GWRE - Earnings call transcript Q1 2019 | Guidewire Software, Inc.

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Operator

Good day, and welcome to Guidewire First Quarter Fiscal 2019 Financial Results Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Curtis Smith, Chief Financial Officer. Please go ahead.

Curtis Smith

Thank you. to of earnings ended fiscal XX, welcome the call on and XXXX. quarter first year afternoon, Guidewire conference Software’s for October Good XXXX, which is Smith. name My Curtis Financial Chief I’m of the Officer Guidewire. the with call And on is Ryu, Executive Guidewire’s Marcus Officer. Chief me of the disclosure be can ir.guidewire.com. which the available SEC, issued both results press our related Investor found as on of at as of well our in our our Relations X-K release complete A in today, furnished website section to are

today’s call. As recorded, a reminder, being a call the and replay is following available conclusion will be of the

or During forward-looking Securities current These are based Safe Litigation as any the differ XX-K and risk We be we should our Form update performance trends, the Private of forward-looking and any as Harbor subsequent statements not expectations upon most Act SEC. anticipated call, business. with factors relied XX-Qs regarding XXXX will statements pursuant statements date. views of Actual the management’s our views Reform the any on today, to the obligation strategies make recent provisions and of the to and Please to of of refer outlook. as results disclaim in representing filed forward-looking materially. may

in press refer our We supplement release. reconciliation information on to Reconciliations of measures additional certain investors. a to will in to and also are A is our measures non-GAAP financial non-GAAP provide posted also provided additional IR to website. data GAAP

then With may fiscal prepared provide over for and Marcus metrics details or his not I and be and the of These dynamics offer may on our will the QX results outlook may the the to our updates ‘XX. During your in turn into take questions. remarks, call call, nature me providing before will I then in let our for details may to future. Marcus and provide provide insights incremental that, greater we one-time business. we

Marcus Ryu

suffered reviewing insurers our effect forest new the comparison revenue to standard and the that quarter that company's QX team’s we as the serve purpose the year-over-year and for of the Guidewire our In forward in revenue in events, for of Curtis. role the the income you, primarily Curtis crucial expectations from detail consolidation losses sympathy fiscal later per revenue of the quarter share. from contract of year. urgency. convey in who’ve want which as California results, will advance Thank greater revenue a even ASC revenue adoption terrible I as for this later, in gives exceeded and recovery adjusting those pulled with fires from first $XXX.X these work our Total our Property benefited million, XXXX, ever the in from was play so Casualty solidarity more But well discuss did a non-GAAP XXX $X.XX

in role growing change behavior, eager in partner the during participate in of technology landscape, Guidewire's in indemnify. time SI competitive in insurers change end-market rapid prospects, that we core Connections for attracted Annual demand and quarter, build customers, Platform, market and well products. our Guidewire Insurance the in saw During User data our the and expanding and a change, to underlying record attendance particularly applications ecosystem who’re change to risks as digital hosted insurers Conference, and as QX from We serving continue for the

Cloud which flexibility to a when our InsuranceSuite message we continental though component. are insurance response Guidewire to cloud-based also our we major optimized deal the in providing XX systems early Though Cloud we is the confident Version our core the InsuranceSuite analytics that market the transition we our InsuranceSuite Cloud complement year. digital strengthened in InsurancePlatform services release more conference in US in about the internationally, core drive engagement our further will positive on four that not of broader to both of are legacy a they we in deals experience close investments remain Cloud, InsuranceSuite for At the close well delivery and additional applications cloud demand complex as did and platform ready. the announced elaborated the the release the enhanced fiscal products Their eight entirety cloud that to and we our especially During suggests we both customers see for existing in engagements of central to to the Guidewire data Guidewire close. conference, an and this InsurancePlatform of quarter, InsuranceSuite for pipeline within replace opportunities, while conference, the The that Europe. new Cloud our as XXXX optimism

their to InsuranceNow Our us their Mutual Farm Bureau to system, Company, influence lead time. Guidewire on-premise of We investment by core over Guidewire will to onto contributes the other InsuranceNow also Cloud. Oklahoma all-in-one Insurance and existing follow adoption during manage expand first via InsuranceNow that Cloud customers on-premise entrusting InsuranceNow with decided quarter, customer Cloud Guidewire their meaningfully believe an Guidewire

was products. a of that which selected a one and to Rating existing selected subsidiary XX% with their of million Guidewire Donegal Company and by a customers PolicyCenter, Insurance ClaimCenter. Services, and La new further sales, Portage of with selection XX% expansions in Insurance an of Group, and selected Management, largest became products Insurance Mutual further ClaimCenter for Europe, XX%. Data Asia’s and selected Canada InsuranceSuite had customer Zurich With Financial our active selecting extended Insurance range products also Zurich customer commitment products. relationship adding four multinational Dowa that broad Data between of Idaho selected selected Farm General agreements Group products added Selected of a Guidewire PolicyCenter including Digital that expanded subscription which Mutual Management. additional insurers Insurance Australia Agency, Reinsurance The Insurance anticipate quarter new Rating year. full that Loya insurer, Group. QX, the and Prairie included DWP included InsuranceSuite, Bureau Limited, Connecticut customers Company range Canada Limited, Interlocal and MS&AD, Digital come Products. In Management. EUI their with and Insurance via continue Fred customers we of InsurancePlatform broad respect added Analytics, Insurance Company new Group Nissay Management along $XXX Insurance Aioi a Pekin other that and add-on Optimum Jewelers of selected Insurance Digital of other And Australia Risk sales We to first Rating number number to modules. XX Mutual Predictive Agency

continues of growing our ecosystem integrator systems alliance services Guidewire success to Our an on and of customer rely partners.

