our results can be found in our press release issued today.
As well as interrelated form 8-K furnished to the FCC.
Both of which are available on the Investor Relations section of our website at <unk> IR Dot Guidewire dotcom.
As a reminder, today's call is being recorded at a replay will be available following the conclusion of the call.
During the call we will make forward looking statements pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 regarding trends strategies and anticipated performance of the business, including the market shift to cloud offerings, our product roadmap and future product availability.
These forward looking statements are based on management's current views and expectations as of today and should not be relied upon as representing our views as of any subsequent date.
We disclaim any obligation to update any forward looking statements for outlook.
Actual results may differ materially.
Please refer to the risk factors in our most recent Form 10-K , M. 10-Q's filed with the FCC.
We will also refer to certain non-GAAP financial measures to provide additional information to investors a reconciliation of non gap to GAAP measures is provided in our press release.
Reconciliations and additional data are also posted in a supplement on our IR website.
During the call we may offer incremental metrics to provide greater insight into the dynamics of our business.
These details maybe onetime in nature, and we may or may not provide updates in the future.
With that let me turn the call over to Mike for his prepared remarks, and then I will provide details on our results before providing our outlook for Q2 and fiscal 2020.
I can I will then take your questions.
Thank you Curtis and thanks to those of you joining us for our first quarter earnings call.
We're off to a positive start to fiscal 2020 with total revenue and he P. S that were above the high end of our guidance ranges total revenue was 157 million and license and subscription revenue was 82.4 million both exceeding the top end of our guidance.
They are our ended Q1 at 463 million up from 460 million as of the end of Q4 overall, we were pleased with our financial performance in Q1, which is always a seasonally slow quarter for us in terms of new sales activity.
And we believe somewhat impacted this year by our strong performance in Q4.
Connections our annual user conference was held just after the close of the quarter and was the first I've had the opportunity to attend it wasn't incredibly successful event and an opportunity for us to lay out our long term plans for the company and for the product.
It was particularly useful for me as it provided an opportunity to hear direct feedback from customers and partners on our vision and plans for the future.
This was our largest connections ever with nearly 2400 customers prospects partners and employees participating in over 100 workshops panels and breakout sessions, but the statistic. Most impressive for me was that nearly two thirds of our customers were represented at the event, which I think is a great indicator of the value created through our specific can seem.
People are focused on the PNC industry.
We presented a live demonstration highlighting our product vision, featuring an innovative use case for rapid design delivering and testing of new insurance products. It was powered by advanced product designer a low code configuration tool that will enable insurers to rapidly design simulate and deploying new insurance products and you true.
Our new digital experience framework for rapidly designing and developing digital apps.
We expect advanced product designer for digital and you true will be available to Guidewire cloud in fiscal Q3, and self managed customers in fiscal Q4.
We also outlined our plan to improve the Guidewire cloud platform through automation tooling frameworks and common cloud services and the Guidewire data platform, a PNC insurance specific data repository and factory that continuously collects data from internal and external sources, enabling insurers to leverage up to.
In a minute information to make smarter faster decisions.
We highlighted science for small business and on demand risk assessment engine that combines internet scale data collection, PNC specific AI and modeling, enabling customers to quickly understand in underwrite small business risk.
Insurance now customers and prospects reacted positively to the newest version of the product, which includes a new user interface and our new prepackaged implementation option insurance now go which we estimate will reduce implementation time and expense by 30% to 50%.
I was impressed with the team's ability to deliver our message and connect with our outstanding roster of customers and partners. So big congratulations to the team and a thanks of all of our customers and partners, who helped make the events such a success.
Connections is not only a form to exchange ideas and best practices. It isn't event that also serves to help customers and prospects from up future purchased an implementation plans, we're continuing to see the market shift from self managed to Guidewire cloud further validating our increased investment in cloud offerings and delivery we're still.
All in the early stages of this multiyear transition and the nature and complexities of these transitions warrants significant consideration by our customers. Therefore justice we experienced last year, we expect cloud demand in fiscal 2020 to be weighted towards the back half of the year.
