Q3 2024 Guidewire Software Inc Earnings Call

We require operator assistance during the conference. Please press Star Zero on your telephone keypad. Please note. This conference is being recorded I'll now turn the conference over to your host Alex Hughes you may begin.

Thank you Molly I'm, Alex Hughes, Vice President of Investor Relations and with me today is Mike Rosenbaum, Chief Executive Officer, and Jeff Cooper, Chief Financial Officer.

Speaker Change: Disclosure of our results can be found in our press release issued today as well as in our related form 8-K furnished to the SEC both of which are available on the Investor Relations section of our website today's.

Speaker Change: Today's call is being recorded and a replay will be available following the conclusion of the call statements.

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

Please refer to the press release and the risk factors and documents, we file with the SEC, including our most recent annual report on Form 10-K, and our prior and forthcoming quarterly reports on Form 10-Q filed and to be filed with the SEC for information on risks uncertainties and assumptions that may cause actual results to differ materially from those set forth.

Speaker Change: And such statements.

Speaker Change: We also will refer to certain non-GAAP financial measures to provide additional information to investors all commentary on margins profitability expenses are on a non-GAAP basis, unless stated otherwise our reconciliation of non-GAAP to GAAP measures is provided in our press release reconciliations and additional data are also posted in the supplement on our IR website and with that.

Mike Rosenbaum: I'll now turn the call over to Mike. Thank you Alex Good afternoon, and thanks to everyone for joining today I'm incredibly excited to share the results of our third quarter and discuss the momentum we're seeing in our business Q3 was another very strong quarter and puts us in great shape heading into the final stretch of our fiscal year, we have all worked.

Mike Rosenbaum: Very hard to establish Guidewire cloud platform and our insurance suite applications as the trusted worldwide standard for P&C insurers and I think our Q3 results and year to date results.

Speaker Change: Clearly show that we're paying off in April we released Jasper our 10th release in under four years, which delivers increased agility in commercial lines.

Speaker Change: Also expanding hazard hub data for Canada. This release, and our continued innovation across our platform and applications improve customer agility speed and business intelligence.

Speaker Change: We are helping our cloud customers innovate faster and make better data driven decisions across the insurance lifecycle.

Speaker Change: I'm more confident than ever that the continual iterative improvements we have demonstrated to customers through our cloud platforms consistent release schedule are helping to align more of the industry around our platform and this general confidence is resulting in our improved business momentum in the third quarter, we closed.

Speaker Change: <unk> insurance suite cloud deals, bringing our total insurance suite cloud deals year to date to 24, which is a 33% increase year over year. We also saw sustained strength with tier one insurers, including four tier one deals in the quarter.

Speaker Change: Our continued deal momentum speaks to the tremendous progress we have made establishing the reputation of Guidewire cloud platform, but also the much improved fiscal year linearity. Our sales teams are driving we have been working for the past few years to establish a more linear quarter to quarter approach to sales and I am <unk>.

Speaker Change: Happy with the more balanced year to date outcome.

Speaker Change: It was also a strong quarter for cloud migration activity with a total of five insurance suite cloud migrations, our customer base is our most valuable asset and a significant part of our cloud strategy has been anchored around the objective to successfully migrate every single one of our on Prem customers to our cloud platform.

Speaker Change: Continuing to drive these cloud transitions ensures that we remain the industry leader it sets us up for further cloud expansion activity down the line and demonstrates the feasibility of Guidewire cloud to new insurers.

Speaker Change: Deal activity in the quarter was particularly strong in our Asia Pacific region, where we had for cloud migration deals in Australia. We are building on our established cloud position in North America with higher engagement and momentum internationally and it's great to see this pay off in the quarter last month, we conducted three.

Speaker Change: <unk> highly successful Guidewire insurance forums with one in London, and one in Sydney in one in Tokyo.

Speaker Change: These events serve as important customer touch points and an opportunity for the broader guidewire ecosystem to come together and share ideas and feedback. They are a powerful vehicle, we use to influence our existing pipeline generate new opportunities and help ensure that existing customers are up to speed on all the product innovation we have planned.

Speaker Change: Each event brings together insurance professionals from leading customers and partners to discuss the future of the P&C industry in Sydney over 135 insurance professionals heard Simone <unk> CEO of <unk>.

Speaker Change: New Zealand discuss our goals for rapid growth on the cloud, how new Guidewire products and features including Apd data platform and <unk> are helping them launch new products quickly and increased customer convenience and Tokyo nearly 150 people heard Nakagawa, San President and CEO of <unk>.

Speaker Change: Automobile and fire insurance part of <unk> group, which was the first insurance company in Japan to deploy Guidewire cloud discuss their strategic journey progress to date and experience with Guidewire cloud and.

Speaker Change: In addition, Eric Marco VP of it has been of a shared how guidewire helped the company accomplished an increase in sales and a decrease in time required to train new team members from <unk> from three to six months to less than a month since upgrading to Guidewire cloud <unk> has completed three updates which is in stark contrast to the <unk>.

Speaker Change: Year to 18 months upgrade duration that they were used to went on prem.

Last month, we emphasized our commitment and aspirations for the Asia Pacific region with the hire of <unk> <unk> as our Asia Pacific Managing Director Sergey has lived in Sydney, Australia for over 30 years and he brings an extensive track record of driving strategic programs and ensure.

Speaker Change: <unk> outcomes in the region.

This leadership addition will further strengthen the connection between Guidewire as global capabilities and the local needs of our customers.

Speaker Change: We made a similar leadership addition to the EMEA region two years ago. When we named will Mcallister as managing director and have been very pleased with the progress we are making and he is leading in Europe.

Speaker Change: In April we were in London for Guidewire Europe Insurance Forum. It was also an incredible event with over 250 attending across 70 insurers and 44 customers, leading insurers such as Axa and Beazley attended and spoke to the importance of agility and the objectives that they have ahead with guidewire.

Speaker Change: I'm, especially pleased with the progress are making.

Speaker Change: The London market, where we are bridging our global capabilities with its specialized content needs.

Speaker Change: We are seeing a high level of market engagement worldwide and combined with the increasing maturity of our platform. We continue to grow our pipeline both in size and quality of engagement this momentum and general confidence help position us very well for this fiscal year and more importantly, our longer term outlook.

Speaker Change: Turning to our ecosystem. Another key element of our strategy is to expand the partner community surrounding guidewire, which helps to accelerate customer adoption deployments and time to market.

Speaker Change: We are seeing the Si community increasingly engaged in Guidewire projects. There are over 38 sides working with us today and in the third quarter. The number of cloud certified partner professionals from these firms increased 27% year over year to 8900. Similarly, our solution partner community continues to expand.

<unk> marketplace now has over 210 solution partners as our marketplace expands with each release and adoption of these applications increases, we reduce customer costs and accelerate their time to value on our platform.

Speaker Change: But maybe the most notable and impressive example of our growing global momentum and ecosystem came in May when we held our inaugural developer summit in Bangalore, India. Nearly 500 people attended this event with participation from our leading partners such as <unk> and Pwc.

As a great opportunity to introduce Mohammad on the new leader of our India operations to the community Aussie joins us from SAP, where he led the largest R&D center outside of Germany. We're excited for him to join US and help drive our strategy execution and growth in India. We also ran a hackathon, which attracted over 120.

Speaker Change: Five entries and made me extremely proud of the progress that we've made in our cloud platform. This event marked a commitment to India as a source of innovation through Guidewire employees, but also connects us more closely to a community of technology professionals, who have dedicated their careers to improving the insurance industry by leveraging guidewire.

Speaker Change: Software.

Speaker Change: Finally, let me turn to the continued progress we are making driving platform scale and efficiency. As you know we've been focused on expanding platform efficiency and gross margin and it's great to see the teams progress reflected in third quarter subscription and support gross margins, increasing 10 percentage points year over year.

Speaker Change: Are.

Speaker Change: This puts US now ahead of plan and we are confident that we will continue to drive improvements here as we continue to execute new approaches to cloud operations and drive more automation and self service tooling across our platform.

This quarter is another validation of the investments we have made and further proof that these investments have produced and we will continue to produce long term profitable growth our software as mission critical and a core system of record for our customers, we price our software as a percentage of an insurers direct written premium.

Speaker Change: And are therefore tied directly to the value our customers create underwriting and ensuring against risk and the associated premiums. They charge. This structure creates a durability to our software business at a time when companies across industries are working to gain efficiency and in many cases reduced workforces this stability.

Speaker Change: <unk> combined with our success in instantiating, our market, leading cloud platform gives me confidence in our model and our ability to invest in further innovation to create new growth opportunities in the future with that I'll now turn the call over to Jeff.

Jeff Cooper: Thanks, Mike Q.

Jeff Cooper: Q3 surpassed our expectations across the board.

Jeff Cooper: <unk> finished at $828 million and benefited from durable cloud demand.

Jeff Cooper: As we have discussed in recent quarters, we continue to see improved bookings linearity and strength in the first three quarter sets us up well for the year.

Jeff Cooper: Total revenue was $241 million, we saw better than expected results in all areas of revenue subscription.

Jeff Cooper: Revenue grew 35% and subscription and support revenue grew 28% as we benefited from deal momentum.

Jeff Cooper: License revenue grew 11% as a result of continued DWP true up activity and expansions upon renewal of term licenses or term license arrangements.

We price our software on basis points of our customers direct written premiums and we have seen customers DWP grow as insurers increase rates to accommodate rising claims costs due to inflation and the risk environment.

Jeff Cooper: Services revenue was better than expectations and was up off of a low point last quarter as utilization rates improve.

We are thrilled that our partners are investing to help us modernize this industry and we expect them to continue to lead the majority of the cloud programs.

Jeff Cooper: We are working hard with our partners to find the right equilibrium to ensure we are supporting their growth. While also ensuring that cloud standards are adopted and that our professional services portfolio mix and volume are healthy.

Speaker Change: Turning to profitability for the third quarter, which we will discuss on a non-GAAP basis.

Speaker Change: Profit was $151 million.

Overall gross margin was 63% compared with 52% a year ago.

Speaker Change: Subscription and support gross margin was 65%, which compares favorably to 55% a year ago.

Speaker Change: This continues to track ahead of our expectations due to increased cloud infrastructure efficiency.

Speaker Change: Services gross profit was $5 million and services gross margin was 10%.

Speaker Change: We expect the cost basis to be relatively stable in the services organization and our ability to drive profit margin will be dependent on growing the topline.

Speaker Change: Overall operating profit was $21 million in the third quarter.

Speaker Change: This was better than expected due to revenue outperformance and lower operating expenses.

Speaker Change: We continue to be thrilled with the operating profit and operating margin momentum.

Speaker Change: Stock based compensation was $37 million up 5% from Q3 of last year.

We ended the quarter with $934 million in cash cash equivalents and investments.

Speaker Change: Operating cash flow was $5 million for the quarter.

Speaker Change: Turning to our outlook for the full fiscal year 2024, we are adjusting our outlook to 856 to 864 million strong.

Speaker Change: Strong activity in Q3 at a healthy pipeline reinforces our confidence in the full year targets and allows us to raise our outlook.

Speaker Change: We expect deal momentum in Q4 to manifest itself more than fully wrapped IRR as customers and prospects are comfortable making significant long term commitments to guidewire cloud.

Speaker Change: I expect fully ramped <unk> to grow at or above 16% for the fiscal year 2024, which is a great result, when you consider it is on top of 17% fully ramped IRR growth, we delivered in fiscal 'twenty three.

Speaker Change: We are building a strong foundation for delivering on our longer term growth targets, we will provide.

Speaker Change: More detail on fully ramped <unk> at year end as this is a metric we disclose on an annual basis.

Speaker Change: As a reminder, our outlook assumes foreign currency exchange rates as of the end of our last fiscal year.

Speaker Change: And we update IRR exchange rates at year end, if we updated <unk> today based on current exchange rates.

Speaker Change: Then we would see a $7 million negative adjustment.

Speaker Change: We will certainly discuss this and quantify this at year end.

Speaker Change: With respect to revenue, we are increasing our expectations for subscription revenue and subscription and support revenue.

Speaker Change: We are adjusting subscription revenue to approximately 474 million and subscription and support revenue to approximately $546 million, representing a positive adjustment of $5 million in both instances.

We expect license revenue of approximately $247 million and services revenue of approximately $179 million as a result, our outlook for total revenue is $968 million to $976 million, a $10 million positive adjustment at the midpoint.

Speaker Change: Turning to margins and profitability, which we will discuss on a non-GAAP basis subscription support gross margins continued to exceed expectations and we now expect between 65% and 66% for the year.

Speaker Change: We still expect services gross margins to be between five and 8%.

Speaker Change: As a result, we now expect overall gross margins of approximately 63% for the full year.

Speaker Change: With respect to operating income, we expect between 94 and $102 million in operating profit for the fiscal year.

Speaker Change: This represents an $11 million positive adjustment at the midpoint.

Speaker Change: We still expect stock based compensation to be approximately $147 million, representing 3% growth year over year.

Speaker Change: We are also increasing our cash flow from operation expectations to between 130 at $150 million for the fiscal year.

Speaker Change: We are proud of our progress as we look ahead to fiscal 'twenty five targets. We discussed at analyst day, we remain confident in our ability to achieve our $1 billion goal.

Speaker Change: We are clearly tracking a bit ahead of our gross margin targets.

Speaker Change: This is creating an opportunity to accelerate some product investment while still achieving our operating margin targets.

Speaker Change: With that operator, you can open the call for questions.

Speaker Change: Thank you at this time, we 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 queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing.

The Star Keys.

Speaker Change: Our first question comes from the line of Kevin Kumar with Goldman Sachs. Goldman Sachs. Please proceed with your question.

Kevin Kumar: Alright, Thanks for taking my question I'm wondering.

Kevin Kumar: Ask a question around the demand environment.

Speaker Change: <unk>, obviously seen some really strong deal activity.

Speaker Change: And that perhaps in contracts.

Speaker Change: Darkness.

Speaker Change: Other software vendors.

Speaker Change: Where customers are perhaps delaying large purchases. So Mike can you just talk a bit about what youre seeing in the P&C market and in general how carriers today are thinking about prioritizing these large kind of quarter with some modernizations.

Speaker Change: Sure.

Kevin Kumar: Kevin Thanks for the question very much appreciated so.

Speaker Change: I would say, we continue to see demand in pipeline steadily build.

Speaker Change: Good.

Speaker Change: I would describe that.

Kevin: Sort of as two one or two things related to that number one is growing confidence around our ability to be successful with the platform in terms of meeting their business objectives.

Kevin: That certainly helps.

Kevin: We've talked about that for years about how the more success we have.

To your question.

Kevin: Figure the longer the track record we have around the successful implementations is going to build confidence.

Speaker Change: Hi, Thanks, Thanks for taking my question I wanted to ask a question around the demand environment Guy. We're obviously seeing some really strong deal activity and that's perhaps in contrast, with some softness in Europe.

Kevin: With these customers both on the migration side, but also the net new side.

Speaker Change: But I also think that there is there is somewhat of a disconnect between the decision making process. These insurance companies go through and thinking about these implementations in these modernizations as it relates to the sort of general broader enterprise software market.

Speaker Change: Other software vendors.

Speaker Change: Where customers are perhaps delaying large purchases. So Mike can you just talk a bit about what youre seeing in the P&C market and in general how carriers today are thinking about prioritizing. These large kind of course with some modernization.

These are decade, if not multi decade decisions that these companies are making these partnerships that they're establishing with us and so I think that there is a bit of a disconnect between what we see with other software purchases in the decision making process, we really see these companies recognizing that agility very much.

Speaker Change: Sure.

Kevin: Kevin Thanks for the question very much appreciated so.

Mike: I would say, we continue to see demand in pipeline steadily build.

Kevin: Good.

Kevin: I would describe that.

Speaker Change: Matters that a modern core platform, that's going to enable them to make better analytical data driven decisions as something that's going to help them be successful and profitable and grow out like I said for over a decade, and so that decision, making process can be done sort of outside the quarter to quarter stresses.

Kevin: Sort of as two one or two things related to that number one is growing confidence around our ability to be successful with the platform in terms of meeting their business objectives.

Kevin: That certainly helps.

Kevin: We've talked about that for years about how the more success we have.

Speaker Change: Maybe other other folks in other industries and other sectors are seeing and so you add those two things up and we just see momentum and confidence continue to build for us.

Kevin: The longer the track record we have around the successful implementation is going to build confidence.

Kevin: With these customers both on the migration side, but also the net new side.

Speaker Change: And it led to a great Q3, and it gives us confidence in Q4 and the rest of the fiscal year.

Kevin: But I also think that there is there is somewhat of a disconnect between the decision making process. These insurance companies go through and thinking about these implementations in these modernizations as it relates to the sort of general broader enterprise software market.

Thanks, that's helpful and then maybe one for Jeff on <unk>.

Margins.

Jeff Cooper: Gross margins for subscription and support have been relatively stable the last couple of quarters.

Kevin: These are decade, if not multi decade decisions that these companies are making these partnerships that they're establishing with us and so I think that there is a bit of a disconnect between what we see with other software purchases in the decision making process, we really see these companies recognizing that agility very much.

Jeff Cooper: So maybe how can we think about the next inflection point that pushes cloud margins closer to the.

Speaker Change: Could that kind of 70% figure that.

Speaker Change: The team has talked about in the past.

Speaker Change: Yeah, I mean, we've made tremendous progress this year in finding an inflection point in delivering higher margins, we're thrilled with that progress.

Kevin: Matters that a modern core platform, that's going to enable them to make better analytical data driven decisions as something thats going to help them be successful and profitable and grow out like I said for over a decade, and so that decision, making process can be done sort of outside the quarter to quarter stresses.

Speaker Change: The two drivers of how we drive long term margin as we think the demand environment is strong and we can see sustained subscription growth.

Speaker Change: That's a big part of how we've invested in the opportunity in the cloud operations function that supports our cloud delivery.

Kevin: Maybe other other folks in other industries and other sectors are seeing and so you add those two things up and we just see momentum and confidence continue to build for us.

Speaker Change: And I think the platform as it gains scale, we continue to recognize some benefits of increasing that scale over time.

Kevin: And it led to a great Q3, and it gives us confidence in Q4 and the rest of the fiscal year.

Speaker Change: And third the engineering team has done a tremendous job.