products. first the go upgrades nine customers core live, had completed seven quarter During customers data version core digital InsuranceSuite major to or and

win and of insurers marketplace. our advantage more year competitive we’re first in the seeking two solid Both also P&C the in We completeness compelling and Quadrant vision evolving new proposition also Quadrant reports that North industry analysts. for Gartner Core of navigating to on of the Gartner the Magic year recognized a continued independent in summary, dimensions Non-Life to represent than America. InsuranceSuite for quarter recently is the Platforms leader the in second to initiated recognition Gartner's ability Guidewire execute. Magic in as for for P&C a off rapidly ever change consecutive believe start to a Europe. industry Platform Insurance value and In

outlook and the further as industry, P&C customers platform drive turn QX $X more the operate reduce for global TCO I’d FYXX. we we process now analytics serving policyholders through efficiently their predictive standardization call our trillion our while better Curtis of engagement. through to As insurance the digital and transformation and choice on to enabled financial elaborate for results over to core and

Curtis Smith

referred guidance transition ASC increases revenue transition representing provided to an with with of The for outlook our Thank in was began licensing million, per a quarter. the an the an those we This License share year as factors QX. a impacted This and ago. last impacts ago. by positively our were from License increase is exceeding from revenue, included two you, and earnings fiscal four Marcus. quarter. caused largest quarter by XXX% and XXX. revenue, Total first year was growth for increase which began Subscription We revenue income, rate XX% the in million XXXX operating $XX.X revenue we outsized $XXX.X Even in accounting to our of subscription Other previously year to factors.

recognized First, in revenue previously latter into we upon and This a notably, be due most annual recognized the on number periods $XX moved due from to that XXX in basis approximately ASC QX. term fiscal ‘XX renewal. to change terms million anticipated of now will contracts quarterly quarterly invoicing a our

to compared over contract. start QX term a the was term QX year two-year in license revenue new $XX of a accelerated contract term of when into Second license which typical license million XX

ASC outlook quarter. revenue subscription our of services revenue multiple from is exceeded revenue we factors, Maintenance provided fiscal factors million to also had Third, support year was were in last considered end year no subscription contracts approximately fees. revenue to as was latter revenue guidance end $XX pulling we to These approximately year to increase into and our was growth license than compared one Services XX% With million high million, revenue to fourth, consolidated Subscription $X under for of more in guidance a anticipated million, our million agreement, the maintenance addition the revenue And subscription we above two X% ago. approximately high without and from continue in perpetual range. quarters subscription Even benefited revenue quarter ago year license $XX.X revenue up XXX. included the two slowly XXX forward of from expect hosting subscription $XX.X was the under the from license XXXX. of license subscription as a in and quarter. ASC the and not last a those we ago moving $X these from for in quarter. a customer a of grow $X items, the part an revenue and million

Turning to profitability.

and reconciliation discuss basis up due issuance quarter a was our the non-GAAP release and XX% our compensation expenses of being compared capacity debt metrics discussed. earnings down Total X%, was quarter implementations continued discussed. measures Cyence we’ve already note, a as in Services the sales ago due costs from stock-based ago. press amortization to metrics for on impact of were increase QX discount XX% XX% million is growth timing these of related in XX% R&D in Gross non-GAAP first year effects margin revenue The GAAP year a to as primary We profit the amortization from to increase continue largely today convertible the to quarter, the of comparable revenue for from differences from gross year and issued XX% the quarter these acquisition quarter in related the a for our margin fiscal of gross of investments for with well ago first GAAP to our will implementations. a and provided strategy in year an ago and previously future million ongoing to $XX.X the with adjustments. and year investments was of intangibles, the operating of margin cloud was the Gross ‘XX. $XXX that completed tax in expenses, consistent in

diluted million million operating of $XX.X guidance our upside, operating XX% largely As an or representing quarter. $X.XX the margin exceeding of for range $XX.X was end the revenue a income per result, from income was share. Net high

for cash $XX.X quarter. outflow to equivalents Also commission outflow the our cash seasonal and due payments from the and the an to normal a in an investments, ago. $XX the an We use a with cash outflow of of million an in seasonality, Turning of $XX.X to flow quarter outflow million quarter, million operating decrease billion ago. bonus compared with cash year Free year million to of the million $XX.X of of a consistent $XX.X fourth compared first primarily was cash was sheet. $X.X flow balance and of end ended

have following: the the turn first year revenue due is year impact our upside revenue note in on previously to As it our significant quarter full therefore And guidance of we not meaningful discussed. recognition revenue important license portion A was and timing subscription of does to expectations. a full to

services to nor a the cloud for expected now was changes expect for cloud revenue in due later engagements pressures conducting expect revenue systems to to now mission-critical backdrop, the that of reviews This before range the demand in XXX. million, Under the $XX migrating $XXX neither decrease Our lower for in the includes XXXX an now be in but revenue fiscal ASC With due to from revenue. to midpoint core million million due comprehensive to reflected to of $XXX approximately increase we $XX.X a -- revenue and customers that million ASC dynamic XXX XX% XXXX due in expected engagements start our cloud. to hosting outlook certain expectations competitive of guidance our subscription is revenue. adoption reflective services X% We at the from prospective of year. of fiscal this reduce is InsuranceSuite prior included total new services updated