There are a number of highlights from the first quarter that support our confidence in our expectations for the remainder of the year as well as our long term goals.
One of our largest tier one customers selected insurancesuite cloud as a platform for new innovative Greenfield use case, while they are and DWP associated with this used case, our small our platform was chosen to provide an agile framework for the carrier to innovate with where.
Excited by this potential deal creates to demonstrate the value of our cloud solution to a tier one carrier where a much larger overall opportunity exists.
Also during the quarter, we signed Pennsylvania State workers Insurance fund, who selected our full insurancesuite core as well as our data and digital products with 225 million in DWP. This when illustrates our ability to serve insurance carriers of all sizes as well as the willingness insurers have to license and implement.
All of insurance suite as a single project.
In the first quarter, we extended relationships with 13 existing customers, who chose 22 additional products.
Among these aren't existing Paul Policycenter, and Billingcenter customer, who licensed claimcenter to expand to the full insurancesuite core.
We're also happy to announce that in existing customer chose science for their workers compensation line of business to provide a more complete view of the underwriting process by augmenting basic company fundamentals with behavioral insights social media sentiment and our environmental influences. This deal.
Bill is particularly notable since its application to workers comp demonstrate can't get demonstrates continued momentum in our approach to broaden our data listening capabilities beyond the cyber use case.
Since references are critical component of the sales process and a significant factor for our customers in selecting guidewire. Our track record of successful implementations is key to extending our market leadership our momentum in the first quarter reflects the strong record of successful implementation with 12 customers going live for the first time on 25 products.
In addition to customers completed major version product upgrades.
Our customer success also continues to be recognized by industry analysts insurance suite was recognized for the fifth consecutive year as a leader in Gartners Magic quadrant for PNC core platforms in North America Guidewire insurance now has been named a challenger in the same report for a third consecutive year.
And in Gartners Magic quadrant for non life insurance platforms in Europe , Guidewire was again honored with the highest ranking for both ability to execute and completeness of vision. This recognition is important to us in that it validates our approach in strategy as well as for customers and prospects who are evaluating adoption of guidewire for.
Forming their businesses.
Looking back on my first quarter here Guidewire I could not be more excited about the opportunities ahead for guidewire and the PNC and industry. Our cloud transformation is a significant part of that and while we still have a lot of work to do is motivating to see that the industry is welcoming the transition to cloud based in modern core platform solutions I'm looking.
Forward.
So the opportunity to lead our contribution to this industry transformation.
I'll now turn the call over to Curtis to elaborate on our Q1 results and financial outlook for Q2 and for the year.
Thank you Mike.
We began fiscal 2020 with a solid start exceeding our guidance for total revenue operating income and earnings per share.
Total revenue in the first quarter was 157 million.
License and subscription revenue was 82.4 million compared to 94.7 million a year ago.
The year over year decrease was primarily due to two unusual term license deals that represented 23.6 million of revenue completed in the first quarter of last fiscal year Park, partially offset by a 12.9 million increase in subscription revenue.
One of these term deals was a new 10 year term license contract that resulted in $14.5 million of revenue being recognized in Q1 last year with no revenue in Q1 of this year.
The second deal was a contract consolidation that positively impacted Q1 last year, but we expect to renew in Q2 of this year.
Subscription revenue was 28.2 million up 84% from 15.3 million a year ago.
This increase is attributable to strong insurance suite cloud sales last year.
From a new sales person mix perspective in the first quarter, 43% of new software sales were subscriptions compared to 26% a year ago.
Early indications 0.2 prospects focusing on our cloud offerings first our self managed offerings. Therefore, we continue to anticipate that between 55 and 75% of new sales for the year will be subscriptions.
If our subscriptions bookings trend towards the high end of this range that could impact near term revenue due to lower upfront revenue from term licenses as we have discussed in the past.
Maintenance revenue was 21 million flat compared to a year ago and also above the high end of our guidance range.
We expect maintenance revenue to be muted by the growth in subscription revenue, which includes maintenance activities as part of the subscription fees.