Speaker Change: Thinking through all the architecture decisions to drive more efficiency into the platform.

Speaker Change: Thanks, that's helpful and then maybe one for Jeff on margins.

They're not done I mean, I think there's more efficiency that we can continue to work on and drive into the platform, we probably won't see the types of gains that we saw this fiscal year, which was tremendous but kind of continue to see.

Speaker Change: I think gross margins for subscription and support have been relatively stable the last couple of quarters.

Speaker Change: So maybe how can we think about the next inflection point that pushes cloud margins closer to the.

Speaker Change: A more linear margin progression as we go towards those long term targets.

Speaker Change: So that kind of 70% figure that.

Speaker Change: Great. Thank you both.

Speaker Change: The team has talked about in the past.

Speaker Change: Okay. Thanks, a lot.

Speaker Change: Yes.

Speaker Change: We've made tremendous progress this year in finding an inflection point in delivering higher margins, we're thrilled with that progress.

Speaker Change: Thank you. Our next question comes from the line of <unk> Becker with William Blair. Please proceed with your question.

Speaker Change: Hey, gentlemen, nice job here, maybe Mike for you we've seen some interesting data from carriers that are more innovative gaining share improving decisioning.

Speaker Change: The two drivers of how we drive long term margin as we think the demand environment is strong and we can see sustained subscription growth.

Speaker Change: In auto I wonder, how that conversation youre, having with customers shifting more to business enablement versus alignment.

Speaker Change: That's a big part of how we've invested in the opportunity in the cloud operations function that supports our cloud delivery.

Speaker Change: Alignment fueling some of that momentum and maybe how customers are thinking about those similar dynamics and share.

Speaker Change: And I think the platform as it gains scale, we continue to recognize some benefits of increasing that scale over time.

Speaker Change: Share gains carrying over traditional P&C lines over time.

Yeah appreciate the question.

Speaker Change: And third the engineering team has done a tremendous job.

Speaker Change: It's hard to sort of describe sometimes the complexity of the use case that we support with Guidewire. When you think about all the regions and all lines of business and all of the tiers that we support.

Speaker Change: Thinking through all the architecture decisions to drive more efficiency into the platform.

Theyre not done I mean, I think there's more efficiency that we can continue to work on and drive into the platform, we probably won't see the types of gains that we saw this fiscal year, which was tremendous but kind of continue to see.

Speaker Change: I think the one common theme that is very consistently.

Speaker Change: Coming up in terms of the carriers' ability to compete effectively is the agility around what you might call product operations being able to set price adjust rates being able to adapt to the.

A more linear margin progression as we go towards those long term targets.

Speaker Change: Great. Thank you both.

Speaker Change: Okay. Thanks, a lot.

Speaker Change: Thank you. Our next question comes from the line of Dylan Becker with William Blair. Please proceed with your question.

Speaker Change: Changing.

Speaker Change: Risk.

Speaker Change: Circumstances, let's say that carriers are seeing.

Dylan Tyler Becker: Hey, gentlemen, nice job here, maybe Mike for you we've seen some interesting data from carriers that are more innovative gaining share improving decisioning.

Speaker Change: Certainly there was a shock to the system as it relates to inflation, specifically the auto line of business in that expense.

Speaker Change: In auto I wonder, how that conversation youre, having with customers shifting more to business enablement versus alignment.

Speaker Change: Claims kind of jumping up and its the carriers that we're able to adjust to this most quickly that we're able to continue to operate successfully continued to adjust prices.

Speaker Change: Alignment fueling some of that momentum and maybe how customers are thinking about those similar dynamics sure.

Speaker Change: Share gains carrying over traditional P&C lines over time.

Speaker Change: It was appropriate to compete effectively in the markets, where there are competing.

Speaker Change: Yeah appreciate the question.

Speaker Change: And it systems like Guidewire that facilitate that and so this is a big part of.

Speaker Change: It's hard to sort of describe sometimes the complexity of the use case that we support with Guidewire. When you think about all the regions and all lines of business and all of the tiers that we support.

Speaker Change: Of what we're effectively selling when we do these transformations as that the carrier the insurance carrier ends up with a platform that they can use to compete most effectively.

Speaker Change: I think the one common theme that is very consistently.

Speaker Change: And as you say in auto, but I would extend that to commercial lines insurance, we're seeing a lot of interest from <unk>.

Speaker Change: Coming up in terms of the carriers' ability to compete effectively is the agility around what you might call product operations being able to set price adjust rates being able to adapt to the.

Speaker Change: International carriers around being more agile around commercial lines, having a system like guidewire to support their aspirations around.

Speaker Change: Just into the markets quickly and being able to just be more agile and be more competitive in market. It's a big part of the value proposition that we're selling with these transformations.

Changing.

Speaker Change: Risk.

Speaker Change: Circumstances, let's say that carriers are seeing.

Speaker Change: Certainly there was a shock to the system as it relates to inflation, specifically the auto line of business and expense.

Speaker Change: That's great.

Mike Rosenbaum: It's a good segue into the second question for you, Mike I think Jasper.

The most recent release calls out commercial agility within that as well.

Speaker Change: Claims kind of jumping up and its the carriers that we're able to adjust to this most quickly that we're able to continue to operate successfully continued to adjust prices.

Mike: And you've had some success on the commercial content side, I think you called out London, there as well, but if you could elaborate maybe on your efforts here on the commercial side of the market in the right way of thinking.

Speaker Change: It was appropriate to compete effectively in the markets, where there are competing.

That opportunity.

Speaker Change: And it systems like Guidewire that facilitate that and so this is a big part.

Mike: Yes happy to so I think that there was a.

Speaker Change: What we're effectively selling when we do these transformations as that the carrier the insurance carrier ends up with a platform that they can use to compete most effectively.

Mike: Phase of modernization in the industry that was focused on high volume highly repetitive where efficiency is these personal lines, where efficiency is the order of the day.

Speaker Change: And as you say in auto, but I would extend that to commercial lines insurance, we're seeing a lot of interest from <unk>.

Mike: There was a there was a component of this around digital interactions and customer convenience driving.

International carriers around being more agile around commercial lines and having a system like guidewire to support their aspirations around.

Speaker Change: The business requirements for the core systems.

Speaker Change: And this is one of the interesting things about the insurance industry is that the core system is almost directly exposed to consumers in terms of getting quotes for commercial lines and so there was this phase of modernization in the industry driven by those shifts.

Speaker Change: Just to the markets quickly and being able to just be more agile and be more competitive in market. It's a big part of the value proposition that we're selling with these transformations.

Thats great.

Speaker Change: It's a good segue into the second question seems like I think Jasper.

Speaker Change: What we're seeing now is this is we're transitioning into a phase in the in the broader industry, where this modernization effort is now more focused on commercial lines and commercial lines, maybe were sort of left to the side a little bit as the focus was more on the personal line side the commercial lines business.

Jasper: The most recent release calls out commercial agility within that as well.

Speaker Change: And you've had some success on the commercial content side, I think you called out London, there as well, but if you could elaborate maybe on your efforts here on the commercial side of the market in the right way of thinking.

Speaker Change: That opportunity.

Speaker Change: Somewhat is getting more attention and so modern systems like Guidewire, where we can deliver a degree of product agility, enabling customers to create new products as fast as they can.

Speaker Change: Yes happy to so I think that there was a.

Speaker Change: Phase of modernization in the industry that was focused on high volume highly repetitive where efficiency is these personal lines, where efficiency is the order of the day.

Speaker Change: Think of them or adjust products that they have based on what their what feedback they are seeing.

Speaker Change: There was a there was a component of this around digital interactions and customer convenience driving.

Speaker Change: The market and what's going to win the day. This is this really really matters Westfield specialty is a great customer of ours that we've talked to that we talked about previously where they're really taking advantage of an opportunity. They see in the commercial line specialty line space and using guidewire to create products very very quickly and being able to be in.

Speaker Change: The business requirements for the core systems.

Speaker Change: And this is one of the interesting things about the insurance industry is that the core system is almost directly exposed to consumers in terms of getting quotes for commercial lines and so there was this phase of modernization in the industry driven by those shifts but what we're seeing now is this is we're transitioning into <unk>.

Speaker Change: Market and and effectively take share and establish themselves very very effectively in partnership with Guidewire. So yeah. I think it's one of the interesting things about the company right. Now is that we're able to take this common cloud platform. This common policy center architecture and apply it to.

Speaker Change: As in the in the broader industry, where this modernization effort is now more focused on commercial lines and commercial lines, maybe were sort of.

Speaker Change: Left to the side a little bit as the focus was more on the personal line side the commercial lines business.

Speaker Change: Our collection of these use cases across lines of business that puts us in a very positive place right now.

Speaker Change: Somewhat is getting more attention and so modern systems like Guidewire, where we can deliver a degree of product agility, enabling customers to create new products as fast as they can.

Mike: That's great. Thanks, Mike Congrats again.

Speaker Change: Yes. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Ken Wong with Oppenheimer. Please proceed with your question.

Ken Wong: Great. Thanks for taking my question I wanted to circle up on the fully ramped <unk> comments. It seems like you guys are set up really well to wrap up the year.

Speaker Change: Think of them or adjust products that they have based on what their what feedback they are seeing.

Speaker Change: From the market and what's going to win the day. This is this really really matters Westfield specialty is a great customer of ours that we've talked to that we've talked about previously where they're really taking advantage of an opportunity. They see in the commercial line specialty line space and using guidewire to create products very very quickly and being able to be in.

Speaker Change: Any color on kind of what.

Speaker Change: Cause in that step up off of a tough comp is it just your customers have higher confidence in the business as it kind of cloud migrations the premium step ups. The true ups like what are some of the factors, we shouldnt be thinking about that's driving that.

Speaker Change: Well I would I would somewhat answer the question is like a little bit of all of the above right generally we're seeing.

Speaker Change: Market and and effectively take share and establish themselves very very effectively in partnership with Guidewire. So yeah. I think it's one of the interesting things about the company right. Now is that we're able to take this common cloud platform. This common policy center architecture and apply it to.

Speaker Change: Healthy.

Speaker Change: Demand healthy pipeline, we're confident in our coverage ratios and then when we look at the detail of the makeup of the deals and the opportunities.

Speaker Change: And to this these deals just generally being very long term in nature.

Speaker Change: Our collection of these use cases across lines of business that puts us in a very positive place right now.

Speaker Change: The ramp activity associated with the demand that we see for Q4 just shows us that.

Speaker Change: That's great. Thanks, Mike Congrats again.

Speaker Change: A lot of the value that we're going to win that we do expect to close in the quarter will flow into the fully ramped number.

Speaker Change: Yes. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Ken Wong with Oppenheimer. Please proceed with your question.

Speaker Change: So as you are hopefully aware some percentage of the booking activity flows into <unk> and shows up in the <unk> number but a lot of this is ramped over time and shows up in a in a long term agreement with that customer and so this is just an inspection of the deals in a signal in terms of the quality.

Ken Wong: Great. Thanks for taking my question I wanted to circle up on the fully ramped <unk> comment. It seems like you guys are set up really well to wrap up the year any color on kind of what.

Ken Wong: Causing that step up off of a tough comp is it just your customers have higher confidence in the business as it kind of cloud migrations the premiums step ups. The true ups like what are some of the factors we should be thinking about that's driving that.

Speaker Change: <unk> of the engagements that we have and the strength that we see in the company long term.

Speaker Change: Okay perfect. Thanks, Mike and then Jeff maybe maybe building off of that as we think about the guide obviously, a very strong Q3.

Speaker Change: Well I would I would somewhat answer the question is like a little bit of all of the above right generally we're seeing.

Jeff Cooper: Maybe a little lighter in Q4.

Ken Wong: Healthy.

Ken Wong: Demand healthy pipeline, we're confident in our coverage ratios and then when we look at the detail of the makeup of the deals and the opportunities in <unk>.

Speaker Change: Should we kind of marry the Q4, the full year 2004 guide with that fully ramp commentary, which is obviously still strength coming off of Q3, but the actual realization is coming down the line.

Ken Wong: These deals just generally being very long term in nature.

Ken Wong: The ramp activity associated with the demand that we see for Q4 just shows us that.

Speaker Change: Yes.

Speaker Change: The way to think about it and when we look at the pipeline for the year. We're obviously thrilled with where we are you know as we tend to think about the business on annual terms much more than that than quarter to quarter.

Ken Wong: A lot of the value that we're going to win that we do expect to close in the quarter will flow into the fully ramped number.

Ken Wong: So as you are hopefully aware some percentage of the booking activity flows into <unk> and shows up in the <unk> number but a lot of this is ramped over time and shows up in a in a long term agreement with that customer and so this is just an inspection of the deals in a signal in terms of the quality.

Speaker Change: We did raise the IRR guy by $3 million at the midpoint that followed a $5 billion raise that we did last quarter. So that's pretty healthy progression for us and as we look ahead.

Speaker Change: The Q4, we're very excited about the demand profile that exists and that excitement is leaning a little bit more towards those fully ramped outcomes.

Ken Wong: <unk> of the engagements that we have and the strength that we see in the company long term.

Speaker Change: As customers are clearly feeling confident the maturity of the platform and.

Speaker Change: Okay perfect. Thanks, Mike and then Jeff maybe maybe building off of that as we think about the guide obviously, a very strong Q3.

Speaker Change: And there's a willingness to make long term commitments.

Speaker Change: Okay perfect. Thanks, a lot guys.

Speaker Change: Yeah.

Speaker Change: Maybe a little lighter in Q4.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Peter Heckmann with D. A Davidson. Please proceed with your question.

Speaker Change: Should we kind of marry the Q4, the full year 'twenty four guide with that fully ramped commentary, which is obviously still strength coming off of Q3, but the actual realization is coming down the line.

Peter Heckmann: Hey, good afternoon can you just remind us about the frequency with which that the pricing is adjusted relative to DWP.

Peter Heckmann: And as regards to that.

Speaker Change: Yes.

Peter Heckmann: How do you think about the effect of some.

Speaker Change: The way to think about it and when we look at the pipeline for the year. We're obviously thrilled with where we are you know us we tend to think about the business on annual terms much more than that than quarter to quarter.

Speaker Change: Personal lines insurance company or even commercial like exiting certain markets just given the.

Speaker Change: The need to.

Speaker Change: Really raise premiums in the face of higher.

Speaker Change: We did raise the IRR guy by $3 million at the midpoint that follow the $5 billion raise that we did last quarter. So that's pretty healthy progression for us and as we look ahead.

Speaker Change: Catastrophe risks.

Speaker Change: I guess, how does that how does that how is that tradeoff work.

Speaker Change: I'll, let Jeff touch on the approach to pricing and resetting price with.

Speaker Change: The Q4, we're very excited about the demand profile that exists and that excitement is leaning a little bit more towards those fully ramped outcomes.

Speaker Change: With respect to DWP, and then I'll give you context on.

Speaker Change: Carriers exiting markets Yeah sure Yeah. So our foundation only our contracts are built around our direct written premium baseline that's embedded into our customer contracts.

Speaker Change: As customers are clearly feeling confident the maturity of the platform and.

Speaker Change: There is a willingness to make long term commitments.

Speaker Change: We have the ability to inspect the direct written premium on an annual basis.

Speaker Change: Okay perfect. Thanks, a lot guys.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Peter Heckmann with D. A Davidson. Please proceed with your question.

Speaker Change: Typically at renewal.

Speaker Change: Our instances, where our longer term initial contract that it may take a couple of years before we see that sort of.

Peter James Heckmann: Hey, good afternoon can you just remind us about the frequency with which that the pricing is adjusted relative to DWP.

Speaker Change: <unk> into what the direct written premium is and it's not uncommon for customers to purchase a slight slightly higher direct written premium then they're they're running today to give them a little bit of room to grow with grow but typically we have the ability to.

Speaker Change: And as regards to that.

Peter James Heckmann: How do you think about the effect of some.

Speaker Change: Personal lines insurance company or even commercial like exiting certain markets just given the.

Speaker Change: To look at that on an annual basis.

Speaker Change: Need to.

Speaker Change: Really raise premiums in the face of higher.

Speaker Change: Yes, and I'll give you I'll give you a perspective on.

Speaker Change: Carriers and the headlines in the news about carriers exiting markets and exiting specific lines of business within specific markets.

Speaker Change: Catastrophe risks.

Speaker Change: I guess, how does that how does that how is it.

Speaker Change: That tradeoff work.

Speaker Change: I'll, let Jeff touch on the approach to pricing and resetting price.

Speaker Change: We have quite a lot of conversations with carriers, who are excited to enter those markets as well right and so I think about this is the.

Speaker Change: With respect to DWP, and then I'll give you context on.

Speaker Change: Carriers exiting markets Yeah sure yeah. So.

Speaker Change: The broad based necessity.

Jeff: Our foundation only our contracts are built around our direct written premium baseline that's embedded into our customer contracts.

Speaker Change: Think of.

Speaker Change: It's more than just demand, but the broad based necessity for P&C insurance does not really change.

Speaker Change: We have the ability to inspect the direct written premium on an annual basis.

Speaker Change: The approach carriers different carriers take to servicing that demand.

Speaker Change: Typically at renewal there are instances, where our longer term initial contract that it may take a couple of years before we see that sort of inspection into what the direct written premium is and it's not uncommon for customers to purchase a slate.

Speaker Change: And any particular reason can change and does change and so our ability to provide a platform to carriers who are interested in entering those markets.

Speaker Change: It can serve as a growth driver for Guidewire.

Speaker Change: So that kind of counterbalances the concern, let's say for one of our customer actually shrinking because they are deciding to leave the market.

Speaker Change: Slightly higher direct written premium then they're they're running today to give them a little bit of room to grow with grow but typically we have the ability to.

Speaker Change: To look at that on an annual basis.

Speaker Change: So that's how I see it as like we've had some very interesting conversations about.

Speaker Change: Yes, and I'll give you I'll give you a perspective on.

Speaker Change: Carriers and the headlines in the news about carriers exiting markets and exiting specific lines of business within specific markets.

About this dynamic and how the agility, we can provide with our platform facilitates entry effective entry into these markets with creative approaches to serving servicing what really is a necessity.

Speaker Change: We have quite a lot of conversations with carriers, who are excited to enter those markets as well right and so I think about this is the.

Speaker Change: Especially if you think about California, and the homeowners market.