revenue revenue, to subscriptions to increasing increasing to of million license million, fiscal $XX XX% change are from ongoing and $XXX outlook of this to be increase $XXX our reflecting are an subscription range guidance in million We Reflecting momentum. to year. million the our subscription hosting XX% and revenue an the we in $XX XXXX, increase to

to continue the $XX down XXXX. million than year, license for less million We from to in perpetual revenue $XX.X be fiscal expect

impacted With of offset total expect between is revenue million million services lower increasing be the We to and and non-GAAP margin, of $XX to which $XXX And to be the InsuranceSuite the mentioned. to for our overall percent decline gross our between $XX the change This by to expect in to in be the XX%. gross year. services represents this as of non-GAAP compared $XX this for at margin services cloud be previously we are margin. in a hosting decrease deals XX% revenue still to in services of margin We adjusting revenue, million midpoint, margin positively XX% reflects maintenance a profile in outlook. prior million respect $XXX now gross by of to outlook We fiscal year. anticipate revenue range the timing million XX% range

is $XXX.X increasing non-GAAP million We midpoint $XXX.X non-GAAP for range of With respect at operating in midpoint. income a representing XX% the to XXXX, year operating million for be which the outlook now are of to modestly we our fiscal expect $XX of margin to the continue between impacts headquarters, the million we million before to million of to complete associated with new it in flow, $XX the which cash expected our fiscal flow expect be and and one-time to buildup approximately to million $XXX $XXX XXXX. cash be

assumed to or $X.XX XX.X $XXX non-GAAP $X.XX share, income shares for is based an XX% In diluted for XXXX. addition, non-GAAP diluted our $XXX.X but net outlook approximately million million tax to million per fiscal rate on and

to second we $XXX the the $XXX to to in Turning be in quarter, million we million. anticipate subscription total within revenue $XX range of $XX expect and to revenue range be the million, million license of to

$XX $XX of QX million $XX We $XX to million to and expect revenue of million maintenance services revenue million. QX

non-GAAP of a million and now $XX.X or our even million approximately For million recurring outperformed to QX XXXX. share between we XXX We are confident share the on financials create for summary, the start making to We understand continue cloud a operating for that reported $XX.X experiencing second QX to and one-time growing focus net Operator, complexities the as revenue. can normalizing in to in a shares. XX.X great pleased our have after and open questions. million ASC fiscal on cloud diluted it we contract you. the call progress our transition strong we $X.XX demand quarter, to $X.XX and are was income income per non-GAAP you consolidation. anticipate Thank we are the remain $XX to guidance million the per In of based $XX.X between

Operator

first we'll William Blair. from Thank question Furby take today Justin [Operator And with you. our Instructions].

Justin Furby

guys, can you me? Hey hear

Marcus Ryu

do. we Yes,

Justin Furby

given loaded any missed ARR those feel out, but past? this maybe to year last do I linearity push XX% there year XX% the or like look on the for Does like a what versus keep you of -- targets your annual remarks out helpful? you with cloud some commentary deals give abnormally like just kind the Are pushing going that you -- would the prepared in backend feel can just set that or I And of it Marcus the stated still at be Great. be to growth. might of some it's these out? years this sense table

Marcus Ryu

sure. Yes,

updating year wouldn't Day, we range range for On providing the on that Analyst but number be when the annual the wouldn't we ARR, indicated put updating out annual it we we out, update at would we be for annual a the that an quarterly basis. be it, that an – guidance,

provided view range Our is the Analyst it. we’re though confirming on for maintaining we year and Day that the

Curtis Smith

pursuing Justin, would year we and It's linear strategic like to we absolutely years as than Cloud question, would the objective a sales it you for will deals, other the have be your closing and is the more team, guess, will it to paramount. to love for and come the And InsuranceSuite have. for probably year looks

achieve that or we then more to have have, negotiating, because or targets we’re different the the that within and the second transaction to familiar order at market. core stakes, definitely not absolutely beyond. that confident and negotiated with system and complex Day, loaded aside, than brought the the are the Data that's through We is -- Analyst we enough have year the kind dimensions enough every to we like cloud getting to of It’s validated to deals to all major on journey the economics that, the offering, have meet meeting new committed broader targets our exceeding ideal, we're talked in our higher for market we we’re about backend part individual enormously we anything demand the and us more and actually from PolicyCenter, go but each to believe that InsuranceSuite we is to standards in if products Analytics yet established so in add-backs a -- than when market pattern our but

Curtis Smith

I me our included my one statement on to quarter. in the beat. our that do let misread factors with two I mentioned has that correct provided were Just revenue impacted script the four and factors last largest outlook

notably QX, moved said The periods This terms renewal. XXXX be recognized we into due in of I quarterly anticipated that's XXX first the now our on and think number, that upon one, quarterly a I number latter term versus correct to previously and invoicing in what recognized to change due annual $XX will revenue was $XX basis ASC a contracts million. the fiscal $XX approximately million million most from

Justin Furby

And first sense the now then us maybe was think just two magnitude cut? at it's -- year, all think you deals just are of looking timing half quarter I you we’re seems the this another not gives closure. the confidence the from of last deal that part assuming was were last give it just couple given the I quarters last the of close Curtis services it now, integrators, the cuts about would around the systems Can and I guess of a of like these time the services what in you what assuming quarter update you and

Curtis Smith

noted here QX. deal that be deals, in we we four more Yes, our the services indicated we loaded, those script and InsuranceSuite this date that’s didn't comments in IS close anticipated we expecting our in cloud an to backend to related start was to now cloud In and the eight of we’re prepared quarter, that noted that right. cut