This includes the impact of cloud migration deals when a customer converts a term license to a subscription service.
They are was 463 million on a constant currency basis at the end of the first quarter compared to 460 million at the end of the year.
As Mike noted Q1 is typically our slowest sales quarter as we digest, hi, Q4 activity and focus on connections.
This Q1 was no different.
Services revenue for the first quarter was 53.6 million the $11 million decrease from year ago was driven by the completion as well as timing of customer projects.
Turning to profitability, we will discuss these metrics on a non-GAAP basis, and we have provided the comparable GAAP metrics and a reconciliation of GAAP to non-GAAP measures in our earnings press release issued today.
With the primary differences being stock based compensation expenses amortization of intangibles, the amortization of debt discount and issuance costs from our convertible note and the related tax effects of these adjustments.
Gross profit was 80.2 million in the first quarter compared to 110.4 million a year ago.
Change compared to year ago was driven by the revenue changes already discussed as well as greater investments in expanding our cloud capabilities.
Gross margin for the quarter was 56% compared to 61% a year ago.
The anticipated decrease in gross margin is largely driven by lower term license revenue and our ongoing shift to subscriptions, including greater investments in Guidewire cloud capabilities.
Services gross margin for the quarter was 10% up from 9% a year ago as we continue to target improve margins through effective cost management of head count and subcontractor spend.
Total operating expenses were 81.1 million in the first quarter, an increase of 5% from a year ago, driven by net increases in head count as well as expenses related to our new headquarters.
As a result operating income was 7.1 million exceeding the high end of our guidance range largely from revenue upside and favorability in expenses due to the timing of hiring and projects.
Net income was 11 million or 13 cents per.
Diluted share.
Turning to our balance sheet, we ended the quarter with 1.3 billion in cash cash equivalents and investments flat compared to the end of the fourth quarter.
Operating cash flow for the quarter was an outflow of 18.1 million compared to an outflow of 27.2 million a year ago.
This outflow is consistent with our first quarter seasonality, where cash is used for employee bonus and commission payments achieved in the previous fiscal year.
Operating cash flow was positively impacted by the 12 million customer payment that moved from Q1 into that moved from Q4 into Q1, which we discussed last quarter.
Free cash flow for the quarter was an outflow of 21.2 million, excluding 7.9 million in build out expenses associated with the new headquarters compared to an outflow of 30.4 million a year ago, which excludes approximately point 3 million in build out expenses.
Now turning to our outlook.
Coming out of Q1, and a successful connections we're off to a solid start and as is normal at this point in the year, we recognize that most of our sales activity for the year is ahead.
Our full year outlook for revenue free cash flow and non-GAAP profitability are unchanged from the outlook provided on our Q4 call.
With respect to the topline.
Our two themes, we are monitoring monitoring that inform our view.
First to the extent that cloud demand drives our subscription bookings higher than approximately 65% of totaling sales.
And our license and subscription revenue for the year could be negatively impacted due to ratable revenue recognition of subscription deals versus upfront revenue for new new term deals.
Second we have seen and may continue to see occasional multiyear term licenses.
While we continue to focus on term licenses with two year initial terms followed by annual renewals based on our experience with term license renewals and new term contracts over the past two years, along with customer it customer interest we may be open to longer terms when it makes sense.
Multiyear deals would positively impact revenue in the period executed, but we will make future year over year comparisons challenge.
They are as a metric is not impacted by either of these two themes and we're still comfortable with our previously discussed range of 14% to 16% year over year growth.
While our non-GAAP net income and net income per share expectations are unchanged. We do expect changes to our GAAP net income as a result of the new base erosion and anti abuse tax or beat regulations issued earlier this week.
We're still evaluating the impacts of these regulations.
We expect our GAAP tax charge to increase.
But do not currently expect an impact to our non-GAAP tax provision.
Given the regulations were made public this week, we expect to provide an update during our next earnings call.
Turning to the second quarter, we anticipate total revenue to be in the range of 162 to 166 million.
Within revenue, we expect license and subscription to be in the range of 92 to 96 million.