Speaker Change: The broad based necessity you could see.

The need for everybody here in California to have effective P&C coverage. So it is something we track very closely but that dynamic is something that kind of balances out for us. If you if you really zoom out.

Speaker Change: Think of.

Speaker Change: It's more than just demand, but the broad based necessity for P&C insurance does not really change.

Speaker Change: The approach carriers different carriers take to servicing that demand.

Speaker Change: Okay. That's helpful. And then just can you remind me of the number of net new logos last year.

Speaker Change: And any particular reason can change and does change and so our ability to provide a platform to carriers who are interested in entering those markets.

Speaker Change: If my tracking right it looks like about nine net new logos, so far this year, but.

Speaker Change: Number one is nine right and then what was the number for last year. It looks like I missed the fourth quarter.

It can serve as a growth driver for Guidewire.

Speaker Change: I am.

Speaker Change: So that kind of counterbalances the concern, let's say for one of our customer actually shrinking because they are deciding to leave the market.

Speaker Change: Hesitant to throw out a number that we can look up and give you. If we think of it in time, because I don't want to get it wrong on the call I would say that we're very comfortable with the growth in.

Speaker Change: So that's how I see it as like we've had some very interesting conversations about.

Speaker Change: The mix of business that I would say that we are achieving as our sales objective as we sort of proceed through the fiscal year.

Speaker Change: About this dynamic and how the agility, we can provide with our platform facilitates entry effective entry into these markets with creative approaches to serving servicing what really is a necessity.

Speaker Change: It's tough sometimes to classify something as a new logo specifically is like the relationships that we have with a lot of our customers are complex multinational kind of agreements, sometimes where different countries might be or might not be considered a new logo I would just say we're we're very.

Especially if you think about California, and the homeowners market.

Speaker Change: The need for everybody here in California to have effective P&C coverage. So it is something we track very closely but that dynamic is something that kind of balances out for us. If you if you really zoom out.

Speaker Change: Comfortable with the iterative year over year growth that we're seeing.

Speaker Change: In this regard and Pete.

Speaker Change: Okay. That's helpful. And then just can you remind me of the number of net new logos last year.

Speaker Change: We often talk about new modernization activity. So workloads that are currently running on legacy systems that are new to being modernized and cloud migrations and then and then expansions.

Speaker Change: If my tracking right it looks like about nine net new logos, so far this year, but.

Speaker Change: Number one is nine right and what was the number for last year. It looks like I missed the fourth quarter.

Speaker Change: There's a lot of new modernization activity that we do at existing customers and to Mike's point, how you kind of logo in this in this industry can can get quite complex with the hierarchy of our customers.

Speaker Change: I am.

Speaker Change: Hesitant to throw out a number that we can look up and give you. If we think of it in time, because I don't want to get it wrong on the call I would say that we're very comfortable with the growth in.

Speaker Change: Okay that makes sense I appreciate it.

Speaker Change: Thank you.

Speaker Change: The mix of business that I would say that we are achieving as our sales subject as we proceed through the fiscal year.

Rishi <unk>: Our next question comes from the line of Rishi <unk>.

RBC: <unk> with RBC. Please proceed with your question.

Speaker Change: Wonderful. Thanks, so much for taking my question I wanted to start with the comment you made about managing to less linearity can you maybe walk us through kind of the steps that you took to get there outside of just the shift to a more ratable model and as we think about our own models beyond this year.

Speaker Change: It's tough sometimes to classify something as a new logo specifically is like the relationships that we have with a lot of our customers are complex multinational kind of agreements, sometimes where different countries might be or might not be considered a new logo I would just say we're we're very.

Speaker Change: Is this year's numbers inclusive of your Q4 guide right blocks to be used for future years, or how should we think about seasonality and I got it.

Speaker Change: Comfortable with the iterative year over year growth that we're seeing.

Pete: In this regard and Pete.

Speaker Change: Follow up.

Pete: We often talk about new modernization activity. So workloads that are currently running on legacy systems that are new to being modernized and cloud migrations and then and then expansions.

Speaker Change #100: Yes, so a lot of this has to do with just more rigorously approaching are.

Speaker Change #101: Our sales processes, what are we doing every single week every single month around creation of pipeline Mitch maturation of deals setting targets every month tracking to those targets setting tough objectives for us internally about Q1 around Q1 and Q2.

Speaker Change: There's a lot of new modernization activity that we do at existing customers and to Mikes point, how you're kind of logo in this in this industry can can get quite complex with the hierarchy of our customers.

Speaker Change: Okay that makes sense I appreciate it.

Speaker Change #102: So that we can get ahead of the curve and just generally thinking about running the business in a very continuous way as opposed to one year.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Rajeev.

Yeah with RBC. Please proceed with your question.

Rajeev: Wonderful. Thanks, so much for taking my question I wanted to start with the comment you made about managing to less linearity can you maybe walk us through kind of the steps that you took to get there outside of just the shift to a more ratable model and as we think about our own models beyond this year.

Speaker Change #102: And then reset and have another year, we're really trying to be almost monthly in the cadence around which we're running the company and by pulling forward those internal objectives for sales and for pipeline generation maturation and bookings activity that creates the linearity of that were.

Speaker Change: Is this year's numbers inclusive of your Q4 guide right proxy to use for future years, or how should we think about seasonality and I got it.

Speaker Change #102: We're seeing and and enables it just enables us to run the business far more effectively and it's taken a while to.

Speaker Change: Follow up.

Speaker Change #103: Kind of steer the ship and adjust everybody's approach and train the market for what we really want to what the outcomes, we want to achieve but it's just great to see us at this point through Q3.

Speaker Change: Yes, so a lot of this has to do with just more rigorously approaching are.

Speaker Change: Our sales processes, what are we doing every single week every single month around creation of pipeline much maturation of deals setting targets every month tracking to those targets setting tough objectives for us internally about Q1 around Q1 and Q2.

Speaker Change #103: With this sort of bookings success.

Speaker Change #103: It makes Q4, a lot more manageable for us.

Speaker Change #104: Yes, the only thing I would add is obviously as the platform has matured the breadth and depth of the pipeline is just in a different place than it was two or three years ago that allows us to kind of inspect that in a much more material way and not we recognize that we can't have the linear we had previously we need to get in front.

Speaker Change: So that we can get ahead of the curve and just generally thinking about running the business in a very continuous way as opposed to one year.

Speaker Change: And then reset and have another year, we're really trying to be almost monthly in the cadence around which we're running the company and by pulling forward those internal objectives for sales and for pipeline generation maturation and bookings activity that creates the linearity of that were.

Speaker Change #104: All of it but certainly the breadth and depth of the pipeline has allowed us to kind of drive some of those behaviors.

Speaker Change #104: Okay.

Speaker Change #104: Okay.

Speaker Change #105: What was the second part of your question.

Speaker Change #106: I expect we'll continue to drive this sort of approach to linear bookings progression next year and so.

Speaker Change #106: That seasonality.

Speaker Change: Seeing and enables it just enables us to run the business far more effectively and it's taken a while to.

Speaker Change #107: <unk> I'm, hoping that we will continue to smooth out yes, I think thats right I mean as I look at how I think about modeling bookings for a number of years, we would had a track record of falling a little bit behind in the first half and catching up in the back half in this year.

Speaker Change: Kind of steer the ship and adjust everybody's approach and train the market for what we really want to what the outcomes, we want to achieve but it's just great to see us at this point through Q3.

Speaker Change #108: We've changed that dynamic a little bit, which is which is great to see and that is certainly our expectation as we look forward.

Speaker Change: With this sort of bookings success.

Okay wonderful that's really helpful. And then I just wanted to ask a question about <unk> since you announced that at connections last year picking up a lot of interest can you maybe walk us through what is adoption and use cases look like so far with gesture out and as we think about.

Speaker Change: It makes Q4, a lot more manageable for us.

Speaker Change: Yes, the only thing I would add is obviously as the platform is mature the breadth and depth of the pipeline is just in a different place than it was two or three years ago that allows us to kind of inspect that in a much more material way and not we recognize that we can't have the linear we had previously we need to get in for.

Speaker Change #109: It's a developer.

Speaker Change #110: Is there an opportunity for you to leverage generative AI just given that that journey has been really helpful. From a coding perspective to maybe even speed up time to value even faster than what we've seen before.

Speaker Change: One of it but certainly the breadth and depth of the pipeline has allowed us to kind of drive some of those behaviors.

Speaker Change: Okay.

Okay.

Speaker Change: What was the second part of your question.

Speaker Change: I expect we'll continue to drive this sort of approach to linear bookings progression next year and so.

Speaker Change #111: Yeah for sure Great question. So just for everybody's benefit you chose our technology platform for supporting our customers' ability to create digital experiences directly on top of our core systems. Typically that's claim center policy center and so the types of experiences that we will have customers.

Speaker Change: That seasonality I'm, hoping yes, we will continue to smooth out yes, I think thats right I mean as I look at how I think about modeling bookings for a number of years, we would had a track record of falling a little bit behind in the first half and catching up in the back half in this year.

Speaker Change #111: Made his first notice of loss for claims flow or quoting experience or some sort of like account management update experiences and these are things carriers could push directly to customers or more agents in order to create a better more convenient and more efficient.

Speaker Change: We've changed that dynamic a little bit, which is which is great to see and that's certainly our expectation as we look forward.

Speaker Change: Okay wonderful. Thanks, that's really helpful. And then I just wanted to ask a question about Joe Joe Since you announced that at connections last year picking up a lot of interest can you maybe walk us through what is adoption and use cases look like so far with <unk> and as we think about it.

Speaker Change #111: Business process in general operation, just kind of good for the consumer good for the agent also good for the carrier and with <unk>, we can make this.

The delivery of this just so much more efficient and so creating a separate standalone digital application that has to be synchronized and integrated into the core system. We can build these experiences directly on our core system and we can make it just far more efficient far faster and cheaper for for our customers.

Speaker Change: As a developer kit.

Speaker Change: Is there an opportunity for you to leverage generative AI just given that that journey has been really helpful. From a coding perspective to maybe even speed up time to value and fashion than what we've seen before.

Speaker Change: Yeah for sure Great question. So just for everybody's benefit you chose our technology platform for supporting our customers' ability to create digital experiences directly on top of our core systems. Typically that's claim center policy center and so the type of experiences that we will have customers.

Speaker Change #112: Quickly our cloud customers to be able to achieve.

Adoption has been very good.

Have the products now gea and so we're working with a number of projects across the cloud customer base to get these programs built on future out into the wild out into the out.

Out into the real world in terms of GAA projects.

Speaker Change: Great is first notice of loss for claims flow or quoting experience or some sort of like account management update experiences and these are things carriers could push directly to customers or more agents in order to create a better more convenient and more efficient.

Speaker Change #112: Just actually in Australia, we were talking with one of our top customers hollered about their experience being.

Speaker Change #113: Actually the first customer to work through this with us and get one of these two trop driven experiences.

Speaker Change #114: Launched for our claims flow that they're supporting with US and that program went very very well there were a great partner with us in sort of working through.

Speaker Change: Business process in general operation, just kind of good for the consumer good for the agent also good for the carrier and would you trial, we can make this.

Speaker Change #114: The project with us over time and getting that to a generally available state, but we're very very happy with the progress to date the adoption in the customer base. We're also excited about where this is going we see a big opportunity to create more packaged contents around you chose to just further.

Speaker Change: The delivery of this just so much more efficient and so creating a separate standalone digital application that has to be synchronized and integrated into the core system. We can build these experiences directly on our core system and we can make it just far more efficient far faster and cheaper for for our customers spin.

Speaker Change #115: Accelerate the creation of these experiences have think of these as these like little micro digital applications that carriers can use to get more efficient you question about generated generative AI is great.

Speaker Change: Typically our cloud customers to be able to achieve.

Speaker Change: Adoption has been very good.

Speaker Change: Have the products now gea and so we're working with a number of projects across the cloud customer base to get these programs built on future out into the wild out into the.

Speaker Change #116: We certainly see.

Speaker Change #116: This will just like any software development program this will be enhanced and improved.

Speaker Change #116: With generative AI and the various co pilots this is offered.

Speaker Change: Out into the real world in terms of GAA projects, just actually in Australia, we were talking with one of our top customers following about their experience being.

Speaker Change #116: That are available today.

Speaker Change #116: This technology is based on react.

Speaker Change #116: Which is the standard.

Speaker Change: Actually the first customer to work through this with us and get one of these two trop driven experiences.

Speaker Change #117: Web programming language, which digital teams all over the world are very familiar with and so they can interact with this future application and think of this as just a head start in terms of connecting those react based applications to guidewire.

Launched for our claims flow that theyre supporting with US and that program went very very well there were a great partner with us and sort of working through.

Speaker Change #118: Yeah, we think react generative AI and these kind of mesh.

Speaker Change: The project with us over time and getting that to a generally available state, but we're very very happy with the progress to date the adoption in the customer base. We're also excited about where this is going we see a big opportunity to create more packaged contents around you chose to just further.

Speaker Change #118: Mechanisms for enhancing and improving coding efficiency can certainly help going forward. So anyway. Thanks for the question.

Speaker Change #119: Thank you.

Speaker Change #120: Thank you. Our next question comes from the line of Matt Van.

Speaker Change: Accelerate the creation of these experiences have think of these as these like little micro digital applications that carriers can use to get more efficient you question about generated generative AI is great.

BTG: Sorry with BTG. Please proceed with your question.

Speaker Change #122: Hey, good afternoon. Thanks for taking the question maybe wanted to dig in a little bit on maybe what some of the specific drivers were that got some of the APAC deals in particular over the line.

Speaker Change: We certainly see.

Speaker Change: Think that this will just like any software development program this will be enhanced and improved.

Speaker Change #122: And sort of improving performance that you called out there on the cloud side of the business.

With generative AI and the various co pilots this is offered.

Speaker Change #122: How much of that is sort of product maturation and other things you're doing versus <unk>.

That are available today.

Speaker Change #123: John and his team are continuing to sort of knock on doors and get deals done.

Speaker Change: This technology is based on react.

Speaker Change: Which is the standard.

Speaker Change #124: You can do provide us with a little more details on what's working there that that maybe it wasn't just as a few quarters ago.

Speaker Change: Web programming language, which digital teams all over the world are very familiar with and so they can interact with this future application and think of this as just a head start in terms of connecting those react based applications to guidewire.

Speaker Change #124: Yes, so a lot of.

John: Locke came together in the quarter and Australia and this was the result of John in the sales organization.

Speaker Change: Yeah, we think.

Speaker Change: Generative AI and these kind of.

Speaker Change: Mechanisms for enhancing and improving coding efficiency can certainly help going forward. So anyway. Thanks for the question.

John Locke: In Australia in Asia Pacific, but also supported generally worldwide.

Speaker Change #127: A lot came together based on a lot of years worth of hard work.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Matt Van Vliet.

Speaker Change #128: Had sort of planted the seeds in.

Speaker Change #129: Australia over the past few years with a number of smaller deals and a number of early cloud success stories.

Speaker Change: Sorry with BTG. Please proceed with your question.

Speaker Change: Hey, good afternoon, thanks for taking the question.

Speaker Change #130: But there was a number of big Australian insurance companies that we've had long relationships with that we've just been working very very hard to build their trust and aligned to their program objectives about what makes sense from an on their modernization roadmap and their business objectives.

Speaker Change: I wanted to dig in a little bit on maybe what some of the specific drivers were that got some of the APAC deals in particular over the line.

Speaker Change: And sort of improving performance that you called out there on the cloud side of the business.

Speaker Change: How much of that is sort of product maturation and other things you're doing versus <unk>.

Speaker Change #130: These things all came together in the quarter and resulted in just really really strong demand.

Speaker Change: John and his team continuing to sort of knock on doors and get deals done.

Speaker Change #131: Just kind of touching back to or kind of relating back to what I was talking about a few minutes ago. There is a direct connection between.

Speaker Change: You can do provide us with a little more details on what's working there that maybe it wasn't just as a few quarters ago.

Speaker Change: Yes, so a lot of.

The success stories that we've been able to achieve in North America. The track record that we've been able to establish the fact that we have now over 60 live cloud customers.

Locke came together in the quarter and Australia and this was the result of John in the sales organization in.

Speaker Change #132: And this thing is more and more proven that creates the confidence there that we can that we can make sure that these programs will be successful and so these things all added up to.

Speaker Change: In Australia in Asia Pacific, but also supported generally worldwide.

Speaker Change: Block came together based on a lot of years worth of hard work.

Speaker Change: Had sort of planted the seeds.

Speaker Change #133: A really phenomenal quarter in Australia.

Speaker Change: Australia over the past few years with a number of smaller deals and a number of early cloud success stories.

Speaker Change #134: We're very excited about it I mentioned on the prepared remarks.

Speaker Change #135: Shanxi joining.

But there was a number of big Australian insurance companies that we've had long relationships with that we've just been working very very hard to build their trust and aligned to their program objectives about what makes sense from an on their modernization road map and their business objectives.

Shanxi: He is an incredible leader that we're excited to bring into the Guidewire family and continue to drive our momentum in Asia Pacific I think we've got a lot more room to grow there and build on this success.

Speaker Change #137: Alright helpful.

Speaker Change #138: And then just two quick follow ups, Jeff one it looks like a pretty big perpetual deal came through in the quarter or any additional details you can sort of.

Speaker Change: These things all came together in the quarter and resulted in just really really strong demand.

Jeff Cooper: Help us with there and then from a more strategic standpoint on the gross margin Reinvestments you talked about anything specifically that you are targeting there or is it just sort of an acceleration of things on the roadmap already.

Speaker Change: Just kind of touching back to or kind of relating back to what I was talking about a few minutes ago. There is a direct connection between.

Speaker Change: The success stories that we've been able to achieve in North America. The track record that we've been able to establish the fact that we have now over 60 live cloud customers.

Jeff Cooper: So on the perpetual deal.

Speaker Change #139: It wasn't any sort of new perpetual deal that was just expansion orders is it an existing customer. So it was a little bit of a blip.

Speaker Change: And this thing is more and more proven that creates the confidence there that we can that we can make sure that these programs will be successful and so these things all added up to.

Speaker Change #139: But nothing I would highlight is a trend or anything along the lines and then what was the second question.

Speaker Change #140: You mentioned the upside to gross margins that maybe are going to accelerate some investments in the platform. Just curious that was pulling things forward or.