Justin Furby

you expecting half? or them in are QX back now in And the

Marcus Ryu

happen prospects. the to conservative but that’ll cases, them heightened At the going taken in to our conservative on a solution both can that avoid suggested; this of approach half the the they’re second happen the non-competitive, are security of as – levels also a what these happen soon of year. all that the as we’re of are dimensions expectations service different be you assume more with these about second took part more second point, the it assuming year for and of Obviously negotiating Justin, as of trying to look quarter, in and precisely the delivering in clear primarily half – in we’ve

Operator

is question Auty Sterling Next J.P. with Morgan. from

Sterling Auty

follow-on at there on your And especially of about companies it’s the not terms at is cloud customers all and -- be a to further this macro have any bells the talk in the get deal is of closures mentioned simply there's demand much stock do to shiny sign line? want slippage, and of cloud but deal always that that is is everybody's to whistles could those think I else I closures Marcus, dotted whenever concern. delay insurance with them toy how buying software looking this couple either from you the deals, hours, these driven, it shift new reacting kind the being of winning meaning how motivation looking competitive, or anything just or to now, concerns got to comfortable or after a

Marcus Ryu

don't demand is Thanks for the the motivated I question, think Sterling. by novelty.

seeking I of a think transfer been time. sought a long, been base that quite and for that accountability of Guidewire’s long has after our set has a this complexity long customer shoulders to

intentions And our conference commitments and investments, was been all one-on-one so, explicit during another our user received. conversations have enthusiastically really and that the really and

alongside in transfer of no and overhead them responsibility, pursuit their all unit and have of declining formalize things get in not process. cloud all and benefits, the sheer involved a cases hurdles, other in core and really to that to and trying there's expectations benefit when audits, critical and simplification And interrupted cloud. brings, that the lot of the applications questions, are and while of or participants they even In been resolute have jump any Now, internal it's costs many and daunting to transact through, the the who mission that insurers that have number on sponsors that of our -- and we're absolutely they intention, deliberation. computing we're

this get demand as the and in more in negotiate our are going direction market. confidence days the discussions simple is underlying But the we more every of conversations requirement whole and these these establish in both also this the winds the standby we and of for complex have this more early and just that are the industry, in more the bespoke in We will this literally Nonetheless, been ideal. standards blowing targets year. and because and in kind has on we the than

Sterling Auty

eight And four eight are existing to or conversions? one of customers clarification. all then those just to wins, brand expected are to four those be point customer of The new Guidewire any if should And a brand make during I that you we you What of new the it’s as customers quarter. in think terms won expect mentioned the to conversion move? existing customers decide

Marcus Ryu

will mix those. both of It a of be

demand have model. their where actually traditional have a business We flavors. existing we adopting a customer of for yet that unit third kind of that the in coming cloud not us licensed or a both for flavor is That premiums in an portion is

would existing three know in to -- little final would net customers the customer but be, three And conversions have it to difficult final now be of a of they're in types say if flavors represented I mix new be sets are customers the doing customer count. would I business, all I or our what exactly So new new all guess will existing all represented pipeline. call will

Operator

with We’ll from now KeyBanc. Monika hear Garg

Monika Garg

If it's later engagement about out. give of you taking what pushed -- starts cloud two or you've Hi, a just got could for my as deals thanks how -- follow-up, you share the one deal deals, question. many number? This talked

Marcus Ryu

QX progress the still a We that pushed fiscal done InsuranceSuite what of striving in last progress well others of we're into the at those. over have a those close and hoped additional a -- to get year. we engaged this count those -- We're of our sharing both end But final of have in did the had next And actually as cloud look transaction lot two year. wouldn’t Monika, until to we you’ll call, forward of quarters. well those within that we as year. couple the get an we shared host to as Well, on consummated that's two recall

Monika Garg

or two us feel of that you because the year have the do as about coming targets could transition, it given conservative insurance it to like coming quarters that deals confident some see deals? the Is those cloud if in of of achieving you into given that we seen still or, that, you and the on think are taking just of the the be five is slippage Then do close, complexities. cloud the gave targets subscription not enough -- like we kind you the could longer it and given

Marcus Ryu

across I mean, unknowns here exactly our ourselves it's are we that forecasting not you in try and there get points and industry. of but that -- know whether sense don't ahead when and There's sooner to -- they inflection a of Monika a know get to business service platform reliable nature or like they just will happen. that as It's The highly geographies, confidence, base -- where of it's small. source across customers they're want of segments no is we're business a different our relationship standard lines delivering broad customer they the wisdom companies of all across later large unanimity that sustained. receipt almost demand in our is remarkable an asset, traded, these so now publicly just or of of different are IT all business, common a so though, That's is the our underlying or the whether what service. mutual longer

system, entitle entire of are and Most all not right question. They're relationships That's much required. are then we critical relationship. are no to the a for that of they of the customer about sensitive negotiations more stage to data high are substantiating deals. that house are -- the next longstanding and role to for their bonafide even steps go that specifics to of of a of base mission critical approved part worthy were all really as and the party really liabilities to risks that mission question us There's transfers business? level source validation service But the transactional that nature. don't economic And deliver to course parcel on evaluate. these now take are kinds they that that in about of the So can with just or discussions through

