GWRE - Earnings call transcript Q2 2019 | Guidewire Software, Inc.

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Operator

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

Curtis Smith

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

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

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

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

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

Marcus Ryu

Thank Curtis. you,

Our ranges earnings our of revenue and sales. sales, for was exceeded guidance first and XX% second non-GAAP $X.XX subscription quarter quarter all of share. QX profitability XX% second revenue It total new of new the million half in represented active which with per financial in the results and $XXX.X an

With cloud strategic Insurance They insurer. Cloud As year. namely and existing via of remain sales momentum migrating Cloud see year’s TD to part is be fiscal progress respect made most two licensed journey the implementation objectives, be in Guidewire of to the personal, their banks bookings the one of largest upgrading three Bank and InsuranceSuite Guidewire home TD for on trusted we to top our such, we InsuranceSuite Guidewire Canadians cloud and InsuranceSuite TD former, we we to and Canada’s quarter, subscriptions. Group, of better believe to XX% their will the and to be deal and Salesforce. of as the part Digital of Guidewire Digital the XX% track InsuranceSuite to of country. second protect insurer this In close more InsuranceSuite first auto advancing our and sold cloud for to Insurance, against

periods. largest their Additionally, minimum Mutual their Grinnell of include in us. use their Guidewire two customers existing reaffirmed their and digital by increasing cloud commitments cloud commitment InsuranceSuite expanded expanded our to cloud with spend InsuranceSuite future customer

demand across which expect and for be we of will be is number and which there now segments work cloud in of importantly and this most confidence X And and year, cloud Guidewire regarding market. progress discussions all our informs are engaged ahead, the X this will InsuranceSuite broad-based enduring deals sales quality While most between considerable in we our or number. that

and scale a of and driving imperative cloud-based than self-managed the ramps is simplified significantly lower is technology ambition serve turn have standardization, Guidewire of has it data to license Guidewire We integration instances of migrate customers our to for the cloud. benefit Consequently, for to entry the point industry convert other deals value as value our of contributory portion InsuranceSuite approach insurance higher in to term marketplace their subscription. in to continue the with cloud cloud. journey production major term words, we they customer industry use partners. facilitates cloud, In customers maximize scale a years in trillion platform into expand of to P&C for and out of that for referenceability the a contracts Our $X platform and customer we subscription lifetime actively relationships in the build us in on-premises as licenses. historically somewhat from position pipeline which led A build steeper subscription annual us global this enables cloud

partnership our to Turning two with with existing closed Salesforce, deals customers. we

its both offering captive primarily licensed a products force One large of and P&C largest distribute that our components of through agency ProducerEngage. the industry’s Salesforce ServiceRepEngage insurers

Santander, Guidewire PSA’s P&C Banco selected accumulation Cyence selected leading in subsidiary quarter core on industry Cyence among service. and enable and also unifying focused We rationale platform of private ServiceRepEngage cloud countries. selected validates a Belgium. and new the BillingCenter. to for and PSA our and Salesforce, energy operating customers the CRM of horizontal selected and Financial of customers, signed Digital policyholder the a company early accumulation. strategic insurance Fortune implementation American insurers, XXX domains selected Cyence P&C a Data. traction This geographic them Salesforce risk reinsurance to InsuranceSuite, our in broker a ProducerEngage In advisor insurer footprint we and digital Group, multiple Guidewire’s sold products, the Cyence United who of risk the Two multiple Outside distribution Salesforce new holding and partnership Lincoln expands XX in States, to Insurance, management

be of beyond will Cyence cyber. their expanded including a line whom large customers two underwriting four of in one now Additionally, using use customers, commercial Guidewire business of longstanding of their Cyence, and new

pleased see Cyence were new higher customer the Cyence experienced we expected wins, we from than churn to While quarter. customers in also

is of lines next. native to we of in market data become forecasted long-term cyber for to over application next as We growth we emerging to new to premiums over other a a are Cyence see insurance Nonetheless, grow decade platform volatility learning billions Cyence insurance sensitive tens the established that serves. listening insurance the mainstream demand cyber line year and it for this demand new as cloud the Cyence, and broaden and of the

customers bringing with digital the customer with with customer momentum base. approximately customers extended one-third We number Guidewire in Turning the quarter, of XX expansions digital existing selecting to we Digital customers. of our data our products relationships XX expanded to second our and