Speaker Change: A really phenomenal quarter in Australia.

Speaker Change: We're very excited about it I mentioned on the prepared remarks.

Speaker Change #141: Look we're clearly tracking ahead of our gross margin targets for this year.

Speaker Change: Joining this he's an incredible leader that we're excited to bring into the Guidewire family and continue to drive our momentum in Asia Pacific I think we've got a lot more room to grow there and build on the success.

We're already tracking ahead of the targets that we established for next year or so.

Speaker Change #141: That creates that's.

Been very exciting for us to watch to see that expansion occur. We think that there is a lot of opportunity out there for us to invest in and so.

Speaker Change: Alright helpful.

Speaker Change: Then just two quick follow ups, Jeff one it looks like a pretty big perpetual deal came through in the quarter or any additional details you can sort of.

Speaker Change #141: As we look at early looks into FY 'twenty five clearly tracking a bit ahead on gross margin, but we see the healthy investment areas to take advantage of this momentum that we have.

Speaker Change: Help us with there and then.

Speaker Change: A more strategic standpoint on the gross margin Reinvestments, you talked about anything specifically that youre targeting there or is it just sort of an acceleration of things on the roadmap already.

Speaker Change #141: And so I still think our overall operating margin targets are the right targets I think so.

Jeff: So on the perpetual deal.

Speaker Change #142: Okay. Thank you.

Speaker Change #143: Thank you.

Speaker Change: It wasn't any sort of new perpetual deal that was just expansion orders is it an existing customer. So it was a little bit of a blip.

Speaker Change #143: Okay.

Speaker Change #144: Thank you. Our next question comes from the line of Alex.

Raymond James: Thus far with Raymond James. Please proceed with your question.

Speaker Change: But nothing I would highlight is a trend or anything along the lines and then what was the second question.

Alex Hughes: Great. Thank you Mike a lot of comments today around the maturity of your cloud solution kind of helping drive faster demand can you just talk about your cloud customers staying closer to the latest release and where that stands today versus a year or two ago and is there any kind of way to characterize how that piece of it is factoring in broader demand and cloud adoption.

Speaker Change: You mentioned the upside to gross margins that maybe are going to accelerate.

Speaker Change: <unk> had some investments in the platform just curious if that was pulling things forward or.

Speaker Change: Look we're clearly tracking ahead of our gross margin targets for this year.

Raymond James: Thanks.

Speaker Change: We're already tracking ahead of the targets that we established for next year. So.

Speaker Change #147: Sure. Thanks for the question I appreciate it because it's been a real focus for us this year.

Speaker Change: That creates that's been very exciting for us to watch to see that expansion occur. We think that there is a lot of.

Speaker Change #148: There's been a series of phases that we went through in terms of establishing the cloud establishing the cloud infrastructure and our ability to scale and reliably and securely run.

Speaker Change: Opportunity out there for us to invest in and so I think as we look at early looks into FY 'twenty five clearly tracking a bit ahead on gross margin, but we see the healthy investment areas to take advantage of this momentum that we have and so I still think our overall operating margin targets are the right targets. Thanks.

Speaker Change #148: Insurance suite applications like the the change that we made in the release cadence was a big part of the cloud value proposition and the promise that we have for the future.

Speaker Change #148: At some point, we even shifted from a twice a year release cadence two or three times a year release cadence, but alongside that has been a whole bunch of just really incredible engineering and focus around making sure that these that the update process in the cloud was it just a completely different experience for <unk>.

Speaker Change: Yeah.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question comes from the line of Alex.

Speaker Change: Thus far with Raymond James. Please proceed with your question.

Alex: Great. Thank you Mike a lot of comments today around the maturity of your cloud solution kind of helping drive faster demand can you just talk about your cloud customers staying closer to the latest release and.

Speaker Change #148: Customers relative to what they were doing on Prem.

Speaker Change #148: And this has really improved in the last Ah.

Speaker Change #148: In the last year in terms of we measure very closely.

Mike: Where that stands today versus a year or two ago and is there any kind of way to characterize how that piece of it is factoring in broader demand in cloud adoption right.

Speaker Change #148: The release version that our customers are running in their non production and production environments relative to what the current state is we measure that and talk about that as like and minus one and minus two and minus three and we track. This weekly we track this with our board and we've run a number of programs.

Speaker Change: Sure. Thanks for the question I appreciate it because it's been a real focus for us this year.

Speaker Change: There has been.

Speaker Change: A series of phases that we went through in terms of establishing the cloud establishing the cloud infrastructure and our ability to scale and reliably and securely run. These insurance suite applications like the the change that we made in the release cadence was a big part of the cloud value proposition and the promise that we have for the future.

Speaker Change #149: Technically and also in terms of how we work with each of our cloud customers around ensuring we're building enough trust with them such that they feel comfortable that they can take these updates.

And as you quite as you can imagine for a customer that's used to a 12 to 18 month update the first time. They do this on our cloud they are a little bit apprehensive and they're taking it very carefully and being prudent.

Speaker Change: Sure.

At some point, we even shifted from a twice a year release cadence two or three times a year release cadence, but alongside that has been a whole bunch of just really incredible engineering and focus around making sure that these that the update process in the cloud was it just a completely different experience for.

Speaker Change #149: But once they do it once once they do it twice once you do it three times and they see that they can do these things in days.

Speaker Change #149: Yes.

Speaker Change #150: And really the impact to their teams and their operations is very very minimal we earn their trust and we enable them to stay current on the either in the current release or maybe you had minus one one release behind and so this has this is going really well as part of my.

Speaker Change: Customers relative to what they were doing on Prem.

Speaker Change: And this has really improved in the last.

Speaker Change: In the last year in terms of <unk>.

Speaker Change: Measure very closely.

The release version that our customers are running in their non production and production environments relative to what the current state is we measure that and talk about that as like N minus one or N minus two and minus three and we track. This weekly we track this with our board and we've run a number of programs.

Speaker Change #151: I was talking about in the prepared remarks these events that we.

Speaker Change #151: We ran all over the World. This is one of the slides we talk about with customers. It's one of the slides, we talked about with partnered with prospects.

Speaker Change #151: As well because it's so important.

Speaker Change #151: The whole value proposition of cloud.

Speaker Change #151: This would all be for naught, if we werent able to keep customers current and being able to deliver the really ground breaking product agility functionality or workflow functionality or do trop digital functionality or generative AI functionality. It's all of the update process that makes that possible possible and so that's gone really really well.

Speaker Change: Technically and also in terms of how we work with each of our cloud customers around ensuring we're building enough trust with them such that they feel comfortable that they can take these updates.

Speaker Change: And as you quite as you can imagine for a customer that used to have 12 to 18 month update the first time. They do this on our cloud they are a little bit apprehensive and they're taking it very carefully and being prudent.

Speaker Change #151: And it's been a big it's been a big Big Ah.

Speaker Change #152: <unk> this year for the company. So thanks for the question.

Speaker Change: But once they do it once once they do it twice once you do it three times and they see that they can do these things in days.

Speaker Change #153: Alright, I appreciate all the color Mike Jeff maybe just a quick follow up for you on Ricky's question around linearity.

Speaker Change: Yeah.

Speaker Change: And really the impact to their teams and their operations is very very minimal we earn their trust and we enable them to stay current on the either in the current release or maybe you had minus one one released behind and so this has this is going really well as part of my.

Speaker Change #154: We obviously have the fourth quarter are our guide I think you also implied that Q4 might not reflect the strength of fully ramped bookings just given ramp schedule. So I just wanted to clarify is the smoother linearity comment kind of less reliance on Q4 is that a phenomenon you're seeing on the fully ramped side too or is there an added aspect in terms of the mix of ramp deals that are you looking at.

I was talking about in the prepared remarks these events that we.

Speaker Change: We ran all over the World. This is one of the slides we talked about with customers just wanted to slides, we talked about with partner with prospects.

Speaker Change #154: Fourth quarter versus the rest of the year, Yes, I think I think what I was trying to communicate there is as we look at the upside and as we look at Q4 and where we think.

Speaker Change: As well because it's so important.

Speaker Change: The whole value proposition of cloud.

Speaker Change #154: Some of the upside may exist.

Speaker Change #155: Seeing some really interesting.

Speaker Change: This would all be for naught, if we werent able to keep customers current and being able to deliver the really groundbreaking product agility functionality or workflow functionality or do trop digital functionality or generative AI functionality. It's all of the update process that makes that possible possible and so that's gone really really well.

Speaker Change #156: The deal momentum and long longer term commitments that come across some reps so.

Speaker Change #157: On the <unk> side as we look at the overall.

Speaker Change #158: Momentum there, we're thrilled with the deal activity, but a lot of that kind of more interesting upside is coming in those ramped outcomes. So that's an exciting fact pattern for us.

Speaker Change: And it's been a big it's been a big big.

Speaker Change: <unk> this year for the company. So thanks for the question.

Speaker Change #159: Alright, thanks for that Jeff.

Speaker Change: Alright, I appreciate all the color Mike Jeff maybe just a quick follow up for you on Ricky's question around linearity.

Speaker Change #160: Thank you.

Speaker Change #161: Our next question comes from the line of.

Speaker Change: We obviously have the fourth quarter are our guide.

Speaker Change #161: Globally.

Speaker Change #162: <unk> with Jpmorgan. Please proceed with your question.

Speaker Change: You also implied that Q4 might not reflect the strength of fully ramped bookings just given ramp schedule. So I just wanted to clarify is the smoother linearity comment kind of less reliance on Q4 is that a phenomenon you're seeing on the fully ramped side too or is there an added aspect in terms of the mix of ramp deals that are you looking at fourth quarter versus the rest of the year.

Speaker Change #163: Hello, everyone.

Mike: Mike I was wondering if you could give us some insight into the customers are still on the <unk>.

Mike: <unk>.

Software versions.

Mike: <unk>.

Mike: When do you think these customers would be ready to migrate to the cloud.

Speaker Change: I think what I was trying to communicate there is as we look at the upside and as we look at Q4, and where we think some of the upside may exist, we're seeing some really interesting.

Mike: I'm assuming that they.

Speaker Change #164: They haven't received any upgrades since you guys.

Speaker Change #164: Sure.

Speaker Change #165: Thank you to introduce cloud products.

Speaker Change: The deal momentum and long longer term commitments that come across some reps so.

I think 2026 or 2027.

Speaker Change #166: All year when.

Speaker Change: On the <unk> side as we look at the overall.

Speaker Change #167: Many of these customers will begin to consider cloud migration.

Speaker Change: Momentum there, we're thrilled with the deal activity, but a lot of that kind of more interesting upside is coming in those ramped outcomes. So that's an exciting fact pattern for us.

Speaker Change #168: Yes, thanks very much for the question I would say that every single one of them is in the consideration process, we engage with these customers closely.

Speaker Change: Alright, thanks for that.

Speaker Change #169: We we work with them to make plans and understand their objectives and align their objectives to our ability to support them either with upgrades to cloud or as you say continued updates to the off premise mutations we continue to support the on Prem implementations with security fixes.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of.

Speaker Change: Uh huh.

Speaker Change: I believe with Jpmorgan. Please proceed with your question.

Hello, everyone.

Michael James Turrin: Mike I was wondering if you could give us some insight into the customers are still on the whole.

Speaker Change #170: So we support customers when they need it.

It's still a big component of our revenue.

Speaker Change: Software versions.

Speaker Change #171: It's just from a from a sort of innovation product innovation perspective, there's just very minimal to no.

Speaker Change: When do you think these customers would be ready to migrate to the cloud.

Speaker Change #171: New investments going into those releases and so the customers can sell reliably and safely operate those systems on Prem and we support them.

Speaker Change: I'm assuming that.

Speaker Change: They haven't received any upgrades since you guys move.

Speaker Change: Thank you can't produce for them.

Speaker Change: Do you think 2026 or 2027.

Speaker Change #172: The real benefit of the of the relationship with Guidewire has to do also with product innovation. We just can do so much more in the cloud so much more efficiently and more effectively and we're trying to be very clear with all of the arm from customers that that's where our focus is and so in terms of.

Speaker Change #100: Full year when.

Speaker Change #100: Many of these customers will begin to consider cloud migration.

Speaker Change #101: Yes, thanks very much for the question I would say that every single one of them is in the consideration process, we engage with these customers closely.

Speaker Change #172: Yeah.

Speaker Change #172: In terms of projecting when exactly these migrations will occur.

Speaker Change #100: We.

Speaker Change #100: We work with them to make plans and understand their objectives and align their objectives to our ability to support them either with upgrades to cloud or as you say continued updates to the off premise mutations we continue to support the on Prem implementations with security fixes.

Speaker Change #173: It's challenging.

Speaker Change #173: Because it's not just <unk>.

<unk> wire in the Guidewire program that factors into our customers' decision, making process theres very often other objectives that they are dealing with inside of their environment other objectives, and so the upgrades to guidewire cloud as something that they have to sequence in with all of their other it.

Speaker Change #100: So we support customers when they need it.

Speaker Change #100: It's still a big component of our revenue.

Speaker Change #100: It's just from a from a sort of innovation product innovation perspective, there's just very minimal to no.

Speaker Change #173: Objectives.

Speaker Change #174: Like I said, we work with every single one of them and have a discussion with them frequently about where they are and where that plan is and what our commitments are in terms of timing around those around support but I would say as we proceed towards 'twenty FY <unk>, our fiscal 'twenty six fiscal 'twenty.

Speaker Change #100: New investment going into those releases and so the customers can still reliably and safely operate those systems on Prem and we support them, but the real benefit of the relationship with Guidewire has to do also with product innovation. We just can do so much more.

Speaker Change #175: Seven in fiscal 2008, I think all of those on Prem implementations those plans to Guidewire cloud will have been firmed up but thats projecting out three years. It's a long time, there's a lot that can occur and happen in change in the world but.

Speaker Change #100: Sure.

Speaker Change #100: In the cloud so much more efficiently and more effectively and we're trying to be very clear with all the on prem customers that that's where our focus is and so in terms of.

Speaker Change #100: In terms of projecting when exactly these migrations will occur.

Speaker Change #175: Hi.

Speaker Change #176: We're working with them.

Speaker Change #177: And we do see that demand and like I said in the prepared remarks.

Speaker Change #100: It's challenging.

Speaker Change #100: Because it's not just <unk>.

Speaker Change #177: This customer base is the most valuable asset of Guidewire and I think culturally.

Speaker Change #100: <unk> wire in the Guidewire program that factors into our customers' decision, making process theres very often other objectives that they are dealing with inside of their environment other objectives, and so the upgrades to guidewire cloud as something that they have to sequence in with all of their other.

Speaker Change #178: And just to our companies kind of ethos is that we're committed to supporting those customers and getting 100% of them moved over to the cloud when it makes sense for them.

Speaker Change #178: Perfect. Thank you, Mike and Jeff a quick question for you.

Speaker Change #100: Objectives.

Speaker Change #179: This strategy of passing on lower margin service revenue to partners mean that.

Like I said, we work with every single one of them and have a have a discussion with them frequently about where they are and where that plan is and what our commitments are in terms of timing around those around support but I would say as we proceed towards 'twenty FY <unk>, our fiscal 'twenty six fiscal 'twenty.

Speaker Change #180: You would not need to add significant amount of.

Additional.

Speaker Change #181: Palin labor capacity in the mid term.

Speaker Change #181: Which would potentially help improve your margins going forward.

Speaker Change #182: Yes, I mean I think.

Speaker Change #100: Seven in fiscal 2008, I think all of those.

Speaker Change #183: The way we look at it is that there is a massive amount of work to modernize this industry and if we were to try to tackle that with all Guidewire resources, we would have to staff up quite significantly and that's not that's not our strategy. We want to work with the best partners in the world to help us tackle that opportunity.

Speaker Change #100: Prem implementations those plans to Guidewire cloud will have been firmed up but thats projecting out three years. It's a long time, there's a lot that can occur and happen in change in the world but.

Speaker Change #100: <unk>.

Speaker Change #100: We're working with them.

Speaker Change #184: We need to have a highly strategic.

Speaker Change #100: And we do see that demand and like I said in the prepared remarks.

Speaker Change #184: Skilled services organization.

Speaker Change #100: This customer base is the most valuable asset of Guidewire and I think culturally.

Speaker Change #184: And we think that we have the right size and scale in that organization today.

Speaker Change #100: And just our companies kind of ethos is that we're committed to supporting those customers and getting 100% of them moved over to the cloud when it makes sense for them.

Speaker Change #184: To allow us to partner with with with the global size to get this work done so kind of as we look ahead, we think we have the right cost basis.

Speaker Change #102: Perfect. Thank you, Mike and Jeff a quick question for you.

Speaker Change #185: And I think as we go through this process of dividing up the labor to tackle this opportunity finding that right equilibrium point, where our resources and ours are highly skilled people are appropriately utilized and our partners have an exciting opportunity to execute against as well. So that's what that's what we're tackling.

Speaker Change #103: This strategy of passing on lower margin service revenue to partners mean that.

Speaker Change #104: You would not need to add significant amount of.

Speaker Change #103: Additional.

Speaker Change #105: Talent and labor capacity in the mid term.

Speaker Change #105: Which would potentially help improve your margins going forward.

Speaker Change #185: I appreciate the answers. Thank you. Thank you Mike.

Speaker Change #106: Yes, I mean I think.

Speaker Change #185: Thank you.

Speaker Change #107: The way we look at it is that there is a massive amount of work to modernize this industry and if we were to try to tackle that with all Guidewire resources, we would have to staff up quite significantly and that's not that's not our strategy. We want to work with the best partners in the world to help us tackle that opportunity.

Speaker Change #186: Thank you. Our next question comes from the line of Michael <unk> with Wells Fargo. Please proceed with your question.

David: Hey, David Undrawn for Michael turn Tonight. Thanks, Thanks for taking the question just one from us.

Michael <unk>: You guys just talk through the trends Youre seeing in terms of the sales cycle and any differences to note by either geography or tier. Thank you.

Speaker Change #107: We need to have a highly strategic.

Speaker Change #107: <unk> services organization.

Speaker Change #189: Yes, I don't know whether or not a call out any particular difference in change in the sales cycle. Our sales cycles are still very long.

Speaker Change #107: And we think that we have the right size and scale in that organization today.