We expect Q2 maintenance revenue of 20 to 20.5 million and Q2 services revenue of 48 to 51 million.
For the second quarter, we anticipate a non-GAAP operating income of between five and 9 million.
In summary, we're off to a positive start to the year and remain optimistic about our prospects looking forward.
Operator can you now open the call for questions.
Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Q you may fresh start to if you'd like to remove your question from the Q for participants using speaker equipment and may be.
There you to pick up your handset before pressing the star Keith one moment, please while we poll for questions.
Your first question comes phone line of Ken Wong with Guggenheim. Please proceed with your question.
Great. Thanks for taking my question guys, maybe the first one for you Curtis as we look at Q2 revenue.
It does look a lot lower than maybe what my peers were projecting just wondering is this.
This is maybe due more to just to return to a different type of seasonality is there more cloud deals expected in Q2 in terms of mix than maybe we might be thinking about just any any color. There would be would be helpful to the extent that there maybe some dynamic where missing.
Yes sure. So we noted that the same seasonality in Q1 that we've seen in the past and Q2 is obviously up over over Q on and we've also noted that in general we've tried to focus the investor and analyst community on annual results are not necessarily the quarterly quarter.
Early results because things do move up and down so I think thats, what youre seeing in in Q2 as we noted in our our comments we are continuing to see.
Cloud demand out there will continue to monitors that over the next quarter and provide any updates coming out of Q2.
Got it got it.
And then Mike a question for you when we when we see when we see a lot of the.
The recent deal announcements, we've noticed that quite a few other customers are deploying insurance suite on on a partner cloud can you maybe talk about this dynamic relative to what you're seeing on the Guidewire cloud side and how you think this might impact.
Allowed adoption for Guidewire specific cloud versus versus partners down the line.
Yes, good question.
Yeah, I think that there is definitely this dynamic in the industry not just specifically in PNC insurance around.
Moving on Prem workloads to cloud environments, and sometimes that can be facilitated through a partner and we certainly see.
Partners in our ecosystem that are working with customers to do that.
I think in the end if you think about the long term the offering that cut that we expect most the guidewire customers to move to an hour cloud offering I will be significantly different than.
Just simply running an instance of Guidewire as managed service on cloud infrastructure I.
I think when you look at some of the things that we announced the connections around native cloud services that we will that we are building in releasing alongside.
Specifically, what we talked about connections with specifically in Policycenter.
Those types of services will end up being distinct in different from what you're able to achieve when you're.
You know.
What is effectively.
A managed service or a self managed implementation that you're managing with a partner.
I want to be clear, though that we remain committed to that mode of operation.
We have a significant customer base, that's running guidewire and a self managed mode and they may choose to move that to cloud service either directly or through a partner as you're asking about so we're committed to that mode of operating guidewire, but we expect in the long run most customers will make the decision to move to.
As sort of more native Guidewire cloud offering.
Got it that makes sense, thanks, a lot for that Mike.
Your next question comes from the line of Chris Merwin with Goldman Sachs. Please proceed with your question.
Okay. Thank you, yes, I had one for Mike I think one of the thank you spoke to you at the analyst day was cloud operations and efficiency. It I know, it's still very early here, but just was hoping you could talk about any progress on that front and any incremental confidence you've gained in being able to scale up cloud gross margins in the coming years up to 65.
Center or better thanks.
Sure. Thanks to the question so Lucky I'm glad that you preface the question with the comment that it's still early you know I am.
Just in the the first couple of months that I've been part of the company very impressed.
With the work that we're doing.
To build efficiencies and build technology layers into our implementation in the cloud that will in the long run deliver the types of efficiencies that.
That ultimately will drive the margin targets that you are referencing.
So.
We have the projects in place we have the teams in place we have they experience now now that we need.
Based on the early adopter customers that we've been working with on the cloud offering to give me a lot of confidence that will eventually get there I don't think that.
Well not in a position now to give you details on how that turns into numbers and metrics other than to say sort of.
Subjectively that we're headed in the right direction.
That the newest implementations that we're doing on the cloud.