added data also two new We in the quarter. customers

Guidewire the can ecosystem kits DevConnect X for launch that platform. of customers differentiator data quarter, track products. go we includes five record version our of connect continue of InsuranceSuite. cloud. or month, our our ClaimCenter upgrades ecosystem last customers use we Guidewire Grinnell’s into via saw This provides production live with in last had on to implementation, icare’s we key environment, both live successful digital we Also complete Guidewire launched to software and DevConnect. insurance Expanding As quarter month build XXXX, core developer development in major build within going QX live in add-ons Marketplace our partner the to Guidewire on on our the go

progress development turn continue of ambition the to of trusted business one optimistic transformation. enter investing the and pre-built Curtis technology adoption serve of for our to cover effective in our technology to are the and QX partners to and call to to ‘XX. our for of overall efforts P&C I over long-term strongly we In our industry. $X our advanced namely to and value most cloud key We trillion two faster FY large We as second standardized sectors, the financial lower and set and growth R&D the and half in results strategic partner second of a global outlook in the year and summary, integrations digital most drivers market that TCO insurance believe customers time is our accordingly. quarter now

Curtis Smith

the first We showing cloud of on products. digital of revenue our the strong exceeding momentum profitability strong and the Marcus. year fiscal guidance the for a half you, InsuranceSuite Thank and in second deal non-GAAP our signing first finished year note, quarter,

stated second $XXX.X Marcus the was was ago year of a the million, from earlier, X% revenue of total our subscription quarter revenue and License high-end for $XX.X increase and which As million. range. is above an guidance was

deal driven subscription new license, X%. better-than-expected activity, that Marcus by large Our performance as revenue our was This his term X-year license term license was digital structured framework. sales in deal X discussed plus Year-over-year X consistent remarks. was including with a the and growth sales high

revenue above are the impacted $XX.X are million we partially from XX% representing the and subscription earnings of the existing our call, of from to This of quarter quarter, XX%. $X.X beginning revenue Maintenance of the As million, also million ago the a of by amount ago, guidance many our $X.X quarter the over customers the affected an in by true-up XXX, adoption deals $X.X quarter Services growth Perpetual rate X% recognition largely churn of and end increase license comparisons The for ago. at completed decline of QX new reflects of the was which ASC year-over-year year Cyence timing a second $XX.X ratably an Subscription from toward agreements. revenue the was license revenue million was subscription of subscription in million, a revenue the in compared was of our $XX.X revenue sequential which of was up revenue a customer. year usage by driven year offset range. year-over-year million. recognized. high-end was noted

these of metrics gross press tax lower and for reconciliation by year of million, margin these operations margin measures margin. ago. issued differences provided primary related compensation comparable a gross debt a today, Turning subscription adjustments. license in we representing intangibles, amortization was and lower of to being our discount costs stock-based GAAP from amortization the on will release impacted and by XX% GAAP expenses, our of services basis we to quarter earnings compared non-GAAP in margin was have metrics the the a cloud decrease issuance of with and note convertible profitability, XX% profit to we $XXX.X in the Gross a to and invest The effects continued discuss and the non-GAAP as

any the quarter noted, by And by ASC impacted last XXX. margin was quarter quarterly second relatively were revenue million Additionally, shifts $XX.X to due QX timing revenue in negatively some expenses gross in is to impacted year. fluctuations. flat as operating in given Total

customer to M&A costs conference factors: costs which year, growth this was under QX year Cyence during annual the QX cloud in commission but While QX of of ASC we transition offset in in and three in related XXX. continue the by year, last incurred was quarter, connections, invest to this last our timing spend our in capitalization

income exceeded XX%. Net better share. was As largely a revenue license management. was which for our million, operating quarter upside $X.XX of cost expected range was was high-end the guidance and million, per result, diluted the margin and due or Operating subscription $XX.X to income $XX.X than

our to an flat compared compared in to inflow of inflow Turning a ended balance quarter $XX.X quarter. to equivalents first ago. $X.X cash, year the billion million million with an investments, $XX.X the cash quarter the we the flow cash was in end Operating of sheet, of and

be overall our non-GAAP of services, non-GAAP XX% gross our to still With million. still $XXX respect XX% $XXX expect fiscal gross gross and margin, we maintaining this year. and to to are revenue services million outlook XX% and margin XX% between margin be for we expect to between We