Speaker Change #107: To allow us to partner with with with the global size to get this work done so kind of as we look ahead, we think we have the right cost basis.

Speaker Change #189: We closed deals that are very often and opened in our system for multiple years.

Speaker Change #190: And that Hasnt changed we feel like we've got a great <unk>.

Speaker Change #107: And I think as we go through this process of dividing up the labor to tackle this opportunity finding that right equilibrium point, where our resources and ours are highly skilled people are appropriately utilized and our partners have an exciting opportunity to execute against as well. So that's what that's what we're tackling.

Speaker Change #191: <unk> two customers are very deep connection often whereas like guidewire is running and some component of their.

Speaker Change #192: Their enterprise and so we have a relationship and that enables us to have an opportunity for a sort of larger price kind of open and working for a long time.

Speaker Change #107: Yeah.

Speaker Change #192: I wouldn't say, we've seen much of a change in that in that cycle. It's just generally we're able to pull the deals in and get them closed based on the confidence in the momentum that we've established in the market today.

Speaker Change #108: I appreciate the answers. Thank you. Thank you Mike.

Speaker Change #109: Thank you.

Speaker Change #110: Thank you. Our next question comes from the line of Michael <unk> with Wells Fargo. Please proceed with your question.

David: Hey, David on for Michael Thanks, Thanks for taking the question just one from us.

Thanks, Mike.

Speaker Change #193: Thank you.

Speaker Change #112: You guys just talk through the trends Youre seeing in terms of the sales cycle and any differences to note by either geography or tier. Thank you.

Speaker Change #193: Our next question comes from the line of Tyler Radke with Citibank. Please proceed with your question.

Speaker Change #194: Hey, this is Peter on a line for Tyler Radke, Congrats on the quarter, Mike and Jeff I just have one question here.

Speaker Change #113: Yes, I don't know whether or not a call out any particular difference in change in the sales cycle. Our sales cycles are still very long.

Peter: Areas of AI is having any impact on recent deal activity and if customers are wanting to modernize their system sooner rather than later to invest in AI projects down the line as you start to introduce more of those applications onto your platform.

Speaker Change #113: We closed deals that are very often an opening in our system for multiple years.

Speaker Change #113: And that Hasnt changed we feel like we've got a great <unk>.

Speaker Change #194: Yeah.

Speaker Change #194: It is a great question and I think certainly.

Speaker Change #113: <unk> two customers are very deep connection often whereas like guidewire is running and some component of their.

Speaker Change #194: Hi.

Speaker Change #196: And I'm going to kind of answer the question I'll give you a long answer to this question.

Speaker Change #197: If you say AI broadly.

Speaker Change #113: Their enterprise and so we have a relationship and that enables us to have an opportunity for a sort of larger price kind of open and working for a long time.

Speaker Change #198: Data very much matters for machine learning and using AI and machine learning techniques to make better predictions to make to operate at an insurance company more efficiently and more effectively and.

Speaker Change #113: I wouldn't say, we've seen much of a change in that in that cycle. It's just generally we're able to pull the deals in and get them closed based on the confidence in the momentum that we've established in the market today.

Speaker Change #199: Getting better access to data is a big part of Guidewire modernization programs and decisions to deploy guidewire.

Speaker Change #114: Thanks, Mike.

Speaker Change #199: At an insurance company that is a big deal.

Michael James Turrin: Thank you.

Speaker Change #115: Our next question comes from the line of Tyler Radke with Citibank. Please proceed with your question.

Speaker Change #200: If you broaden this to generative AI I think there are.

Speaker Change #115: Hey, this is Peter on a line for Tyler Radke, Congrats on the quarter, Mike and Jeff I. Just have one question here curious if AI is having any impact on recent deal activity and if customers are wanting to modernize their system sooner rather than later to invest in AI projects down the line as you start to introduce more of those applications onto your platform.

Speaker Change #200: There absolutely is a sense that <unk>.

Speaker Change #200: Getting to a system like Guidewire modernizing your core application suite around claims flows and policy flows. This is the right platform to applied generative AI features.

Speaker Change #201: To a modern system trying to do this on top of a mainframe legacy system I think is virtually impossible and so in the conversations I'm, having with customers. We see this future where a significant amount of the sort of tedious tasks that people operate.

Speaker Change #115: Thanks.

Speaker Change #116: It is a great question and I think certainly.

Speaker Change #116: AI.

And I'm going to kind of answer the question I'll give you a long answer to this question.

Speaker Change #117: If you say AI broadly.

Speaker Change #117: Data very much matters for machine learning and using AI and machine learning techniques to make better predictions to make to operate at an insurance company more efficiently and more effectively.

We'll have to do in order to effectively run an insurance company can be facilitated it improved with generative AI and guidewire as a platform for doing that is a logical.

Speaker Change #202: Right. So it is certainly helping us.

Speaker Change #117: And <unk>.

Speaker Change #117: Getting better access to data is a big part of Guidewire modernization programs and decisions to deploy guidewire.

Speaker Change #203: In terms of thinking about like what's the steps towards being prepared for taking advantage degenerative AI as its applied to insurance Guidewire.

Speaker Change #117: At an insurance company that is a big deal.

Speaker Change #203: As a logical step.

If you broaden this to generative AI I think there are.

Speaker Change #204: And then we are now starting to talk to customers about <unk>.

Speaker Change #205: <unk> Zip AI products and.

Speaker Change #117: There absolutely is a sense that.

Speaker Change #205: Functionality and features that we will.

Speaker Change #117: Getting to a system like Guidewire modernizing your core application suite around claims flows and policy flows. This is the right platform to applied generative AI features.

Speaker Change #205: Embed within claim center and policy center to facilitate better efficiency for the.

Speaker Change #206: For the team members that are using Guidewire and so that's that's helpful and that's a boost to their thinking about whether the benefits associated with the Guidewire decision. So it's generally very very helpful and aligned.

Speaker Change #117: To a modern system trying to do this on top of a mainframe legacy system I think is virtually impossible and so in the conversations I'm, having with customers. We see this future where a significant amount of the sort of tedious tasks that people operate is that people have to do and.

Speaker Change #206: But still like kind of has to relate to a general transformation progress.

Speaker Change #206: Excuse me transformation program, that's going to drive a guidewire decision.

Speaker Change #117: To effectively run an insurance company can be facilitated it improved with generative AI and guidewire as a platform for doing that is a logical.

Alright. Thanks.

Speaker Change #207: Thank you. Our next question comes from the line of Erin aims and with citizens JMP. Please proceed.

Speaker Change #117: Step right. So it is certainly helping us.

Speaker Change #117: In terms of thinking about like what's the steps towards being prepared for taking advantage of generative AI as its applied to insurance Guidewire.

Speaker Change #208: Thanks for the question.

Erin Aims: Can you provide any color on that.

Erin Aims: There is an accelerated product investment that Jeff mentioned.

Erin Aims: Prepared remarks.

Speaker Change #117: As a logical step.

Speaker Change #117: And then we are now starting to talk to customers about.

Speaker Change #210: Sure we feel we see a lot of opportunity to continue to.

Speaker Change #117: Generally if AI products and.

Speaker Change #211: Number one just enhance.

Speaker Change #212: Policy Center claim center insurance now applications to make them more effective.

Speaker Change #117: Functionality and features that we will.

Speaker Change #117: Embed within claim center and policy center to facilitate better efficiency for the.

Speaker Change #213: And during the one of the questions, we're thinking about better digital applications and digital components that we can continue to invest and we talked about London markets.

Speaker Change #117: For the team members that are using Guidewire and so that's that's helpful and that's a boost to their thinking about whether the benefits associated with the Guidewire decision. So it's generally very very helpful and aligned.

Speaker Change #214: The content strategy that we have for applying guidewire to London markets, you think about further enhancements to different countries and different regions. There's localization requirements Theres just things that we can invest in the product to accelerate our growth.

Speaker Change #117: But still like kind of has to relate to a general transformation progress.

Speaker Change #117: Excuse me transformation program, that's going to drive a guidewire decision.

Speaker Change #215: Across the landscape of.

Speaker Change #215: The product landscape that we have today.

Speaker Change #118: Alright. Thanks.

Speaker Change #216: I think theres a lot of.

Speaker Change #119: Thank you. Our next question comes from the line of Erin aims and with citizens JMP. Please proceed.

Speaker Change #217: There is a lot of excitement and interest right now in the industry around underwriting and using generative AI to facilitate better underwriting.

Speaker Change #120: Thanks for the question.

Speaker Change #121: You provided any color on the specific areas of accelerated product investment that Jeff mentioned at the end of his prepared remarks.

Speaker Change #217: Our processes and approaches and the like.

Speaker Change #217: Mike.

Speaker Change #218: Analytics, AI better approaches to using analytics and AI for for pricing and for rating.

Speaker Change #122: Sure we feel we see a lot of opportunity to continue to.

Speaker Change #123: Number one just enhance.

Speaker Change #219: There's a wealth of opportunity for us and now that we have.

Speaker Change #124: Policy Center claim center insurance now applications to make them more effective.

Speaker Change #220: Really established ourselves in kind of created a modern cloud platform that we have this high degree of confidence its going to scale and work for us and work for our customers over the next decade, we can start to broaden our perspective about where else can we apply.

Speaker Change #125: I said it.

Speaker Change #125: During the one of the questions, we're thinking about better digital applications and digital components that we can continue to invest and we talked about London markets.

Speaker Change #125: The content strategy that we have for applying guidewire to London markets, you think about further enhancements to different countries and different regions. There's localization requirements Theres just things that we can invest in the product to accelerate our growth.

Speaker Change #221: <unk> investment to enhance better outcomes for insurance companies to make them more agile and make them more efficient and you see that just across the insurance lifecycle and so that's what he's talking about is that it's like this kind of period of time for our company, where we needed to be so focused on cloud infrastructure and making sure that that was.

Speaker Change #125: Across the landscape of.

Speaker Change #125: The product landscape that we have today.

Speaker Change #125: I think theres a lot of.

Speaker Change #222: Going to work, we're getting passed that phase, where we can now think about more strategically where can we apply product investment innovation investment and enhance our ability to grow and support the industry more effectively.

Speaker Change #125: There is a lot of excitement and interest right now in the industry around underwriting and using generative AI to facilitate better underwriting.

Our processes and approaches and the like.

Speaker Change #125: Mike.

Speaker Change #223: Very helpful. Thank you and then.

Speaker Change #125: Analytics, AI better approaches to using analytics and AI for for pricing and for rating and there is this.

At one year.

Speaker Change #223: Yes.

Speaker Change #224: Sorry could you repeat and then maybe.

Speaker Change #125: There's a wealth of opportunity for us and now that we have.

Speaker Change #225: Yes stepping back on one of your co founders.

Marcus: Remember Marcus.

Really established ourselves in kind of created a modern cloud platform that we have this high degree of confidence its going to scale and work for us and work for our customers over the next decade, we can start to broaden our perspective about where else can we apply.

Marcus: He believes in futures offers vertical.

Marcus: More and more specific.

Marcus: One barracuda bathroom vertical software.

Speaker Change #227: Summary, nearing productivity of around them.

Speaker Change #228: That's the amount of the value menu.

Speaker Change #229: Software applications provide an attractive number.

Speaker Change #126: <unk> investment to enhance better outcomes for insurance companies to make them more agile and make them more efficient and you see that just across the insurance lifecycle and so that's what he's talking about is that it's like this kind of period of time for our company, where we needed to be so focused on cloud infrastructure and making sure that that was.

Mike: Mike where on the spectrum between those two trains of thought.

Speaker Change #229: Buying on reinsurance.

Speaker Change #229: Yeah.

Speaker Change #230: I will tell you we win when Llm's specifically cogeneration.

Speaker Change #231: <unk> launched on the World a.

Speaker Change #231: A year or so ago, we spent a lot of time thinking about this.

Speaker Change #126: Going to work, we're getting passed that phase, where we can now think about more strategically where can we apply product investment innovation investment and enhance our ability to grow and support the industry more effectively.

Speaker Change #231: My conclusion about Guidewire and specifically the P&C industry is that the.

Speaker Change #232: The necessity to have a core system of record.

Speaker Change #233: That that supports the rigorous highly regulated financial obligations of insurance companies.

Speaker Change #127: Very helpful. Thank you and then.

Speaker Change #128: At one year.

Speaker Change #128: Yes.

Speaker Change #129: Sorry could you repeat and then maybe.

Speaker Change #234: Is going to remain a very complicated enterprise software package, that's going to have a long long life I feel very very good about that I feel very strong about our position about our track record in the amount of investment that we have put into creating this platform that works off.

Speaker Change #130: Yes stepping back on one of your co founders.

Speaker Change #131: Remember Marcus group.

Speaker Change #131: He believes in futures offers vertical.

Speaker Change #131: More and more specific.

Speaker Change #131: One barracuda bathroom vertical software.

Speaker Change #131: Tolerate engineering productivity of around them.

Speaker Change #235: All over the world for every size carrier in every line of business that we support.

Speaker Change #131: That's the amount of the value menu.

Speaker Change #131: Software applications provide an attractive number.

Michael James Turrin: Mike where on the spectrum between those two trains of thought.

Speaker Change #235: I feel really very good about that position.

Speaker Change #236: I think these insurance companies that we partner with are making decisions for the next 10 or 20 years and we are the right company for them to partner with and I think generative AI.

Michael James Turrin: Buying on reinsurance.

Michael James Turrin: Yes.

Michael James Turrin: I will tell you we.

Michael James Turrin: When when Llm's, specifically cogeneration.

Speaker Change #236: Will serve a different purpose in the insurance vertical it will facilitate the creation of digital applications like we talked about on top of Guidewire core systems. It will facilitate generative AI features within policy Center and claim center that will make people more efficient it will facilitate.

Speaker Change #132: <unk> launched on the World a.

Speaker Change #132: A year or so ago, we spent a lot of time thinking about this.

Speaker Change #132: My conclusion about Guidewire and specifically the P&C industry is that the.

Speaker Change #132: The necessity to have a core system of record.

Speaker Change #132: That that supports the rigorous highly regulated financial obligations of insurance companies.

Speaker Change #237: Submission processes for our commercial lines insurance, where today, maybe the very structured database driven approaches that we've had.

Speaker Change #132: Is going to remain a very complicated enterprise software package, that's going to have a long long life I feel very very good about that I feel very strong about our position about our track record in the amount of investment that we have put in for creating this platform that works off.

Speaker Change #237: And the tool set that we've had to date don't quite.

Speaker Change #237: Solve the problem, but generative AI now gives us this ability to solve those sort of more complex.

Speaker Change #237: Less data.

Speaker Change #237: Less.

Speaker Change #237: Database oriented problems can now be soft more effectively with computer systems powered by generative AI, So I think that the.

All over the world for every size carrier in every line of business that we support.

Speaker Change #132: I feel really very good about that position.

Speaker Change #237: The position we're in in terms of vertical software is very very strong and generative AI will only help us.

Speaker Change #132: I think these insurance companies that we partner with are making decisions for the next 10 or 20 years and we are the right company for them to partner with and I think generative AI.

Speaker Change #237: Going forward. So that's that's my position and specifically on P&C.

Speaker Change #237: I can't speak to.

Speaker Change #132: Will serve a different purpose in the insurance vertical it will facilitate the creation of digital applications like we talked about on top of Guidewire core systems. It will facilitate generative AI features within policy Center and claim center that will make people more efficient it will facilitate.

Speaker Change #238: I could probably but it's not appropriate for me to speak to the vertical category in general, but I'm very confident about guidewire position relative to the P&C insurance industry.

Speaker Change #238: Thank you.

Speaker Change #239: Hey, Thanks for the question.

Speaker Change #239: Thank you. Our next question comes from the line of Mike Funk with Bank of America. Please proceed with your question.

Speaker Change #132: Submission processes for our commercial lines insurance, where today, maybe the very structured database driven approaches that we've had.

Speaker Change #239: Great. Thanks, Hi, This is Matt on for Mike just a quick one for me.

Speaker Change #132: And the tool set that we've had to date don't quite.

You called out the DWP, either growing because of the rising claim costs and inflation understanding that there isn't a one to one link between DWP growth and because of tiered pricing can you help us quantify the contribution to growth this year and remind us how we should be thinking about factoring in DWP growth overall in our models going forward.

Solve the problem, but generative AI now gives us this ability to solve those sort of more complex.

Speaker Change #132: Less data.

Speaker Change #132: Less.

Speaker Change #132: Database oriented problems can now be soft more effectively with computer systems powered by generative AI, So I think that the.

Speaker Change #240: Yes, sure I mean, so this is a pretty consistent part of our model and we see.

Speaker Change #132: The position we're in in terms of vertical software is very very strong and generative AI will only help us.

Speaker Change #240: DWP true up in CPI elements to renewals on an annual basis, certainly we've seen that accelerate over the last couple of years.

Speaker Change #132: Going forward. So that's that's my position and specifically on P&C.

Speaker Change #132: I can't speak to.

Speaker Change #240: Given how it works like some of the contracts are longer some of the customers have bought more DWP than they are currently running so it will take a take some time in order to for a true up to manifest itself.

Speaker Change #132: I could probably but it's not appropriate for me to speak to the vertical category in general, but I'm very confident about guidewire position relative to the P&C insurance industry.

Speaker Change #241: But it's probably contributed an incremental percentage or percentage of the half of growth this year.

Speaker Change #133: Thank you.

Speaker Change #134: Hey, Thanks for the question.

Speaker Change #241: And then last year as well was a little bit elevated versus what we've seen historically.

Speaker Change #135: Thank you. Our next question comes from the line of Mike Funk with Bank of America. Please proceed with your question.

Speaker Change #242: Really helpful. Thank you.

Great. Thanks, Hi, This is Matt on for Mike just a quick one for me.

Speaker Change #243: Thanks for the question.

Speaker Change #244: Thank you we have reached the end of the question and answer session I will now turn the call back over to Mike Rosenbaum for closing remarks.

Matt: You called out the DWP, either growing because of the rising claim costs and inflation understanding that there isn't a one to one link between DWP growth and because of tiered pricing can you help us quantify the contribution to growth this year and remind us how we should be thinking about factoring in DWP growth overall in our models going forward.

Mike Rosenbaum: I just wanted to thank everybody for joining we're incredibly excited about the results of Q3 and the momentum there.