Our done in a way that will lead us towards greater and greater efficiency.
And the organization is aligned right now around ensuring that any work we're doing is.
Tending towards a more and more efficient ability to deliver those implementations.
Okay, that's great. Thanks, and Hey, one for Curtis just I know you talked about the new cloud bookings mix and.
Something you're monitoring for the impact that could have on revenue for the rest of the year I mean, even in the one key can you talk about how that trended relative to your internal expectations. Another three more quarters here, but.
Just curious like if that was.
Adam ahead of plan so far thanks.
Sure. So we maintain that metric this year news newt, new subscription sales as a percent of overall sales than we thought was an important metric to continue to track as we did last year and we put the range out of the 55, 75%.
Initially and we've talked about this earlier, we targeted the midpoint of that range.
As we come through Q1, and we come through Q2, we have more information, we'll have a better indicator of where we will.
Where we will land on that range.
We continue to see.
The March towards the cloud and we'll be in a position to provide an update.
On on that range and how we're thinking about that coming out of Q2.
Okay, great. Thank you.
Okay.
Your next question comes from the line of Sterling out are you with Jpmorgan. Please proceed with your question.
Great. Thanks for taking our questions. This is Jackson ader on for Sterling Tonight.
Just on the on the our our.
Increase the $3 million increased sequentially can you just maybe also give us an idea of how that trended relative to what your expectations work for the sequential increase narrow.
Yes, sure I would say is generally inline with expectations in how we plan to year as we pointed out Q1 is traditionally.
A light quarter.
Think particularly this year, we had we had a very very successful and strong Q4.
It's probably played an impact into the Q1 activity.
But.
You know the outcome in Q1.
You know didn't do anything to change our outlook for the year our confidence in the projections that we've made for the year the demand for cloud and our ability to to validate the guidance that we've already provided.
Okay.
And then.
On the.
Insurance, we cloud when and where you're inside that that tier one customer and existing tier one customer even though the greenfield cloud opportunity is small.
Is that is that existing tier one customer they pool insurance suite.
Term license customer at the moment.
Yes, so I would say.
I don't want to get we're purposely not.
Disclosing who that customer is.
They have licensed part of the insurance suite.
But the intention is to give details about.
What exactly that scenario is I would say this though.
That used cases, particularly exciting for us.
In that the cloud offering cloud based model gives these carriers the opportunity to innovate.
And bring to market Greenfield products in a way that I think is is new to this industry and something we're really excited about so that particular use case, where we're able to partner with them to bringing innovative product to market prove out our cloud offering and create the confidence in experience we need.
To potentially in the future like we said.
Unlock a larger sort of existing.
DWP in a our opportunity for both of US I think thats really exciting.
And I think I would say is one of the things that we're seeing as we look towards the rest of the year that theres that sort of similar potential and the rest of our customer base and even beyond our customer base for those greenfield innovative opportunities that a cloud based model affords us an affords our prospects and customers the potential to.
Deploy.
Okay. Thanks for taking my question.
Your next question comes from line of Brad Sills with Bank of America. Please proceed with your question.
Great Hey, guys. Thanks for taking my question.
I know you have this back end loaded trend in the business.
Given the nature of the large enterprise.
Market that you're addressing could you just comment I know, it's early but on what that pipeline is shaking out like for the remainder of the or just in terms of what types of deals you're seeing this year versus last year or are they are they more multi department deals for the cloud.
I think you alluded to some more strategic type deals like the one that just closed.
Any color on just kind of what the what the pipeline looks like for these these cloud deals entering for for this year.
Yes, so we monitor the pipeline.
This year versus last year, one of the things we saw coming out of Q1 of last year in our conference was.
A lot of demand for our cloud offering.
We continue to see.
That trend this year.
As we move throughout the year and that's why we talked to some extent about the mix of our subscription new sales versus.
Total total new sales.
So the I think the nice thing about what we're seeing this this year versus a year ago had a year of experience going to market. We've got more referenceable customers in place with some go lives in place in general and I think thats been helping us as we continue to go to market and to focus on the pipeline and new opportunities going forward.