Operator

has Stifel our next question. with Roderick Tom

Tom Roderick

Hi question. guess thanks my taking for

So so the this we from lighter just timing obviously a if the conservative big have the at a outlook demand coming the end that. you a little force I kind later year that some here day kind lot there of bigger a from revenue picture the is on more full of look than of of of At given for parts little and moving cloud come bit in services expected of year the I I deals. in first big you quarter, or changing beat there noise as much we really talked guess the would tricky of and that is about of timing core steady for simply else then for a there’s the the everything picture get big and timing cloud XXX that. always InsuranceSuite the movements, all out around but is of kind ASC it lot think about, through question But environment picture historically if it demand we'll be

is what's you? in the stuff on the guess changing economy, there big I out picture all the for So going

Marcus Ryu

Right.

and most robust our more but very place across I origin, So challenging particular just tremendously in also ever myself been technology Europe, platforms expectations considerations is the insurers the of once offering investment, and history much rising and that cannot our had of you the market bracket and deeply heard personally end new voice There’s all our that than historically we platforms, much that would earnings they’re of I agility and of markets activity which the digital than Day. greater are the than ever, on that operations, these in out demand if in all business and there that Analysts is consumers seeing we accounting in before. our underlying -- in don't industry absolutely motivates more but drivers felt and demand, legacy serve excitingly calls engagement in more -- you’ve the way ever and has in the all the with is for automated us which Guidewire’s for think more at the be now segments the for a of with of me and of on existing met change that all and have that we've dynamism more present of things changing at linear other product and focus more us

of more to time service area happening a broader evaluation expected the with before, the than the earlier. much as were entering supply many question really I about, has that that’s that of into cloud-based kind questions surface Guidewire, that’s that relationship of in and that’s more be think On the is to we IT asked -- it alluded the business industry us, there’re wants relationship. market. not should of credentials to but have a that now has to have it’s on relationship because because platform be hand insurers and -- own we’ve top that believe seeking, what that stance are lot taken again exogenous hand, many And was over that more be interest an before we market created one other just Now that the really to just assertive its of agitated a on cloud-based complication the very trying the I insurers

now. So hold right again more than becomes that ground. that’s But the of where routinized we more that more major ever as And will to the sales each it, where but little before. we’re year beneficiary find relationships are customer a difficult bit to that that’s of think we the engagement on be activity, more ourselves in with the rest

Tom Roderick

a digital Salesforce the quite presence hear and awareness advantage policy demand, on means you’ve more your of one office partnership side? approach But of been on advantage bit sort where customers taking of installed you like may office, base take like accelerate digital little offering talked side. extent already has had their love vendors accelerating be going and still can pure seems front to engagement a your slower cloud that a claims And cloud with the the that bit, to with your be they I’d as of in to with or of a bit on the of front the a that cloud sort you Marcus digital Salesforce. potential about perhaps about they’re the it little play will Does the

Marcus Ryu

to have the for their that There’s IT were Tom. for other enterprise catalyst. with supply driving insurers that the is points two partners here, major process completely the our lot to biggest digital transform claims example. insurers then the industries a secondarily, their well, single true chain of interaction distribution end But need their as one, investments involved policyholders; in with primarily channels; digital in is thirdly, So and a catalyst Number certainly probably probably It’s well. within among markets.

digital core that. today in won’t they led need can't COBOL mainframes, kind that XXXXs those you they a digital need support just those onto are much that of the mortality the All insurers environment of their more and realize future, a to just be interactions not paste that it’s for for to in turn than designed system just

good And for system is in core us. that’s motivating so which evaluations turn also

decision we lead policy is if the may be to want. digital initial seriously even business motivation to replacements, distribution core So the what which may that evaluate

your the with part very question been second that’s productive. of is The about relationship Salesforce

We’re announcing collaboration of a with in wins meaningful hopeful this year couple of them.

and very in system. that's the internal XXX And really deliver horizontal both And that's all build customer want do collaborating these two what experience value universes together that of which do, core -- for have in proposition. consumer we the never namely to a a external seeking, together. they that and digital insurers what work proposition insurers complementary will grade view to satisfying users. capabilities things is the our never have value of we They are an We’re where deliver turn wholly will but we CRM insurance effectively field

but So it's proposition, our of a is with digital it. entirety -- not the value the relationship component our of Salesforce

it’s just engagement hugely it's -- is talk partners. replacement they exciting customers digital, need system want core about insurers for for and some it's complement really side to a others with to distribution of For and they digital what and the off where kind it's

Operator

Securities. question with Guggenheim from Ken comes Our next Wong

Ken Wong

on two little bit. contracts, wanted the Hey large a two the touch to guys. I contracts that's on QX

has you a that XX First, customers used of with consolidation. that longer I'm hearing in seems of to seeing a little year to second the And kind mentioned in then do of deal Any the past. than maybe shift in in they that kind do to and minute way last have the that past? ability subscription making the lock buy some trying buying sure purchased in of a and the can to they of kind

Marcus Ryu

It's interesting question Ken.

anomalous where I was technology the are cases decision. both think these it of one-off about not really kind

about I capital think own and requirements. it allocation was accounting internal more their

on And a they to year just about market dogmatic the the little what And a the a cases did And been kind historically. absolutely resistant, that not We've XX was XX of we us something horizon was to relationships. to found insurer or One that, US of for the to by acceleration norm. subscription more and recognition, adamant This even long-term perverse kind adapted of that's just in kind because very consideration. year this agreeing needed I our we European that. so with held investment a that though have we position on capitalizing reluctantly accounting to with we think they one annual led about again we've just to of of was ourselves European been a contract needed that us contract a and year model. wanted the any that plus the And have insurer, for don't would motivated would the but conform of five of horizon for had of macro we on more a a was course proud accounting like always we regime historically perverse customer durations, much it fact loop. probably but

licensed across renegotiation The the portions or years. wanted of that contract. different multinational international, of rationalization over just wanted of their And kind both -- a a also we full we to case has products many customer a a many of other had, consolidation we was business under longstanding single of a our

almost did And that today. That's to then followed business like by And keep considerations that reported so what we things that mostly was the we just accounting afterthought. from motivated simple. an