Mike Rosenbaum: That we see in the business and look forward to seeing everybody and talking about what we hope will be a great Q4. So thanks very much for joining today and we'll see you later.

Speaker Change #137: Yes, sure I mean, so this is a pretty consistent part of our model and we see.

Speaker Change #245: And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Speaker Change #138: DWP true up in CPI elements to renewals on an annual basis, certainly we've seen that accelerate over the last couple of years.

Speaker Change #138: Given how it works like some of the contracts are longer some of the customers have bought more DWP than they are currently running so it will take a take some time in order to for a true up to manifest itself.

Speaker Change #138: But it's probably contributed an incremental percentage or percentage of the half of growth this year.

Speaker Change #138: And then last year as well was a little bit elevated versus what we've seen historically.

Speaker Change #139: Really helpful. Thank you.

Speaker Change #140: Thanks for the question.

Thank you we have reached the end of the question and answer session I will now turn the call back over to Mike Rosenbaum for closing remarks.

Michael George Rosenbaum: I just wanted to thank everybody for joining we're incredibly excited about the results of Q3 and the momentum.

Michael George Rosenbaum: That we see in the business and look forward to seeing everybody and talking about what we hope will be a great Q4. So thanks very much for joining today and we'll see you later.

Speaker Change #142: And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Speaker Change #142: Okay.

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Greetings and welcome to the Guidewire third quarter fiscal 2024 financial results Conference call. At this time all participants are in a 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 the telephone keypad. Please note. This conference is.

Speaker Change #142: Being recorded I will now turn the conference over to your host Alex Hughes you may begin.

Speaker Change #142: Thank you sure Molly I'm, Alex Hughes, Vice President of Investor Relations and with me today is Mike Rosenbaum, Chief Executive Officer, and Jeff Cooper, Chief Financial Officer.

Speaker Change #143: Fleet disclosure of our results can be found in our press release issued today as well as in our related form 8-K furnished to the SEC.

Speaker Change #143: Which are available on the Investor Relations section of our website.

Today's call is being recorded and a replay will be available following the conclusion of the call statements.

Speaker Change #143: Statements made on this call include forward looking ones regarding our financial results products customer demand operations, the impact of local national and geopolitical events on our business and other matters. These statements are subject to risks uncertainties and assumptions are based on management's current expectations as of today and should not be relied upon as representing our views as of any subsequent date.

Speaker Change #143: Please refer to the press release and the risk factors and documents, we file with the SEC, including our most recent annual report on Form 10-K, and our prior and forthcoming quarterly reports on Form 10-Q filed MTB filed with the SEC for information on risks uncertainties and assumptions that may cause actual results to differ materially from those set forth.

Speaker Change #143: And such statements.

Speaker Change #143: We also will refer to certain non-GAAP financial measures to provide additional information to investors all commentary on margins profitability and expenses are on a non-GAAP basis, unless stated otherwise our reconciliation of non-GAAP to GAAP measures is provided in our press release reconciliations and additional data are also posted in the supplement on our IR website and with that.

Mike: I'll now turn the call over to Mike. Thank you Alex Good afternoon, and thanks, everyone for joining today I'm incredibly excited to share the results of our third quarter and discuss the momentum we are seeing in our business Q3 was another very strong quarter and puts us in great shape heading into the final stretch of our fiscal year, we have all worked.

Mike: Very hard to establish Guidewire cloud platform and our insurance suite applications as the trusted worldwide standard for P&C insurers and I think our Q3 results and year to date results clearly show that work paying off in April we released Jasper our 10th release in under four years, which.

<unk> increased agility and commercial lines, while also expanding hazard hub data for Canada. This release, and our continued innovation across our platform and applications improve customer agility speed and business intelligence.

We are helping our cloud customers innovate faster and make better data driven decisions across the insurance lifecycle I'm now more confident than ever that the continual iterative improvements we have demonstrated to customers through our cloud platforms consistent release schedule are helping to align more of the industry around our platform and.

Mike: It's general confidence is resulting in our improved business momentum.

Mike: In the third quarter, we closed eight insurance suite cloud deals, bringing our total insurance suite cloud deals year to date to 24, which is a 33% increase year over year. We also saw sustained strength with tier one insurers, including four tier one deals in the quarter.

Mike: Our continued deal momentum speaks to the tremendous progress we have made establishing the reputation of Guidewire cloud platform, but also the much improved fiscal year linearity. Our sales teams are driving we had been working for the past few years to establish a more linear quarter to quarter approach to sales and I am very.

Mike: <unk> happy with the more balanced year to date outcome.

Mike: It was also a strong quarter for cloud migration activity with a total of five insurance suite cloud migrations, our customer base is our most valuable asset and a significant part of our cloud strategy has been anchored around the objective to successfully migrate every single one of our on Prem customers to our cloud platform.

Mike: Continuing to drive these cloud transitions ensures that we remain the industry leader it sets us up for further cloud expansion activity down the line and demonstrates the feasibility of Guidewire cloud to new insurers.

Mike: Deal activity in the quarter was particularly strong in our Asia Pacific region, where we had for cloud migration deals in Australia. We are building on our established cloud position in North America with higher engagement and momentum internationally and it's great to see this pay off in the quarter last month, we conducted three.

Mike: <unk> highly successful Guidewire insurance forums with one in London, and one in Sydney and one in Tokyo. These events serve as important customer touch points and an opportunity for the broader guidewire ecosystem to come together and share ideas and feedback they are a powerful vehicle we used to influence our existing pipeline generate new opera.

Mike: <unk> and help ensure that existing customers are up to speed on all the product innovation. We have planned each event brings together insurance professionals from leading customers and partners to discuss the future of the P&C industry and Sydney over 135 insurance professionals heard Simone <unk> CEO.

Mike: <unk> <unk> <unk>.

New Zealand discuss our goals for rapid growth on the cloud, how new Guidewire products and features including Apd data platform and <unk> are helping them launch new products quickly and increased customer convenience and Tokyo nearly 150 people heard Nakagawa, San President and CEO of <unk>.

Saw automobile and fire insurance part of <unk> group.

Speaker Change #144: Which was the first insurance company in Japan to deploy Guidewire cloud discussed their strategic journey progress to date and experienced with Guidewire cloud and.

Speaker Change #144: In addition, Eric Marco VP of it had been over shared how Guidewire helped the company accomplish an increase in sales and a decrease in time required to train new team members from <unk> from three to six months to less than a month since upgrading to Guidewire cloud <unk> has completed three updates which is in stark contrast to the <unk>.

Speaker Change #144: Year to 18 months upgrade duration that they were used to went on prem.

Speaker Change #145: Last month, we emphasized our commitment and aspirations for the Asia Pacific region with the hire of <unk> <unk> as our Asia Pacific Managing Director Sergey has lived in Sydney, Australia for over 30 years and he brings an extensive track record of driving strategic programs and ensure.

<unk> outcomes in the region.

Speaker Change #145: This leadership addition will further strengthen the connection between guide wires global capabilities and the local needs of our customers.

Speaker Change #145: We made a similar leadership addition to the EMEA region two years ago. When we named will Mcallister as managing director and have been very pleased with the progress we are making and he is leading in Europe.

Speaker Change #145: In April we were in London for Guidewire Europe Insurance Forum. It was also an incredible event with over 250 attending across 70 insurers and 44 customers, leading insurers such as axon Beasley attended and spoke to the importance of agility and the objectives that they have ahead with guidewire.

Speaker Change #145: Im, especially pleased with the progress are making.

Speaker Change #145: The London market, where we are bridging our global capabilities with its specialized content needs.

We are seeing a high level of market engagement worldwide and combined with the increasing maturity of our platform. We continue to grow our pipeline both in size and quality of engagement this momentum and general confidence help position us very well for this fiscal year and more importantly, our longer term outlook.

Speaker Change #145: Turning to our ecosystem. Another key element of our strategy is to expand the partner community surrounding guidewire, which helps to accelerate customer adoption deployments and time to market.

Speaker Change #145: We're seeing the Si community increasingly engaged in Guidewire projects. There are over 38 sides working with us today and in the third quarter. The number of cloud certified partner professionals from these firms increased 27% year over year to 8900. Similarly, our solution partner community continues to expand.

Speaker Change #145: <unk> marketplace now has over 210 solution partners as our marketplace expands with each release and as adoption of these applications increases, we reduce customer costs and accelerate their time to value on our platform.

Speaker Change #145: But maybe the most notable unimpressive example of our growing global momentum and ecosystem came in May when we held our inaugural developer summit in Bangalore, India. Nearly 500 people attended this event with participation from our leading partners such as <unk> and Pwc.

Speaker Change #145: It's a great opportunity to introduce Mohammad on the new leader of our India operations to the community Aussie joins us from SAP, where he led the largest R&D center outside of Germany. We're excited for him to join US and help drive our strategy execution and growth in India. We also ran a hackathon, which attracted over 120.

Speaker Change #145: Five entries and made me extremely proud of the progress that we've made in our cloud platform. This event marked a commitment to India as a source of innovation through Guidewire employees, but also connects us more closely to a community of technology professionals, who have dedicated their careers to improving the insurance industry by leveraging Guidewire <unk>.

Speaker Change #145: <unk>.

Finally, let me turn to the continued progress we are making driving platform scale and efficiency. As you know we've been focused on expanding platform efficiency and gross margin and it's great to see the teams progress reflected in third quarter subscription and support gross margins, increasing 10 percentage points year over year.

Speaker Change #145: Are.

Speaker Change #145: This puts US now ahead of plan and we are confident that we will continue to drive improvements here as we continue to execute new approaches to cloud operations and drive more automation and self service tooling across our platform.

Speaker Change #145: This quarter is another validation of the investments we have made and further proof that these investments have produced and we will continue to produce long term profitable growth our software as mission critical and a core system of record for our customers, we price our software as a percentage of an insurers direct written premium.

And are therefore tied directly to the value our customers create underwriting and ensuring against risk and the associated premiums. They charge. This structure creates a durability to our software business at a time when companies across industries are working to gain efficiency and in many cases reduced workforces this stability.

Speaker Change #146: <unk> combined with our success in instantiating, our market, leading cloud platform gives me confidence in our model and our ability to invest in further innovation to create new growth opportunities in the future with that I'll now turn the call over to Jeff.

Jeff: Thanks, Mike Q.

Jeff: Q3 surpassed our expectations across the board.

<unk> finished at $828 million and benefited from durable cloud demand.

Jeff: As we have discussed in recent quarters, we continue to see improved bookings linearity and strength in the first three quarter sets us up well for the year.

Jeff: Total revenue was $241 million, we saw better than expected results in all areas of revenue subscription.

Jeff: Revenue grew 35% and subscription and support revenue grew 28% as we benefited from deal momentum.

Jeff: License revenue grew 11% as a result of continued DWP true up activity and expansion upon renewal of term licenses and term license arrangements.

Jeff: We price our software on basis points of our customers direct written premiums and we have seen customers DWP grow as insurers increase rates to accommodate rising claims costs due to inflation and the risk environment.

Jeff: Services revenue was better than expectations and was up off of a low point last quarter as utilization rates improve we.

Jeff: We are thrilled that our partners are investing to help us modernize this industry and we expect them to continue to lead the majority of the cloud programs.

Jeff: We're working hard with our partners to find the right equilibrium to ensure we are supporting their growth. While also ensuring that cloud standards are adopted and that our professional services portfolio mix and volume are healthy.

Jeff: Turning to profitability for the third quarter, which we will discuss on a non-GAAP basis gross profit was $151 million.

Jeff: Overall gross margin was 63% compared with 52% a year ago.

Jeff: Subscription and support gross margin was 65%, which compares favorably to 55% a year ago.

Jeff: This continues to track ahead of our expectations due to increased cloud infrastructure efficiency.

Jeff: Services gross profit was $5 million and services gross margin was 10%.

Jeff: We expect the cost basis to be relatively stable in the services organization and our ability to drive profit margin will be dependent on growing the top line.

Jeff: Overall operating profit was $21 million in the third quarter.

Jeff: This was better than expected due to revenue outperformance and lower operating expenses.

Jeff: We continue to be thrilled with the operating profit and operating margin momentum.

Jeff: Stock based compensation was $37 million up 5% from Q3 of last year.

Jeff: We ended the quarter with $934 million in cash cash equivalents and investments.

Jeff: Operating cash flow was $5 million for the quarter.

Jeff: Turning to our outlook for the full fiscal year 2024, we are adjusting our outlook to 856 to 864 million strong.

Jeff: Strong activity in Q3 at a healthy pipeline reinforces our confidence in our full year targets and allows us to raise our outlook.

Jeff: We expect deal momentum in Q4 to manifest itself more than fully wrapped IRR as customers and prospects are comfortable making significant long term commitments to guidewire cloud.

Jeff: I expect fully ramped <unk> to grow at or above 16% for the fiscal year 2024, which is a great result, when you consider it is on top of 17% fully ramped IRR growth, we delivered in fiscal 'twenty three.

We are building a strong foundation for delivering on our longer term growth targets, we will provide.

Jeff: More detail on fully ramped <unk> at year end as this is a metric we disclose on an annual basis.

Jeff: As a reminder, our outlook assumes foreign currency exchange rates as of the end of our last fiscal year.

And we update <unk> exchange rates at year end, if we updated <unk> today based on current exchange rates.

Jeff: Then we would see a $7 million negative adjustment, we will certainly discuss this and quantify this at year end.

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

Jeff: We are adjusting subscription revenue to approximately 474 million and subscription and support revenue to approximately $546 million, representing a positive adjustment of $5 million in both instances.

We expect license revenue of approximately $247 million and services revenue of approximately $179 million as a result, our outlook for total revenue is $968 million to $976 million, a $10 million positive adjustment at the midpoint.

Jeff: Turning to margins and profitability, which we will discuss on a non-GAAP basis subscription and support gross margins continued to exceed expectations and we now expect between 65 and 66% for the year.

We still expect services gross margins to be between 5% and 8%.

Jeff: As a result, we now expect overall gross margins of approximately 63% for the full year.

With respect to operating income, we expect between 94 and $102 million in operating profit for the fiscal year.

Jeff: This represents an $11 million positive adjustment at the midpoint.

Jeff: We still expect stock based compensation to be approximately $147 million, representing 3% growth year over year. We are also increasing our cash flow from operation expectations to between 130 at $150 million for the fiscal year.

Jeff: We are proud of our progress as we look ahead to fiscal 'twenty five targets. We discussed at analyst day, we remain confident in our ability to achieve our $1 billion goal.

We're clearly tracking a bit ahead of our gross margin targets and this is creating an opportunity to accelerate some product investment while still achieving our operating margin targets.

Speaker Change #147: With that operator, you can open the call for questions.

Speaker Change #148: Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change #149: Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Speaker Change #150: Our first question comes from the line of Kevin Kumar with Goldman Sachs. Goldman Sachs. Please proceed with your question.

Kevin Kumar: Alright, Thanks for taking my question I wanted to add.

Kevin Kumar: Ask a question around the demand environment.

Speaker Change #152: We're obviously seeing some really strong deal activity.

Speaker Change #153: And that perhaps in contrast.

Speaker Change #152: <unk>.

Speaker Change #152: Other software vendors.

Speaker Change #154: Where customers are perhaps delaying large purchases. So Mike can you just talk a bit about what youre seeing in the P&C market and in general how carriers today are thinking about prioritizing these large kind of core system modernization.

Speaker Change #154: Sure.

Kevin Kumar: Kevin Thanks for the question very much appreciated so.

Mike: I would say, we continue to see demand and pipeline steadily build.

Kevin Kumar: Good.

Kevin Kumar: I would describe that.

Kevin Kumar: Sort of as two one or two things related to that number one is growing confidence around our ability to be successful with the platform in terms of meeting their business objectives.

Kevin Kumar: That certainly helps.

Kevin Kumar: We've talked about that for years about how the more success we have.

Kevin Kumar: The longer the track record we have around the successful implementations is going to build confidence.

With these customers both on the migration side, but also the net new side.

Kevin Kumar: But I also think that there is there is somewhat of a disconnect between the decision making process. These insurance companies go through and thinking about these implementations in these modernizations as it relates to the sort of general broader enterprise software market.

These are decade, if not multi decade decisions that these companies are making these partnerships that they're establishing with us and so I think that there is a bit of a disconnect between what we see with other software purchases in the decision making process, we really see these companies recognizing that.

Kevin Kumar: Agility very much matters that a modern core platform, that's going to enable them to make better analytical data driven decisions as something thats going to help them be successful and profitable and grow out like I said for over a decade, and so that decision, making process can be done sort of outside the quarter to.

Kevin Kumar: Quarter stresses that maybe other other folks in other industries and other sectors are seeing and so you add those two things up and we just see momentum and confidence continue to build for us.

Kevin Kumar: And it led to a great Q3, and it gives us confidence in Q4 and the rest of the fiscal year.

Speaker Change #155: Thanks, that's helpful and then maybe one for Chad on on margins.

Speaker Change #156: I think gross margins for subscription and support have been relatively stable the last couple of quarters.

Speaker Change #157: So maybe how can we think about the next inflection point that pushes cloud margins closer to the to that.

Speaker Change #158: Just kind of steadily.

Speaker Change #159: Figure that we had.

Speaker Change #160: Makena was talked about in the past.

Yes, I mean, we've made tremendous progress this year in finding an inflection point in delivering higher margins, we're thrilled with that progress.

Speaker Change #160: The two drivers of how we drive long term margin as we think the demand environment is strong and we can see sustained subscription growth.

Speaker Change #160: That's a big part of how we've invested in the opportunity in the cloud operations function that supports our cloud delivery.

Speaker Change #160: And I think the platform as it gains scale, we continue to recognize some benefits of increasing that scale over time.

Speaker Change #160: And third the engineering team has done a tremendous job thinking through all the architecture decisions to drive more efficiency into the platform.

Speaker Change #160: And Theyre not done I mean, I think there's more efficiency that we can continue to work on and drive into the platform, we probably won't see the types of gains that we saw this fiscal year, which was tremendous but kind of continue to see.

Speaker Change #160: More linear margin progression as we go towards those long term targets.

Speaker Change #161: Great. Thank you both.

Speaker Change #162: Okay. Thanks, a lot.

Speaker Change #163: Thank you. Our next question comes from the line of Dylan Becker with William Blair. Please proceed with your question.