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

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

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

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

share and million $XX.X income $X.X per per and operating share and the diluted non-GAAP a on shares. $X.X between $X approximately For quarter, $X million and or million net income $X.XX anticipate million non-GAAP third between of based we million $X.XX of

there provided respect with Finally, is to Analyst no expectations to Day. the ARR, at change

transitioning we of cloud. ramped two closing, helping highlighted referenced, it while years. cloud note strong believe we the We the In positive ARR the existing deals providing where Marcus subsequent the a closures deals deal, relationship are maximizing InsuranceSuite see that lifetime quarter, of in to the the the dampen with As Salesforce in value by cloud current these a while deal our partnership the tailwind in customers Guidewire can and year are activity facilitate to year. the in customer second half cloud ramps was

have we cloud is to-date. of now open questions? we and ahead there work we lot you. the you progress Thank a call can Operator, opportunity While multi-year pleased us, of made the we are the with see for know

Operator

will [Operator We Auty from question Thank take our with Sterling first you. JPMorgan. Instructions]

Sterling Auty

a jumped the in of on noticed Hi, guys. cloud terms of Do any I the effect those late, how you terms I think thanks. Yes, think color the domino win, apologize some a also discussions about little year. bit the cloud in provides process side? and you win of think on target wins sales cloud this you the that increased I additional of for but with for

Marcus Ryu

for Thanks Sterling question. the

business. of geography, a relevant discussion segments we the and the of speak of prospect that are a the to customers to both entirety of that goes size, cloud by across We engaged is by our almost of Really, huge line activity is underway. and base with the all there customer by market array different lot

mission-critical very transactions in a it’s talked many As and as we us partner. core moving terrain for context about the these is of their production a to cases, calls, about in in of one think previous each insurer complicated systems to new

terms are of more as going will they of more done, lot customers standardized number our easier will kind will And surface the them And challenging, that be, get that so every involved one them but we we the be, the area of are a you suggest by through we we be. is more the the of are encouraged in. with pre-negotiated, the that

but the still to And incrementally these standardize every more emphasize, and accelerate wrestle of to target, are half still We days. so to make we but and a the ahead ground about that incrementally of deals mistake, the represent would early very of deal these the the pace have second it’s no work challenging are conversations, increased helps I lot number we year. in the confident

Sterling Auty

And then driven? that expect training or in implementation predominantly on be their are implementation the the the deals Guidewire follow-up, great. cloud just the will for side help one still partners where first we Alright, should handful to

Marcus Ryu

So our we the with have engage lot of done cloud. to activate respect to a work and SI partners

ones done with dozens of are the major really different excited for they of think we I I whom geographies. I opportunity projects, the think speak all all by and have

Guidewire the as similar done implementation SI in of opportunity of all over I are proportion want would last, most managed and they to scaling their think also all base. in work see time, customers think to that ourselves have be would versus to the serve them. them. of that what perhaps soon importance that next the will demand recognize to for the we set partner or I by we year our be – that the expect customer will we the there also as next pretty for I our economic involvement that And being they

Sterling Auty

you. thank Great,

Operator

next with go Please from ahead. question will Securities. Guggenheim Ken take our Wong We

Ken Wong

deployment? circle obviously made ramp, of the I take a to minimum your willingness at to start to the to about wanted for a back subscription a or a term this you steeper on Marcus, value a upfront comment lower Great, thanks at is willingness a lower on simply lot. guidance longer just thresholds deploy have economics

Marcus Ryu

of Yes. have part majority the in but are of that it etcetera. really a transition for It one customers to economically or and and the year the total their transition, are of a under cloud existing we curve kind the customers a we for we years on feels reflects other the type Guidewire that area budgets, that relationship. or economic term to for IT they bridge customers focused on well. license relationship makes to an and on the intentional but They longstanding our so to to of not long-term are disruptive for our be to are ease talking that have like timeframe, bridge The need the customer, possibly where relationship have same it too customers transition license as decision to X focused understand even sense place we the

All an choice. for these nature. that a discussions No intentional be would moving in customer it’s are to So multi-year cloud would about think nonsensical. single year the

So are But bridge thinking while part from two that to on table the obstacle doing we first lifetime are of all that our so a year the horizon. about customer. the focusing remove multiyear just total over it they the or value to

Ken Wong

guys are thoughts Got cloud Any the impacting pretty in went basis, was And was didn’t guidance, Curtis, beat reflecting full and it on move great? maybe pull term that some of that year would it. simply QX, what’s a then there obviously that’s up terms or forward there you a much deal all license it a side Got that be it. is on significant and the it.