Ken Wong

line license then to it. that wondering and particular of does to Curtis, shift pieces in on any top-line, from moving headwind whether I'm that's benefiting in a up the Got revenue inverse services? And the is not terms if or hosting for obviously services just from additional

Curtis Smith

the Yes. And The of our of the of and into That's Ken, approximately outlook one in was $XX fourth XXX. came or license ASC out that that from amount we and year, license our reasons growth factor moving put from benefited XXX for the was revenue, hosting full rate that services the $X million noted some in under revenue noted subscription we to for under subscription. we a things item of QX. and million subscription services

on impact from moving the revenue the services was to that subscription. So hosting

Ken Wong

Perfect. you a Okay. just And for million. the Thank XX clarification.

Operator

question. Turrin our Michael has with Deutsche Bank next

Michael Turrin

the still of some added it’s complexity or Europe momentum, fiscal wondering overseas of in pronouncing to a does a the the we some region see could recent I’m cloud that impact update on transition started showing more an to could signs Marcus in you more that pointing 'XX, be point, of on get around notable strength more have tipping regions similar as well? if

Marcus Ryu

a a are -- it's of part cultural, Europe, year. from America. returned the just the what I have are North be we're These the region not this I speaking invested US on accordingly. the in we're would this overstate I very about in engagement of sure that conservatism they'll feel I other we've subject just later. vendor. don't that. saw specific certainly again as really than getting. the be that US will just organizations, that, target interesting we're cloud for do as with it whether be of discussions about level extremely that a evaluation want multiple great friction traction do a that the reason additional -- become still countries theoretical more relevant enthusiastic conservative could lot companies of in are be ago English working if it there's to We're could And you we we they half and are and in nonetheless, exceeded we about meaningfully in say there continue may terms to or positive there so last hopeful where The But weeks or We always, give behind relevant in and few countries. Europe. that I a so year. felt couldn't cloud getting dozen there of in

our the just are now. for still over as that most focused we part, America. and every evolve discussions have in the licensing Europe in time, model here expectation North will on-premise But that traditional For model is it on

Michael Turrin

a then impact it QX. Curtis, positive sounds to And Helpful. XXX adoption had of more like

overall to the that First secondly, of Thanks. as is, a the expecting course impact closer we And is that through be then still neutral you year? are work fair classification? to

Curtis Smith

in We that we year multi-license million Yes, We revenue. license noted that's accelerated when years term out expecting, closing were $XX we it comment. fiscal future out. XX little the into And provided noted we contract fair revenue of expectation over which in QX this on came a QX it above some and did from then directly into a finished 'XX and QX. bit that that bring our

'XX an and when QX from revenue our in also later periods year outlook quarter the and on into came due renewal QX I XXX of we of impact approximately was the the now being on invoicing later that other provided years $XX my from year million to QX. The in in the in annual that's recognized quarterly into referenced contracts for anticipated this comments initial that those fiscal

Operator

D.A. with Rishi comes next from Davidson. Jaluria Our question

Rishi Jaluria

Hey, Curtis, I will you. question. guys. for Thanks with taking start my

maybe that us you the versus expect the balance number to that for to year, about InsuranceNow it that help is growing. versus hosting directionally about guidance cloud On flat talked and How implies you line revenue subscription essentially the of be for alongside year, quarter? be the you the much of And that million that are? of Cloud is actual I’d side versus the going talked full subscription subscription components what InsuranceSuite can $X understand within Services

be us I’ve for understand help a may So And follow-up Marcus? that? then

Curtis Smith

Sure.

hosting versus and revenue a the $XX into revenue guidance $XX million $XX.X on subscription year is updated includes was revenue ago outlook. that a additional to $X services So approximately subscription moving million the we our in our revenue of and that previously to in range subscription of million and our outlook noticed the million that was $XX in quarter then we revenue million

is to to $XX be hosting So you million know $XX $XX of million for component revenue year. the one million that the in going

split we've new or that other that providing. a been not up metric subscription within is components have how divides out the We subscription,

release up the in You'll revenue. and showing it overall in line it press XX-Q see subscription we but beyond break and as a item our license don't our of

Rishi Jaluria

saying alongside maybe three million not Okay. $XX million the faster? marginally actually million And $XX then growing for be $XX the be on up sequentially, why to going this that quarters that doing just that, in essentially or subscription guide, you’re to next revenue quarter, based subscription is flat would

Curtis Smith

out year. the -- break we per is quarter. quarter, per the for have guidance the don't amount We don’t amount There break that some just we given annual

per to and math another your million $XX million doing quarter, million the the $XX million. million $XX hear $XX get you’re So if point up to to $XX $XX in million a to it’s year on I

get to if in one going things more loaded, come that that can in note Then with because agreement revenue backend too be early see subscription fourth subscription we’d you’re going So the revenue so quarter, you it it’s a more. also of the to you the ratable, the start subscription are quarter. of

number. of be So one might that’s components the that factoring that into

Rishi Jaluria

you quarter, Okay, last then InsuranceNow maybe business. there’s thanks. mentioned that Marcus And the some on difficulty

is quarter and updates talked you business about see trending? to on the just any conversion wanted that Just -- the in InsuranceNow how the