Dylan Tyler Becker: Hey, gentlemen, really nice job here, maybe Mike for you we've seen some interesting data from carriers that are more innovative gaining share improving decisioning in the like in.

Dylan Tyler Becker: In auto I Wonder how that conversation you are having with customers shifting to business enablement versus outright alignment fueling some of that momentum and maybe how customers are thinking about those similar dynamics.

Dylan Tyler Becker: Share gains carrying over traditional P&C lines over time.

Yeah appreciate the question.

Speaker Change #164: It's hard to sort of describe sometimes the complexity of the use case that we support with Guidewire. When you think about all the regions and all lines of business and all of the tiers that we support.

Speaker Change #164: I think that one common theme that is very consistently.

Speaker Change #164: Coming up in terms of the carriers' ability to compete effectively is the agility around what you might call product operations being able to set price suggest rates being able to adapt to the.

Speaker Change #164: Changing.

Speaker Change #164: Risk.

Speaker Change #164: Circumstances, let's say that carriers are seeing.

Speaker Change #164: Certainly there was a shock to the system as it relates to inflation and specifically the auto line of business and expense.

Speaker Change #164: Claims kind of jumping up and its the carriers that were able to adjust to this most quickly that we're able to continue to operate successfully continue to adjust prices.

Speaker Change #164: It was appropriate to compete effectively in the markets, where there are competing.

And it just seems like guidewire that facilitate that and so this is a big part.

Speaker Change #164: Of what we're effectively selling when we do these transformations as that the carrier the insurance carrier ends up with a platform that they can use to compete most effectively.

And as you say in auto, but I would extend that to commercial lines insurance, we're seeing a lot of interest from <unk>.

Speaker Change #164: International carriers around being more agile around commercial lines, having a system like guidewire to support their aspirations around.

Just into the markets quickly and being able to just be more agile and be more competitive in market. It's a big part of the value proposition that we're selling with these transformations.

Speaker Change #165: That's great.

Speaker Change #166: So that's a good segue into the second question for you, Mike I think Jasper.

Speaker Change #167: The most recent release called out commercial agility within that as well.

Speaker Change #168: And you've had some success on the commercial content side, I think you called out London, there as well, but if you could elaborate maybe on your efforts here on the commercial side of the market in the right way of thinking.

Speaker Change #168: That opportunity.

Speaker Change #169: Yes happy to so I think that there was a.

Speaker Change #169: Phase of modernization in the industry that was focused on high volume highly repetitive where efficiency is these personal lines, where efficiency is the order of the day.

Speaker Change #169: That was there was there was a component of this around digital interactions and customer convenience driving.

Speaker Change #169: The business requirements for the core systems.

Speaker Change #169: And this is one of the interesting things about the insurance industry is that the core system is almost directly exposed to consumers in terms of getting quotes for commercial lines and so there was this phase of modernization in the industry driven by those shifts, but where we.

Speaker Change #169: What we're seeing now is this is we're transitioning into a phase in the in the broader industry, where this modernization effort is now more focused on commercial lines and commercial lines, maybe were sort of left to the side a little bit as the focus was more on the personal line side the commercial lines business.

Speaker Change #169: Somewhat is getting more attention and so modern systems like Guidewire, where we can deliver a degree of product agility, enabling customers to create new products as fast as they can.

Speaker Change #169: Think of them or adjust products that they have based on what their what feedback they are seeing.

Speaker Change #169: The market and what's going to win the day. This is this really really matters Westfield specialty is a great customer of ours that we've talked to that we've talked about previously where theyre really taking advantage of an opportunity. They see in the commercial line specialty line space and using guidewire to create products very very quickly and being able to be in.

Speaker Change #169: Market and and effectively take share and establish themselves very very effectively in partnership with Guidewire. So yeah. I think it's one of the interesting things about the company right. Now is that we're able to take this common cloud platform. This common policy center architecture and apply it to.

Speaker Change #169: Our collection of these use cases across lines of business that puts us in a very positive place right now.

Speaker Change #170: That's great. Thanks, Mike Congrats yet.

Speaker Change #171: Yes. Thank you.

Speaker Change #172: Thank you. Our next question comes from the line of Ken Wong with Oppenheimer. Please proceed with your question.

Ken Wong: Great. Thanks for taking my question I wanted to circle up on the fully ramped <unk> comments. It seems like you guys are set up really well to wrap up the year.

Speaker Change #173: Any color on kind of what.

Ken Wong: Cause in that step up off of a tough comp is it just your customers have higher confidence in the business as it kind of cloud migrations the premium step ups. The true ups like what are what are some of the factors we should be thinking about that's driving that.

Speaker Change #174: Well I would I would somewhat answered the question as to like a little bit of all of the above right generally we're seeing.

Speaker Change #174: Healthy.

Demand healthy pipeline, we're confident in our coverage ratios and then when we look at the detail of the makeup of the deals and the opportunities.

Speaker Change #174: To this these these deals just generally being very long term in nature.

Speaker Change #174: The ramp activity associated with the demand that we see for Q4 just shows us that.

Speaker Change #174: A lot of the value that we're going to that we do expect to close in the quarter will flow into the fully ramped number.

So as you are hopefully aware some percentage of the booking activity flows into <unk> and shows up in the <unk> number but a lot of this is ramped over time and shows up in a in a long term agreement with that customer and so this is just an inspection of the deals in a signal in terms of the quality.

Speaker Change #174: <unk> of the engagements that we have and the strength that we see in the company long term.

Speaker Change #175: Okay perfect. Thanks, Mike and then Jeff maybe maybe building off of that as we think about the guide obviously very strong Q3.

Speaker Change #176: Maybe a little lighter in Q4.

Speaker Change #177: Should we kind of marry the Q4, the full year 'twenty four guide with that fully ramped commentary which is.

Speaker Change #178: Still strength coming off of Q3, but the actual realization is coming down the line.

Speaker Change #178: Yes.

Jeff: Thats the right way to think about it and so we look at the pipeline for the year. We're obviously thrilled with where we are as we tend to think about the business on annual terms much more than that than quarter to quarter.

Jeff: We did raise the IRR guy by $3 million at the midpoint that followed a $5 billion raise that we did last quarter. So that's pretty healthy progression for us and as we look ahead.

Jeff: At the Q4, we're very excited about the demand profile that exists and that excitement is leaning a little bit more towards those fully ramped outcomes.

Jeff: As customers are clearly feeling confident the maturity of the platform and.

Jeff: And there's a willingness to make long term commitments.

Speaker Change #179: Okay perfect. Thanks, a lot guys.

Speaker Change #179: Okay.

Speaker Change #180: Thank you.

Our next question comes from the line of Peter Heckmann with D. A Davidson. Please proceed with your question.

Peter James Heckmann: Hey, good afternoon can you just remind us about the frequency with which that the pricing is adjusted relative to DWP.

Speaker Change #181: As regards to that.

Speaker Change #182: How do you think about the effect of some.

Speaker Change #183: Personal lines insurance company or even commercial like exiting certain markets just given.

Speaker Change #183: The need to.

Speaker Change #183: Really raise premiums in the face of higher.

Speaker Change #183: Catastrophe risks.

Speaker Change #183: I guess, how does that how does that has that tradeoff work.

Speaker Change #184: I'll, let Jeff touch on the approach to pricing and resetting price.

Speaker Change #184: With respect to DWP, and then I'll give you context on.

Speaker Change #185: Carriers exiting markets Yeah sure yeah. So so our foundation only our contracts are built around our direct written premium baseline that's embedded into our customer contracts.

Jeff: We have the ability to inspect the direct written premium on an annual basis.

Typically at renewal there are instances, where our longer term initial contract that it may take a couple of years before we see that sort of inspection into what the direct written premium is and it's not uncommon for customers to purchase a slight slightly higher direct written premium then they're they're running today.

Jeff: <unk> to give them a little bit of room to grow with grow but typically we have the ability to.

Jeff: To look at that on an annual basis.

Speaker Change #186: Yes, and I'll give you I'll give you a perspective on.

Speaker Change #186: Carriers and the headlines in the news about carriers exiting markets and exiting specific lines of business within specific markets.

Speaker Change #186: We have quite a lot of conversations with carriers, who are excited to enter those markets as well and so I think about this is the.

Speaker Change #186: The broad based necessity.

Speaker Change #186: Think of.

Speaker Change #186: It's more than just demand, but the broad based necessity for P&C insurance does not really change.

Speaker Change #186: The approach carriers different carriers take to servicing that demand.

And any particular reason can change and does change and so our ability to provide a platform to carriers who are interested in entering those markets.

Speaker Change #186: It can serve as a growth driver for Guidewire.

Speaker Change #186: So that kind of counterbalances the concern, let's say for one of our customer actually shrinking because they are deciding to leave a market.

Speaker Change #186: So thats, how I see it as like we've had some very interesting conversations about.

Speaker Change #186: About this dynamic and how the agility, we can provide with our platform facilitates entry effective entry into these markets with creative approaches to serving servicing what really is a necessity.

Speaker Change #186: Especially if you think about California, and the homeowners market.

Speaker Change #186: The need for everybody here in California to have effective P&C coverage. So it is something we track very closely but that dynamic is something that kind of balances out for us. If you if you really zoom out okay.

Speaker Change #187: Okay. That's helpful. And then just can you remind me of the number of net new logos last year.

If my tracking right it looks like about nine net new logos, so far this year, but.

Speaker Change #188: Number one is nine right and what was the number for last year. It looks like I missed the fourth quarter.

Speaker Change #189: I am.

Speaker Change #190: Hesitant to throw out a number that we can look up and give you. If we think of it in time, because I don't want to get it wrong on the call I would say that we're very comfortable with the growth in.

Speaker Change #190: The mix of business that I would say that we are achieving as our sales objectives as we sort of proceed through the fiscal year.

Speaker Change #190: It's tough sometimes to classify something as a new logo specifically is like the relationships that we have with a lot of our customers are complex multinational kind of agreements, sometimes where different countries might be or might not be considered a new logo I would just say we're we're very.

<unk> with the iterative year over year growth that we're seeing.

Speaker Change #190: In this regard.

Speaker Change #190: We often talk about new modernization activity. So workloads that are currently running on legacy systems that are new to being modernized and cloud migrations and then and then expansions.

Mike: There is a lot of new modernization activity that we do at existing customers and to Mike's point, how you count a logo in this in this industry can can get quite complex with the hierarchy of our customers.

Okay that makes sense I appreciate it.

Speaker Change #191: Thank you.

Speaker Change #192: Our next question comes from the line of Rishi <unk>.

Julia: Julia with RBC. Please proceed with your question.

Wonderful. Thanks, so much for taking my question I wanted to start with the comment you made about managing to less linearity can you maybe walk us through kind of the steps that you took to get there outside of just the shift to a more ratable model and as we think about our own models beyond this year.

This year's numbers inclusive of your Q4 guide right blocks to be used for future years, or how should we think about seasonality and I've got a quick follow up.

Speaker Change #194: Yes, so a lot of this has to do with just more rigorously approaching are.

Speaker Change #195: Our sales processes, what are we doing every single week every single month around creation of pipeline Mitch maturation of deals setting targets every month tracking to those target setting tough objectives for us internally about Q1 around Q1 and Q2 so.

Speaker Change #195: We can get ahead of the curve and just generally thinking about running the business in a very continuous way as opposed to one year.

Speaker Change #195: And then reset and have another year, we're really trying to be almost monthly in the cadence around which we're running the company and by pulling forward those internal objectives for sales and for pipeline generation maturation and bookings activity that creates the linearity of that were.

Speaker Change #195: Seeing in and enables it just enables us to run the business far more effectively and it's taken a while to.

Speaker Change #195: Kind of steer the ship and adjust everybody's approach and train the market for what we really want to what the outcomes, we want to achieve but it's just great to see us at this point through Q3.

Speaker Change #195: With this sort of bookings success.

Speaker Change #195: It just it makes Q4 a lot more manageable for us.

Speaker Change #196: Yes, the only thing I would add is obviously as the platform is mature the breadth and depth of the pipeline is just in a different place than it was two or three years ago that allows us to kind of inspect that in a much more material way and not we recognize that we can't have the linear we had previously we need to.

Speaker Change #196: To get in front of it but certainly the breadth and depth of the pipeline has allowed us to kind of drive some of those behaviors.

Speaker Change #196: Okay.

Speaker Change #197: What was the second part of your question.

Speaker Change #197: I expect we'll continue to drive this sort of approach to linear bookings progression next year and so.

Speaker Change #197: That seasonality.

Speaker Change #198: We will continue to smooth out, yes, I think thats right I mean as I look at how I think about modeling bookings for a number of years, we would had a track record of falling a little bit behind in the first half and catching up in the back half.

Speaker Change #198: This year we.

Speaker Change #198: We've changed that dynamic a little bit, which is which is great to see and that is certainly our expectation as we look forward.

Speaker Change #199: Okay wonderful that's really helpful. And then I just wanted to ask a question about <unk> since you announced that at connections last year.

Speaker Change #200: Picking up a lot of interest can you maybe walk us through what is adoption and use cases look like so far with gesture out and as we think about it.

Developer.

Speaker Change #200: Kit is there an opportunity for you to leverage generative AI just given that that journey has been really helpful. From a coding perspective, maybe even speed up time to value even faster than what we've seen before.

Speaker Change #201: Yeah for sure Great question. So just for everybody's benefit you chose our technology platform for supporting our customers' ability to create digital experiences directly on top of our core systems typically Thats claim center policy center and so the type of experiences that we will have customers.

Speaker Change #201: Trade is first notice of loss for claims flow or a quoting experience or some sort of like account management update experiences and these are things carriers could push directly to customers or more agents in order to create a better more convenient and more efficient.

Speaker Change #201: Business process in general operation, just kind of good for the consumer good for the agent also good for the carrier and we do try we can make this.

The delivery of this just so much more efficient and creating a separate standalone digital application that has to be synchronized and integrated into the core system. We can build these experiences directly on our core system and we can make it just far more efficient far faster and cheaper for for our customers.

Speaker Change #201: <unk>, our cloud customers to be able to achieve.

Speaker Change #201: Adoption has been very good we have the products now gea and so we're working with a number of projects across the cloud customer base to get these programs built on <unk> out into the wild out into the.

Speaker Change #201: Out into the real world in terms of GAA projects, just actually in Australia, we were talking with one of our top customers holler at about their experience being they were actually the first customer to work through this with us and get one of these do trop driven experiences.

Speaker Change #201: Launched for our claims flow that theyre supporting with US and that program went very very well there were a great partner with us in sort of working through.

Speaker Change #201: The project with us over time and getting that to a generally available state, but we're very very happy with the progress to date the adoption in the customer base. We're also excited about where this is going we see a big opportunity to create more package contents around to try to just further.

Speaker Change #201: Accelerate the creation of these experiences have think of these as these like little micro digital applications that carriers can use to get more efficient you question about generated generative AI is great.

Speaker Change #201: We certainly see.

Speaker Change #201: Think that this will just like any software development program. This will be enhanced and improved with generative AI and the various co pilots. This has offered.

Speaker Change #201: That are available today.

Speaker Change #201: This technology is based on react which is the standard.

Speaker Change #201: Web programming language switch digital teams all over the world are very familiar with and so they can interact with this future application and think of this as just a head start in terms of connecting those react based applications to guidewire.

Speaker Change #202: Yes, we think react.

Speaker Change #202: Generative AI and these kind of.

Speaker Change #202: Mechanisms for enhancing and improving coding efficiency can certainly help going forward. So anyway. Thanks for the question.

Speaker Change #203: Thank you.

Speaker Change #204: Thank you. Our next question comes from the line of Matt Van Vliet.

Speaker Change #205: Sorry with BTG. Please proceed with your question.

Hey, good afternoon. Thanks for taking the question maybe wanted to dig in a little bit on maybe what some of the specific drivers were that got some of the APAC deals in particular over the line.

Speaker Change #206: And sort of improving performance that you called out there on the cloud side of the business.

Speaker Change #206: How much of that is sort of product maturation and other things you're doing versus <unk>.

Speaker Change #206: John and his team continuing to sort of knock on doors and get deals done.

Speaker Change #207: You can do provide us with a little more details on what's working there that that maybe it wasn't just as a few quarters ago.

Speaker Change #208: Yes, so a lot of.

Locke came together in the quarter and Australia and this was the result of John in the sales organization.

In Australia in Asia Pacific, but also supported generally worldwide.

Speaker Change #208: A lot came together based on a lot of years worth of hard work.

Speaker Change #208: Had sort of planted the seeds.

Speaker Change #208: Australia over the past few years with a number of smaller deals and a number of early cloud success stories.

Speaker Change #208: But there was a number of big Australian insurance companies that we've had long relationships with that we've just been working very very hard to build their trust and aligned to their program objectives about what makes sense from an on their modernization roadmap and their business objectives.

Speaker Change #208: These things all came together in the quarter and resulted in just really really strong demand.

Speaker Change #208: I think just kind of touching back to or kind of relating back to what I was talking about a few minutes ago. There is a direct connection between.

The success stories that we've been able to achieve in North America. The track record that we've been able to establish the fact that we have now over 60 live cloud customers.

And this thing is more and more proven that creates the confidence there that we can that we can make sure that these programs will be successful and so these things all added up to.

Speaker Change #208: A really phenomenal quarter in Australia.

Speaker Change #208: But we're all we're very excited about it I mentioned on the prepared remarks.

Speaker Change #208: Joining this he's an incredible leader there we're excited to bring into the Guidewire family and continue to drive our momentum in Asia Pacific I think we've got a lot more room to grow there and build on the success.

Speaker Change #209: Alright helpful.

Speaker Change #210: Then just two quick follow ups, Jeff one it looks like a pretty big perpetual deal came through in the quarter or any additional details you can sort of help.

Jeff: Help us with there and then from a more strategic standpoint on the gross margin Reinvestments you talked about anything specifically that you are targeting there or is it just sort of an acceleration of things on the roadmap already.

Speaker Change #211: So on the perpetual deal.

Jeff: It wasn't any sort of new perpetual deal that was just expansion orders is it an existing customer. So it was a little bit of a blip.

Speaker Change #212: But nothing I would highlight is a trend or anything along the lines and then what was the second question.

Speaker Change #213: You mentioned the upside to gross margins that maybe are going to accelerate some investments in the platform. Just curious that was pulling things forward or.