Curtis Smith

of can’t deals quarter and in the come there quarter. that out Yes. Every are

QX but QX, year some And for QX this deals But outlook the the that came too came came that were saw quarters. future quarter some there so of the side revenue modestly of out into into overall overall gave things and we of subscription revenue much. of things. maintenance on we the side wasn’t the that’s both of also side And impacted why guidance that things and increased the and out we

Ken Wong

a guys. Got Thanks lot it.

Operator

take our question next from will We Sachs. with Chris Goldman Merwin

Chris Merwin

much Great. taking my for question. Thanks very

So, And migration, think said about a brand can migrations, the that but please Maybe types year? deal then I additional cloud of have just in as might and correct talked if taking cloud I to think the customers? products. it three you new existing different seeing you have customers not. about signed, a you relates still deals Is it new expectation past, in the was I cloud for me particular the And comment cloud you follow-up. Thanks. customers

Marcus Ryu

That’s with cloud Chris. of a are Thanks, basically and growth also essentially are production that ahead Right. scope of to cloud, entirety three in that anticipated right. is InsuranceSuite. of of us flavors migrating that one Those just longstanding they relationship the that They to deals cover of the announced today in their the are Guidewire implementation meaningful of production where are we is implementation there but the business. book

So, there is growth. intended

mode, in of Some would cloud. that of or Guidewire all perhaps will now growth in happened be it have that but happening the on-premise

Chris Merwin

that agreements I cloud sign a of as some then sticking was guided was you about as I about or guess great. more contracts? discussions these And additional much talk you have past just you pricing in ever security, – talked And had know new you that have service really information then longer pricing, features deal, a that relate previously? Okay, been customers, you for the you follow-up the Has in it to need into within nature. range to around and as have the the the did been work to pricing the all point level

Marcus Ryu

Sure.

intrinsically challenging and and finally are think are the our But are the liabilities the in parts complicated deals in generally that risks closed dimension economics arise not with more complicated discussion. of and system. mission-critical about nature. distribution economic led specification have of different kinds that situations that production get service always these the levels They of to to of So, a are reports being relevant I the all

transition pleased contributes discussion multiyear thinking the terms with primarily I primary we of what horizon relationship economics that’s thought it, now particular arrangement duration. it, deal. economic existing over expanding also about are same negotiation the and transition is the which license of term the in and a the make to locus to new value of think customer they this result subscription So, a an respect that a this and to materially the sense that again, overall year, but and of to but discovery as in but and With had that’s of that’s cloud the had customer transaction, to

Chris Merwin

Thank great. Okay, you.

Operator

next Please take D.A. question Jaluria Davidson. Rishi We will go our from ahead. with

Rishi Jaluria

back expect kind in you maybe a of I this for in the apply one the that deal motions TD of can taking that help same sign-up of Insurance. deals the of deal guys. IS cloud Was wanted the had initial deal had quarters significantly a got this currently that or a was deals you and that, close my Marcus, entry, ramp And was Hey that then to one it new some or deal this as size expect very to the of I but are to time questions. of over or two a you one to these deal of of circle past mentioned it with that Thanks deals future the little expand came kind follow-up. it slip was And have motion? that you lower was in bit of complexity you because fray? what kind that

Marcus Ryu

there TD was full go customers. the that and closed was levels, but have I valuation were me particularly we earlier. And It as of in we risk be were with. hear But to a we think negotiation a they was be the through liabilities thorough. They the fine hoped data good on that also Sure. to the insurance indeed wanted this and respect they get our work to service an considerable had security, satisfied rational, for to mitigation of also the to to in forth. have to I governing to had previous explore terrain has us extremely bank with with calls, but they to And partner not one area it one all surface that that was only very say would of about so earnings think it education division, talked prospective that relationships and

a conclusion it I in to banks, reach so and but helpful not will because lot entities. a are that really test case other to but with, it we inform hopefully for think in owned And insurers, through banks are managed by who or by was us particularly of the conversations are go general a are standalone insurance