<unk>.
I would say obviously, it's tough for me to give you an answer that compares to last year.
At this time, but when you when when we look at the rest of the year. We look at the pipeline I think the key things were looking for is.
That is that percentage of cloud demand.
And how.
Deployment model that can you know that commitment for customers to make that leap with us and what percentage is that going to be to the overall.
Bookings that were able to achieve for the year.
Like we keep saying we still.
Our very positive on the investment we're making in the cloud in the demand we're seeing from customers for cloud based implementations.
And I think the other the other thing that's interesting just for me as a newcomer here as we keep stressing that we're committed to the self managed mode of operating Guidewire and I would say that has as much to do with the existing installed base and providing upgrades and new capabilities enhancements to our installed base of.
Self managed customers as it does to the propensity of our.
Net new customers to choose that deployment model right. So even though that's possible we're going to remain committed even if you know everybody decides to move to the cloud.
I think that that's sort of the interesting thing.
Thing that were that I look at when I'm looking at the nature of the deals that we're looking at for the remainder of the fiscal year and I guess I would just continue to stress as Curtis has said.
We see the market shifting to the cloud we see the demand shifting to the cloud, although we remain committed to self managed motive operating operating guidewire.
Thanks, Mike and then one more if I may just on the digital and data business is there something about the nature of these cloud deals that are there are more strategic perhaps they lend themselves more to digital and data attach it sounds like you're you're starting to see some some real progress and that business.
Yes, I think.
To the extent that.
Companies are looking at new Greenfield use cases and.
And using cloud as a mechanism to go after new lines of business.
You know it creates an opportunity for them to be thinking about smarter more modern more agile ways of rating that business. I think that was one of that really interesting things about the use case that we highlighted and some of things we've talked about connections with respect to data and analytics is just taking them you know a different more modern approach.
Rating.
Commercial risk and writing that premiums they like Thats whats really exciting to me is you see these when we can line up our product offerings against the bids the new business the growth business initiatives of insurance carriers, whether or not that's a core system or an analytics and data.
System to the extent that we can facilitate their ability to innovate and grow that's really exciting.
And I think that that kind of that's the dynamic that we see and I think lines up to this sort of the basis of your of your question.
Great. Thanks, Mike.
Your next question comes from line of Tyler Radke with Citi. Please proceed with your question.
Hi, there thanks for taking my question.
I wanted to ask you about insurance now and I think Mike you made some comments that the new insurance now go offering is focused on reducing the time for implementation and the overall implementation expenses, but maybe just give an update on where you think that.
This is like I know that that's going to focus for you can see Tom and in terms of improving the performance, but I guess when when should we start to expect that business kind of get back to you know, maybe where the the where you'd like it to see where it's meaningfully driving revenue or are they are.
Yeah. Thanks for the I appreciate the question because its stuff, it's definitely been one of the things that we've talked about.
You know at Analyst day, and then the and the meetings that we've had certainly a connections.
I think just this isn't specific to insurance now I think it's just kind of the nature of the industry in the way that these decisions are made in how serious they are for carriers I think you know I'm looking at that.
You know that business on an annual basis is how to think about it I don't think you should think that things are going to change dramatically quarter over quarter, but we made a big investment in the product last year.
Like we've said previously we made some changes in our go to market approach and the and the way that were Incenting people to go after that business. The insurance now go offering helps us bring.
An offering to market that can address the total cost of implementing the product in a very positive way.
And I look at all of those things very positively the feedback that we got from customers and prospects. It at connections was positive.
And so.
I'm positive on the outlook for insurance, now, but but I think that.
You know I I'm looking at it on an annual basis right. So I do definitely want to see changes in that business quarter to quarter, but it's it's kind of the timeframe of this whole of this whole industry I would say is annual and so that's the sort of the metronome of the clock that we need to be thinking about.
When we when it comes to saying okay.
How do we assess the performance of that business unit and the performance of that.
Of that product line for us, but like I said everything that I've seen since joining the company has been very very positive.