Speaker Change #213: Look we're clearly tracking ahead of our gross margin targets for this year.

Speaker Change #213: We're already tracking ahead of the targets that we established for next year or so.

Speaker Change #213: That creates that's been very exciting for us to watch to see that expansion occur. We think that there is a lot of opportunity out there for us to invest in and so.

Speaker Change #213: As we look at early looks into FY 'twenty five clearly tracking a bit ahead on gross margin, but we see the healthy investment areas to take advantage of this momentum that we have.

Speaker Change #213: And so I still think our overall operating margin targets are the right targets to think about.

Speaker Change #214: Okay. Thank you.

Speaker Change #215: Thank you.

Speaker Change #215: Okay.

Thank you. Our next question comes from the line of Alex.

Alex Hughes: Thus far with Raymond James. Please proceed with your question.

Alex Hughes: Great. Thank you Mike a lot of comments today around the maturity of your cloud solution kind of helping drive faster demand can you just talk about your cloud customers staying closer to the latest release and where that stands today versus a year or two ago and is there any kind of way to characterize how that piece of it is factoring in broader demand and cloud adoption.

Alex Hughes: Thanks.

Sure. Thanks for the question and I appreciate it because it's been a real focus for us this year.

Alex Hughes: There has been.

Alex Hughes: A series of phases that we went through in terms of establishing the cloud establishing the cloud infrastructure and our ability to scale and reliably and securely run.

Alex Hughes: Insurance suite applications like the the change that we made in the release cadence was a big part of the cloud value proposition and the promise that we have for the future.

Alex Hughes: At some point, we even shifted from a twice a year release cadence two or three times a year release cadence, but alongside that has been a whole bunch of just really incredible engineering and focus around making sure that these that the update process in the cloud was it just a completely different experience for <unk>.

Alex Hughes: Customers relative to what they were doing on Prem.

Alex Hughes: And this has really improved in the last Ah.

Alex Hughes: In the last year in terms of we measure very closely.

Alex Hughes: The release version that our customers are running in their non production and production environments relative to what the current state is we measure that and talk about that as like and minus one and minus two and minus three and we track. This weekly we track this with our board and we've run a number of programs.

Alex Hughes: Technically and also in terms of how we work with each of our cloud customers around ensuring we're building enough trust with them such that they feel comfortable that they can take these updates.

Alex Hughes: And as you quite as you can imagine for a customer that used to have 12 to 18 month update the first time. They do this on our cloud they are a little bit apprehensive and they're taking it very carefully and being prudent.

Alex Hughes: But once they do it once once they do it twice once you do it three times and they see that they can do these things in days.

Alex Hughes: Okay.

Alex Hughes: And really the impact to their teams and their operations is very very minimal we earn their trust and we enable them to stay current on the either in the current release or maybe you had minus one one released behind and so this has this is going really well as part of my.

Alex Hughes: I was talking about in the prepared remarks these events that we.

Alex Hughes: We ran all over the World. This is one of the slides we talk about with customers is one of the slides, we talked about with partnered with prospects.

Alex Hughes: As well because it's so important.

Alex Hughes: The whole value proposition of cloud.

Alex Hughes: This would all be for naught, if we werent able to keep customers current and being able to deliver the really ground breaking product agility functionality or workflow functionality or do trop digital functionality or generative AI functionality. It's all of the update process that makes that possible possible and so that's gone really really well.

Alex Hughes: And it's been a big it's been a big big.

Speaker Change #217: <unk> this year for the company. So thanks for the question.

Speaker Change #218: Alright, I appreciate all that color, Mike Jeff maybe just a quick follow up for you on Ricky's question around linearity.

Speaker Change #219: We obviously have the fourth quarter are our guide I think you also implied that Q4 might not reflect the strength of fully ramped bookings just given ramp schedule. So I just wanted to clarify is the smoother linearity comment kind of less reliance on Q4 is that a phenomenon you're seeing on the fully ramped side too or is there an added aspect in terms of the mix of ramped deals that are you looking at.

Speaker Change #220: Fourth quarter versus the rest of the year, Yes, I think but I think what I was trying to communicate there is as we look at the upside and as we look at Q4 and where we think.

Speaker Change #220: Some of the upside may exist, we're seeing some really interesting.

Speaker Change #220: Deal momentum and long longer term commitments that come across some reps so.

Speaker Change #220: On the <unk> side as we look at the overall.

Momentum there, we're thrilled with the deal activity, but a lot of that kind of more interesting upside is coming in those ramped outcomes. So that's an exciting fact pattern for us.

Alright, thanks for that Jeff.

Jeff: Thank you.

Our next question comes from the line of.

Speaker Change #221: Uh huh.

<unk> with Jpmorgan. Please proceed with your question.

Speaker Change #222: Hello, everyone.

Mike: Mike I was wondering if you could give us some insight into the customers are still on the whole.

Speaker Change #222: <unk>.

Speaker Change #223: Software versions.

Speaker Change #223: When do you think these customers would be ready to migrate to the cloud.

Speaker Change #224: I'm assuming that.

We haven't received any upgrades can see rates move.

Speaker Change #225: Uh huh.

Speaker Change #226: Thank you to introduce cloud products.

Speaker Change #227: Do you think 2026 2027.

Speaker Change #228: Full year when.

Speaker Change #228: Many of these customers will begin to consider cloud migration.

Yes, thanks very much for the question I would say that every single one of them is in the consideration process, we engaged with these customers closely.

Speaker Change #228: We.

Speaker Change #228: We work with them to make plans and understand their objectives and align their objectives to our ability to support them either with upgrades to cloud or as you say continued updates to the off premise mutations we continue to support the on Prem implementations with security fixes.

Speaker Change #228: We support customers when they need it.

Speaker Change #228: It's still a big component of our revenue.

Speaker Change #228: It's just from a from a sort of innovation product innovation perspective, there's just very minimal to no.

Speaker Change #228: New investments going into those releases and so the customers can still reliably and safely operate those systems on Prem and we support them, but the real benefit of the relationship with Guidewire has to do also with product innovation. We just can do so much more.

Speaker Change #228: More.

Speaker Change #228: In the cloud so much more efficiently and more effectively and we're trying to be very clear with all the on prem customers that that's where our focus is and so in terms of.

Speaker Change #228: In terms of projecting when exactly these migrations will occur.

Speaker Change #228: It's challenging.

Speaker Change #228: Because it's not just <unk>.

Speaker Change #228: <unk> wire in the Guidewire program that factors into our customers' decision, making process theres very often other objectives that they are dealing with inside of their environment other objectives, and so the upgrades to guidewire cloud as something that they have to sequence in with all of their other.

Speaker Change #228: Objectives.

Speaker Change #228: Like I said, we work with every single one of them and have a discussion with them frequently about where they are and where that plan is and what our commitments are in terms of timing around those around support but I would say as we proceed towards 'twenty FY <unk>, our fiscal 'twenty six fiscal <unk>.

Speaker Change #228: Seven fiscal 'twenty eight I think all of those.

Speaker Change #228: Prem implementations those plans to Guidewire cloud will have been firmed up but thats projecting out three years. It's a long time, there's a lot that can occur and happen in change in the world but.

Speaker Change #228: <unk>.

Speaker Change #228: We're working with them.

Speaker Change #228: And we do see that demand and like I said in the prepared remarks.

Speaker Change #228: This customer base is the most valuable asset of Guidewire and I think culturally.

Speaker Change #228: And just our companies kind of ethos is that we're committed to supporting those customers and getting 100% of them moved over to the cloud when it makes sense for them.

Speaker Change #229: Perfect. Thank you, Mike and Jeff a quick question for you.

Speaker Change #230: This strategy of passing on low margin service revenue to partners mean that.

Speaker Change #231: You would not need to add significant amount of.

Speaker Change #230: Additional.

Speaker Change #232: Talent and labor capacity in the mid term.

Speaker Change #232: Which would potentially help improve your margins going forward.

Speaker Change #233: Yes, I mean I think.

The way we look at it is that there is a massive amount of work to modernize this industry and if we were to try to tackle that with all Guidewire resources, we would have to staff up quite significantly and that's not that's not our strategy. We want to work with the best partners in the world to help us tackle that opportunity.

Speaker Change #233: We need to have a highly strategic.

Speaker Change #233: Skilled services organization and.

Speaker Change #233: And we think that we have the right size and scale in that organization today too.

Speaker Change #233: To allow us to partner with with with the global size to get this work done so kind of as we look ahead, we think we have the right cost basis.

Speaker Change #233: And I think as we go through this process of dividing up the labor to tackle this opportunity finding that right equilibrium point, where our resources and ours are highly skilled people are appropriately utilized and our partners have an exciting opportunity to execute against as well. So that's what that's what we're tackling.

Speaker Change #234: I appreciate the answers. Thank you. Thank you Mike.

Hey, Thank you.

Speaker Change #235: Thank you. Our next question comes from the line of Michael <unk> with Wells Fargo. Please proceed with your question.

David: Hey, David on ground for Michael <unk>. Thanks, Thanks for taking the question just one from us.

Speaker Change #236: Can you guys just talk through the trends youre seeing in terms of the sales cycle and any differences to note by either geography or tier. Thank you.

Yes, I don't know whether or not a call out any particular difference in change in the sales cycle. Our sales cycles are still very long.

We closed deals that are very often and opened in our system for multiple years and that Hasnt changed we feel like we've got a great connection.

Speaker Change #236: Connection to customers, a very deep connection often whereas like guidewire is running and some component of their of their enterprise and so we have a relationship and that enables us to have an opportunity for a sort of larger price kind of open and working for a long time.

Speaker Change #236: I wouldn't say, we've seen much of a change in that in that cycle. It's just generally we're able to pull the deals in and get them closed based on the confidence in the momentum that we've established in the market today.

Speaker Change #237: Thanks, Mike.

Mike: Thank you.

Our next question comes from the line of Tyler Radke with Citibank. Please proceed with your question.

Mike: Hey, this is Peter on a line for Tyler Radke, Congrats on the quarter, Mike and Jeff I. Just have one question here curious if AI is having any impact on recent deal activity and if customers are wanting to modernize their system sooner rather than later to invest in AI projects down the line as you start to introduce more of those applications onto your platform.

Mike: Thanks.

It is a great question and I think certainly.

AI.

Speaker Change #238: And I'm going to kind of answer the question I'll give you a long answer to this question.

If you say AI broadly.

Speaker Change #238: Data very much matters for machine learning and using AI and machine learning techniques to make better predictions to make to operate at an insurance company more efficiently and more effectively.

And <unk>.

Speaker Change #238: Getting better access to data is a big part of Guidewire modernization programs and decisions to deploy guidewire.

At an insurance company that is a big deal.

Speaker Change #238: If you broaden this to generative AI I think there are.

Speaker Change #238: There absolutely is a sense that.

Speaker Change #238: Getting to a system like Guidewire modernizing your core application suite around claims flows and policy flows. This is the right platform to applied generative AI features.

Speaker Change #238: To a modern system trying to do this on top of our mainframe legacy system I think is virtually impossible and so when cuts in the conversations I'm, having with customers. We see this future where a significant amount of the sort of tedious tasks that people operate is that people have to do and.

To effectively run an insurance company can be facilitated it improved with generative AI and guidewire as a platform for doing that is is a logical.

Speaker Change #238: Step right. So it is certainly helping us.

Speaker Change #238: In terms of thinking about like what's the steps towards being prepared for taking advantage of generative AI as its applied to insurance Guidewire.

Speaker Change #238: As a logical step.

Speaker Change #238: And then we are now starting to talk to customers about.

Speaker Change #238: General Zip AI products and functionality.

Functionality and features that we will.

Speaker Change #238: Embedded within claim center and policy center to facilitate better efficiency for the for.

Speaker Change #238: For the team members that are using Guidewire and so that's that's helpful and.

Speaker Change #238: That's a boost to their <unk>.

Speaker Change #238: <unk> about whether the benefits associated with the Guidewire decision. So it's generally very very helpful and aligned.

Speaker Change #238: But still like kind of has to relate to a general transformation progress.

Speaker Change #238: <unk> transformation program, that's going to drive a guidewire decision.

Speaker Change #239: Alright. Thanks.

Thank you. Our next question comes from the line of Erin aims and with citizens JMP. Please proceed.

Speaker Change #240: Thanks for the question.

Erin: Can you provide any color on the specific areas of accelerated product investment that Jeff mentioned.

Speaker Change #241: Repaired remarks.

Speaker Change #243: Sure we feel we see a lot of opportunity to continue to.

Speaker Change #244: One just enhance.

Policy Center claim center insurance now applications to make them more effective.

Speaker Change #244: Said it.

Speaker Change #244: During the one of the questions, how we're thinking about better digital applications and digital components that we can continue to invest and we talked about London markets.

Speaker Change #244: The content strategy that we have for applying guidewire in a lot of new markets. You think about further enhancements to different countries and different regions. There's localization requirements Theres just things that we can invest in the product to accelerate our growth.

Across the landscape of.

Speaker Change #244: The product landscape that we have today.

I think theres a lot of.

Speaker Change #244: There's a lot of excitement and interest right now in the industry around underwriting and using generative AI to facilitate better underwriting.

Speaker Change #244: Our processes and approaches and the like.

Speaker Change #244: Mike.

Speaker Change #244: Analytics, AI better approaches to using analytics and AI for for pricing and for rating and there is this.

There's a wealth of opportunity for us and now that we have.

Speaker Change #244: Really established ourselves in kind of created a modern cloud platform that we have this high degree of confidence its going to scale and work for us and work for our customers over the next decade, we can start to broaden our perspective about where else can we apply.

Speaker Change #245: <unk> investment to enhance better outcomes for insurance companies to make them more agile and make them more efficient and you see that just across the insurance lifecycle and so that's why he is talking about is that it's like this kind of period of time for our company, where we needed to be so focused on cloud infrastructure and making sure that that was.

Speaker Change #245: Going to work, we're getting passed that phase, where we can now think about just more strategically where can we apply product investment innovation investment and enhance our ability to grow and support the industry more effectively.

Speaker Change #246: Very helpful. Thank you.

Speaker Change #247: And then I think that when you are coming from.

Speaker Change #248: Sorry could you repeat and then maybe.

Speaker Change #249: Yes stepping back on one of your co founders.

Speaker Change #249: Some of our markets.

Speaker Change #250: We believe future offers vertical where theyre going.

Speaker Change #250: More and more specific.

Speaker Change #250: One barracuda bathroom vertical software.

Speaker Change #250: Salaried engineering productivity.

Speaker Change #250: To capture a lot of the value in many vertical software applications provide an attractive number.

Mike: Mike where on the spectrum between those two trains of thought.

Mike: We think buying on reinsurance.

Mike: Yes.

Speaker Change #251: I will tell you we win when Llm's specifically cogeneration.

Sorry launched on the World.

Speaker Change #251: A year or so ago, we spent a lot of time thinking about this.

Speaker Change #251: My conclusion about Guidewire and specifically the P&C industry is that the the.

Speaker Change #251: The necessity to have a core system of record.

Speaker Change #251: That that supports the rigorous highly regulated financial obligations of insurance companies.

Speaker Change #251: Is going to remain a very complicated enterprise software package, that's going to have a long long life I feel very very good about that I feel very strong about our position about our track record in the amount of investment that we have put into creating this platform that works off.

Speaker Change #251: All over the world for every size carrier in every line of business that we support.

Speaker Change #251: I feel really very good about that position.

Speaker Change #251: I think these insurance companies that we partner with are making decisions for the next 10 or 20 years and we are the right company for them to partner with and I think generative AI.

Speaker Change #251: Will serve a different purpose in the insurance vertical it will facilitate the creation of digital applications like we talked about on top of Guidewire core systems. It will facilitate generative AI features within policy Center and claim center that will make people more efficient it will facilitate different.

Speaker Change #251: Submission processes for our commercial lines insurance.

Speaker Change #251: Today, maybe the very structured database driven approaches that we've had.

Speaker Change #251: And the tool set that we've had to date don't quite solve.

Speaker Change #251: Solve the problem, but generative AI now gives us this ability to solve those sort of more complex.

Speaker Change #251: Less data.

Speaker Change #251: Yes.

Speaker Change #251: Database oriented problems can now be soft more effectively with computer systems powered by generative AI.

Speaker Change #251: So I think that the.

Speaker Change #251: The position we're in in terms of vertical software is very very strong and generative AI will only help us.

Speaker Change #251: Going forward. So that's that's my position and specifically on P&C.

Speaker Change #251: I can't speak to.

Speaker Change #251: I could probably but it's not appropriate for me to speak to the vertical category in general, but I am very confident about guidewire position relative to the P&C insurance industry.

Speaker Change #252: Thank you.

Speaker Change #253: Hey, Thanks for the question.

Speaker Change #254: Thank you. Our next question comes from the line of Mike Funk with Bank of America. Please proceed with your question.

Matt: Great. Thanks, Hi, This is Matt on for Mike just a quick one for me.

Matt: You called out the DWP, either growing because of rising claim costs and inflation understanding that there isn't a one to one link between DWP growth.

Speaker Change #255: Because of tiered pricing can you help us quantify the contribution to growth this year and remind us how we should be thinking about factoring in DWP growth overall in our models going forward.

Speaker Change #256: Yes, sure I mean, so this is a pretty consistent part of our model and we see.

Speaker Change #256: DWP true up in CPI elements to renewals on an annual basis, certainly we've seen that accelerate over the last couple of years.

Speaker Change #256: Given how it works like some of the contracts are longer some of the customers have bought more DWP than they are currently running so it will take it takes some time in order to for a true up to manifest itself.

Speaker Change #256: But it's probably contributed an incremental percentage or our percentage of the half of growth this year.

Speaker Change #256: And last year, as well was a little bit elevated versus what we've seen historically.

Speaker Change #257: Really helpful. Thank you.

Thanks for the question.

Speaker Change #258: Thank you we have reached the end of the question and answer session I'll now turn the call back over to Mike Rosenbaum for closing remarks.

Michael George Rosenbaum: I just wanted to thank everybody for joining we're incredibly excited about the results of Q3 and the momentum there.

Michael George Rosenbaum: We see in the business and look forward to seeing everybody and talking about what we hope will be a great Q4. So thanks very much for joining today and we'll see you later.

And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.