Marcus Ryu

resale the The a product was important of that almost the conversion an and one, company. was

revenue of the the over and time. that happen relationship -- expect that’ll that that their customer recurring for much very of managed the in-fills that self So we rest we’re value has of pretty materially right now relationship, increased

have new net customers, product, I the new alignment -- the previous been who driving we handle the we’ve products as Guidewire for strong And business demand for underlying longstanding end periods, over having I who ago a that half impact. we’ve the the on as -- over challenging about what's year is think that a of As assignment that good leader in and think took go-to-market segment really is feel we market think we it’s is the leader ever.

execution we than So commitment year have do to year with this materially with -- that we think we than those area. last we did better sales in the ingredients can product and better

Operator

We’ll now Sills with Bank America hear Brad Lynch. of Merrill from

Brad Sills

make taking whether getting for center need there's multi-tenancy? for about that I to Thanks these you of to customers over about to to wanted with architecture, ask hurdle investment do you or guys. it the hurdle need get over to these adoption? Hey, there it's my data something cloud, hosted to make the kind that Is is customers easier InsuranceSuite some of question. the kind might model go

Marcus Ryu

that very always around levels sovereignty here. level board process approval It's well customer hard not And We're happen. of with they for talking validate as simply isn't I No, and our tell stranger to we most -- opportunity validation, responses that's to market as consensus that our takes, think Once there overcome strategic aversion customers need a but why bad we can in as doubled architectural customers just kind different of that seeing And this we topic. an about once XXX institutional data And a inevitability. just then customers think that momentum sometimes building lots explorations. more of I see on one that need involved behind want what on, there's responding almost that's it's that not to customer of becomes ton to with order think reverse a core it company for for these to what's and but a We're for adoption. because risk about in very rational of lots with benefit and best aversion insurers they're doubly but way have we betting it be difficult discussions. for of true to What future. it's the that because to about them this. are decision when their in they this decision serious when really and would what our long they and systems, the a that going a about that's division us time, indemnification it that only for. because kind the build need entirely a governance themselves -- to comes confirming that labor by to for of novelty, doing really is really hurdle to that repetition and/or make time customers application that our understand have relationships, carefully requirements, them, it’s now this cloud, to that the do a like the over that there sense ticket, -- discover feel There's all they're can And the us. and community, And it. that make to interrupting risk theoretical nearly the in in they -- the that we're of a around will investing of a a to they're having of makes work is it these the pursuit tend maybe growing here really our haul, which now to now think feels number like really thesis, we're lot in-fill it's greater It's they all and liabilities a outcomes what more of be a easier security. negotiation and implications these true isn't

Brad Sills

one Great. I Thanks more Marcus. if And please. may

Data seeing real where on some in platform. be very of with Just things on case you color and may are that good of Digital. some of here your terms you're it deep scenarios customers Thank of maybe Any analytics some the traction sounds for? they much. like seeing use you're used often larger the What going

Marcus Ryu

in we that a use there’s better out guesswork is their a -- sides, to can really and usage just visualization difficult data to quite out whether decisions driven that data, Then have claim, such create customer in then and that what which one many Predictive they about are of able core it just insurance of to they the new ideal doing we much on what about how learning see that's separate and financial you by fashion shown sometimes of to is high which whether machine to policyholder out a with are business of universes proposition. what geo think to of two is of across decisions taking how Digital And different ensures data, value the systematic their interpret though value, take are cetera. being et data figure raw even larger Sure. and of ensure with data, Data and and and Yes. of There it a better, as for. think interpret when -- them to climate about think and uplift at visualizations location universe data kind different in offer and now the compelling, And that volume but quite whether form operationalize are how most Analytics, how and data combination that. just the some making want are of more are renew we've I the combining data to price, to underwriting,

very really the very now, use insurers kinds of think beginning we're are we that and where cases pursue well standard are situated. data So those to

like a insurance and because that by the bar, Apple, the very need feels service a interactions their here, support. any you that partners side, to closer products interactions that's insurers more set it's great complex Amazon, especially to On digital consumer want. how the the substantial being right have the more insurers standard, by being almost get experience to their by what consider customers of for but distribution And are, about creating insurer high And standard not when consumer Uber, Internet. closer by and of that's that every all distribution particular -- set put, is by a simply and

the market expensive the have many back first it's to will digital. developments great for transformation a And that company. for kind in products requirement, the traditional is at go are I us in of It's we has expectations years simply at more function would that's collaboration additional so so decade that one-off think the that come. work and be just our the a and the phenomenon years gap opportunity been than office the of because for wide satisfy we not arena focus digital And and compelling to so

Operator

We'll now Securities. here from Lowry Peter JMP with

Peter Lowry

Thanks for taking my questions.

that mission are their the out? to I taking is, your to question there the critical, so people InsuranceSuite they're how the you? that manage risk. much moving figure get all deals, guess steps the Or I there trying is industry On best validation, anything towards cloud it’s practice is