You know listening to the customers about the feedback around the user experience and the focus that we can take on implementing it more quickly and easily I think that those are going to be very positive.
Great and then Mike if I could ask you a follow up question.
We talked a little bit about how you're seeing some customers choosing to move to the cloud, but maybe in a self managed way and I'm I'm curious I guess when you get to the point, where your where you're targeting customers that are self managing on the cloud to move over to insurance to be cloud like how does how does that go to market change and do you.
I have to do.
Less of a ramp deal given that they're already on the cloud and how do you just thinking about that go to market rather than.
Moving a customer that maybe a self managing on premise. Thank you.
Yeah. Okay. So look I think the word cloud to me sort of represents two things. One is where is the application running right is it running on somebody else's infrastructure somebody else managing that infrastructure on a cloud based cloud plot honestly.
Cloud based platform.
But then there's also the approach to the way that you.
Manage that implementation going forward and who's responsible for upgrading that application and keeping occurrence and I think that that upgrade the rapid upgrades that are associated with.
Software as a service offerings.
In the long run I think that that's really.
What's going to end up being very transformational for this industry.
And so I really look at.
Moving on instance of Guidewire to a cloud platform as really just the first step.
In a logical progression towards a.
More of a software as a service cloud based service that is continually being upgraded and enhanced.
Without the necessity for customers have to worry about.
All the work involved in upgrading a software application like Guidewire.
So I think it's a positive thing you know I think that Theres a whole host of.
Questions that a a carrier goes through in order to become comfortable with running.
Core application in a in a cloud platform and I think to the extent that they're making that decision either directly or through a managed services partner I think that that's a positive.
Staff in the right direction, but I think that ultimately.
If you think the real long term vision of what we want to achieve here.
Is that there is more a software as a service like model, where we're providing that core policy claims and billing service to a insurance carrier that makes sense.
Yes Super helpful. Thanks.
Your next question comes from the line of Bob in surgery with William Blair. Please proceed with your question.
Hey, guys. Thanks for taking my question and.
Congrats I wanted I wanted to slump in the previous question, a little bit, but talk about sort of the.
The tier ones of large guys and sort of their willingness to move the cloud service to separate in a little bit.
And say you have sort of billings and you have claims and then you have policy, which is kind of the big calculation engine.
Thing is or is there way to modularize that were pieces can move the cloud and something like policy, which is.
A lot more complex maybe.
And the other two pieces on stays on premise for a little longer.
Is that a way to get them more interested in the cloud.
Or am I thinking is the wrong way.
No you're not thinking about the wrong way I think the thank you got to realize about.
Core systems and Guidewire is that.
Every implementation that we do ends up being integrated to other systems inside of a a carriers enterprise architecture, sometimes those things will be on prem and sometimes those things there'll be other cloud based offerings, but.
It is not inconceivable that components of that overall solution would be migrated to.
To cloud based services independently of one another.
That is how a very significant maybe even all.
You know historically guidewire customers would implement right as you do one of these things at a time you do different lines of business one after the other and they all of these things have to work.
In unison.
And the environments that they're running and to the extent that they're open which certainly cloud environments sort of necessarily support it facilitates the type of step based approach to cloud migration that you're describing.
Yeah, Yeah, especially given the integration maybe take PNC Vin numbers and all sorts of databases, Yes, cool and then a quick follow up for me.
On the partner.
Hi.
You talked a little bit out in the past.
About sort of than Dep connect solution partner network, you've obviously worked with the larger size just some updated sort of how that's progressing and sort of you know when we were at the conference you had a lot of sort of ESI is talking about interest in the cloud just sort of how thats playing out in sort of your investments in that space to drive further sort of ESI connect solution partner network grow.
Both to offset some of the services on your side would love to get some color. Thank you.
Well I think yeah, I'd say the answer that question kind of relates back to one of things I, just said which is that.
Guidewire implementation on core.
Implementation is always going to connect to other applications and other services and so to the extent that.
We opened it up we make it easier for customers and partners to integrate to guide wire, we can reduce the implementation expense.
The deployment expense of of these transitions, that's going to be beneficial to everyone.