Marcus Ryu

for insurers, say, have complexity, but cannot for across their they they I'd the all customers of more them, the proliferation the well, customization future have that degree we that cannot is of more enterprise IT their saying afford hard they systems. afford

are divisional works. the frankly, that a They cloud. located. want And really is in boxes that their so inherent they need the just And business labor simplification function the of the don't users that care where just blinking

are ready we've job, questions much an being an to it These more much of divergences, norm there the do -- data. would we us universally surely you of is examples these to vendor base what are referring industry say, a sense of higher company How appropriate I there's Workday. just take that of -- and become enough not has of domicile height are invoking and how hold insurable? to need to to these do done questions. you and have our liability to an find we standard I meaningful alright? we say to examples we over and to. routinized how more yet on, how because all do ask, how that with. as to these conversations is the is But we there's nature what much will really having. time, hold? more more -- sense on customer insurer than what have more Salesforce the somewhat Salesforce, standard or and with the And much the it And an diligence hold strategic party higher we times insurance actually point than is I is and And to established often some you have think asking natural, ourselves Workday to I wrestled more to -- That's can for diligence as where we're cannot we insurance So the more sentiment, questions well who sort as that's mission-critical more kind our we much entrust reply a to customer outside feel to we

Peter Lowry

regard? then stands the of great. quickly, just Okay, or could allocation your $X.X your M&A that your capital update we in billion an get And on with -- cash

Marcus Ryu

fair question. a Yes,

still going believe themselves. all the companies both and teams sometimes technology the logical M&A there of no have mama is our lot days. these home almost enormous here that investment the we we’re have by was -- So customers in in a innovation entirely for cloud We core technologies on strong. time still time by are and this technology we’re energies consolidator insurtech, the announcements, and insurtech logical that told of said, these the That that the focused are most

evaluations are think now and is is mindful when which I the obviously fit, thing in distracted transformation. we’re we’re right cloud the we the still job find position getting not from to kind most prime So quite of daunting then one right that the of again act

we’re and that well committing rush -- anything target cloud. a unlikely consequential in that environment, it’s it’s announce you of the us to shown unlikely but not we’re in see we’re very rich think with traction until kind you’ll I So that really here extremely also any we’ve

Operator

will question come next Jaffray. Piper Our with Zukin from Alex

Alex Zukin

pushing the XQ the back follow-ups. with So you’re thought, to couple from then half? pushing the of push half, pushed half second close to deals expecting two finish kind half also from the just first are second this Marcus pushed what And is the -- that about in a the first have other up deals that to cloud just going that in deals to -- the but of I’ve

Marcus Ryu

that’s deals And and a say long to evaluate who our been it’s more more to differ but trips because more conventional and longer we’ve weigh I that weigh were more to in are a that we’re the wanted I’d finding in made, our of constituencies fair there’s cycles this to taken were questions should hoped. it the with long sales customers. is in get it say, a negotiation by more it’s set these what’s cloud to it’s question what then a than have we range on just say broad different we’ve to that’s there’re would norm. to than takes than the two say surprised insurers have on that cases cases reassurances, will people question in the historical where I with have while. of for but whole be and different with largely steps to evaluation more process temporal how going core just we normally other And but we’ve personal still commitments commercial or is a that in pattern, made interact additional with And for had done cases, one respect, visit go decision that the system both we questions boards decision there through phased are on really to of

Alex Zukin

anticipate, And you’re giving these what take I around you your again a longer are or is gives like that that what than you going just then or on to be to to them these is there figure lot two able out confidence the of many anticipate? deals with the volume and replicate of year, if you -- the going just longer something you like deals wrong, of just longer a those all reaffirmed feel to and than you all but ARR you deals of it deals sounds lot then this am if this me I confidence of guess call is on stemming growth continuing or kind from but these so eight correct guys four velocity confidence the perspective a is of

Marcus Ryu

us these, sitting standstill, some Well, estimation of always within the -- get were can we’ve are forecasting the many get are deals to or high or been of a the on is in the we’re of today the amount about time of challenge variance variance we’ve a Alex, more been done them the on in It how we we within a takes there’s there’s and closed. because and portfolio we confidence volume getting these talking as of as year negative more all pursuit as discussions that degrees for of done have not these advanced just timeframe. based dark right at varying they it now of all more very one hand nor anticipated in

transition, reason to an a every that two an We've other there meaningful them, this believe looking and to that they're adopters including modeling customers we have that assume seeking of FY'XX success year will to of that stories base, been believe kind whether the are today, ones initial us. by with question. we we three hand, this in question that's the already flow make On production And have from and large or prompted be that not a reason acceleration. corpus that hundred or have to a and every several have customer

the at that targets committed forecasting make sufficiently makes we we but say portfolio us, are can we a think targets is for that it do the the advanced question we have best for our publicly challenging year. can enough for that targets So --

Alex Zukin

maybe cloud then jump just the version? do get do meaning customers With final they directly need your or go some -- platform, cloud to most of to that customers just Guidewire existing then it in version modern And can the version those larger the maybe Yes. to one. of current one steps, and

Marcus Ryu

is to XX, release, to practice this Connections theme that big was is the asserted really The that best get to not that at end InsuranceSuite cloud-optimized a of which phase. we’ve use is a

to put as in do us our -- everything going all customers. is architectural functional to that lot concept the InsuranceSuite XX designed before our that our we're deliver, is release question moving can at we on. course for the to the in that upgrade And have intent of for practice between. an about Of functional would and a products, therefore, we in more was be not cloud to the advance our the applications that And managing but that's to many -- just the that this best enhancements

capital new for generally required the and and existing recommendation that customers. estimating which the way make So for on will to that's the be customers both transition based we're

Operator

turn today's any this the or That closing to over to and answer question additional Ryu At will I’d like conclude session. Marcus time, remarks. conference for

Marcus Ryu

bye. additional all today. our Thank you No comments. for Good call participating in

Operator

does call. today's you. for participation. Thank Thank That conference you conclude your

You may disconnect. not

Guidewire Software (GWRE) 4 Dec 182019 Q1 Earnings call transcript