You know is a big part of our connection connections message is this is this investment.
On on the Guidewire side around debt can act and creating a.
An open.
Surface area of Npis, an SDK is that partners and customers can connect to in order to facilitate faster integration of applications into Guidewire I think that all of that is very very strategic to us to the extent that it reduces the the expanse and the time necessary to deploy one of these implemented.
Patients.
We saw a lot of momentum and connections year year in terms of the applications ecosystem. The momentum that we have bond Dev connect were very positive around it's a big part of our.
Our R&D roadmap and focus as just expanding the surface area around which these partners can connect using dep connect into core Unbilled add ons.
They that customers can deploy the our marketplace.
I'm very very.
Bullish about.
The potential for that model to have a positive impact for for our customers in terms of how easy it is for them to deploy these new cloud based implementations.
Gotcha Gotcha, often thanks for taking my questions guys. Congrats yes. Thank you.
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Jerome diarrhea with D.A. Davidson. Please proceed with your question.
All right. Thanks for taking my questions out maybe I just wanted to follow up a little bit on on insurance now like I think the road map that was laid out at.
The conference was was really encouraging and customers, where I think pretty positive on it.
Maybe just to understand.
In terms of getting insurance now kind of back on track or or at least half your expectations.
Is that wrote about kind of indicative of what needs to be down from product perspective to get it on board and maybe alongside that are there any changes in the go to market side and sales execution side.
On insurance now to kind of regained meaningful traction with that product and then I've got a follow up for Curtis.
Yes, yes, thanks to yet thanks, a question I guess I'd reiterate what I said, a little bit before I think customers want to know that we're committed to the product right and I think that that commitment comes starts with me. It starts with the other product executive the company is validated by the release of these new capabilities, which is most visible in the complete.
Lately enhanced user experience and like we highlighted the new approach the implementation.
Which we're calling insurance now go that sort of creates the.
You know clarity I think that prospects need in order to make a decision about.
Going with insurance now as a core platform the changes that we made in the the approach to selling the product in the alignment of our sales organization around specifically selling that yes, we just put that in place at the beginning of the year right. So we've had one quarter under our belt of operating that way and as you're.
Probably in hopefully aware.
The decision cycles for these implementations.
Very often will last significantly longer than three months right. So awesome.
Very positive on the changes we've made the commitment that we've signaled in delivered and also the the pipeline that we've created just based on that change in our approach to distribution.
But like I said really this is going to take the whole year to play itself out before we're able to assess completely whether or not those changes in those business initiatives are having the types of results that we would expect.
But just clearly given the fact that we're highlighting it here and the work we've done in the you know the the announcements that we made at connections I think it ought to be clear to everybody that we're committed to this product line.
Got it that's helpful and then Curtis going back to the air our question.
I think if I'm not understanding as a first time, you're giving us at or at least from quarterly perspective.
Maybe just and helping us with our models can you help us understand how should we just be thinking about seasonality of air our shouldn't be similar to how recurring revenue may have been under six so five or anything like that and maybe find it was up 3 million sequentially what was the growth in air.
Our our year over year. Thanks.
Yes so.
This the first quarter, though we were reporting we talked about at analyst day, we will be reporting they are on a quarterly basis this year going forward.
We did not report it last year, so that we won't be providing those year over year comparisons, but we won't grow through 12 months of this year, we'll be able to see those year over year comparisons.
Going forward.
In terms of seasonality Q1, it's always seasonally low for US. This Q1 is similar to our past Q on when we looked at it.
Across the board revenue.
They are and other metrics. So I think we would continue to have you focus on the annual number we reconfirm that growth rate, the 14% to 16% air our growth expected this year versus last year.
And we'll provide the quarterly updates again in Q2.
So you get a sense for how much progress we're making.
Got it alright, thank you.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Mr., Mike Rosenbaum for closing remarks.
Alright. Thank you. Thank you all for participating on the call.
Just want to reiterate how excited I am to be here and have the opportunity to participate in this transformation. So.
Thanks, all for participating and.
Have a good evening.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.