Rishi Jaluria

it. of Got And deal just then expectations? commentary your Thanks. any to the the relative around size

Marcus Ryu

expectations. the what I are think with – market, but it’s price And we talked our ahead this is ones have are with in there in and aligned the in us line past. we been in general, we with a still about that of other the broadly discovery conversation still

Rishi Jaluria

relative expecting. Thanks. follow-up to cash think I it. on it and a just then flow I what what was puts should flow, thinking in the the or should Got be cash cash should expecting was basis? think in Curtis, And about the flow be we in of Thanks. kind little how maybe light takes quarter for How year quick and flow for full the operating we about was cash quarter we

Curtis Smith

Yes, great.

about and of free of than cash to we free the approximately had being headquarters $XX basis, $XXX full quarter that related be million million a costs cap original paid biggest are been it to $XXX total this In expenditures million in $XX we forecast and So, in the lower And that noted can million this one-time billings excludes for the year we in quarter. attributed the year-over-year flow talked was to change to our we that quarter, collections. to quarter, million. initial of headquarter build-out. the of related cash flow build-out driver new $X timing the last The also maintaining

investments be making the Secondarily, to is due excluding year, one-time to R&D fiscal this with intentionally to in expected line headquarter and were beginning ‘XX, the in be fiscal at of we ready. in the free cloud in the cloud cash flow the we CapEx we ‘XX and noted

Rishi Jaluria

you, guys. Okay, that’s helpful. Thank

Operator

from We will Deutsche take Michael question our with next Bank. Turrin

Michael Turrin

Great. my questions. Thanks for taking

of a there, persist to is something and that event specific some talk that a for just that then the of any can expected about should we back there little or that potential or subscription Cyence how maybe going number Just that trajectory helpful? impact moment? for about just be we churn the how magnitude somewhat bit the than to of that comment forward some could more from think higher look and think the of would a Is going quarter about to sort is – influence

Marcus Ryu

be relationships, are thinking the them. lifetime fair we difficult And is those would phenomenon Yes, Michael. are consummate expect, tend to customer but once a have churn we ones very questions, are we they much that not accustomed that we on been as about. It’s – generally focused Guidewire to as us new you one very for to secure

unusual very, So, kind is for any churn of very us.

which trend Cyence mean respect and back year. we half the surprised Things so we have But and we the of the did to optimistic we with some the of service, with products, very were a an each could non-renewals is not here with cause which the in half the of of in software high emerging to very, and get line case, the as could much the root growing support volatility marks all insurance, in analysis about is customer cyber as business primarily very as that first in kind And experienced progressed year. for, underlying secured of feel mentioned is latter then think we underlying I cautiously the I of quickly. designed as the the product that the support or more It’s but we to strong cause insurance. the since remarks,

some it’s half to relative lines, XX what months like the something over is certainly the as estimates So, it last of by insurance expected. growing it as projected, speed not was quickly was other but

think early doubt and in in insurance. have some significant there’s not would no it’s a the to or and cuts the among I the one initiatives the of and will the line But customers be so insurance than business. large the days been industry guessed has cyber trajectory some become just analysts of bumpier making on still Cyence and the prove that part impacted business that

that recall lines broader about applicability Now, about have we that we was we past, you’ll we the established from all know data been billion-dollar the from and multi-hundred you almost and insurance, the we’ve generalize as But from insurance. if including revenue existing never look that working cyber that was days our It customer saw insurance well have early early you’ve a across progress some followed and comes forward other of many wins most still Cyence lines of platform listening commentary to more that cyber as that’s to Cyence of talking just it about insurance. describe. of hard to in

we was long-term were year, remainder the with vulnerable headwind, the don’t started but a so, year. for It it’s that. an which a relative expectations we of And headwind to it for adverse the We think a is in it’ll business, surprise. the guidance to bit reflected be our certainly the

Curtis Smith

that couple of QX. up with our that We add And to lines too. Cyence’s noted things I’d historical QX

with fiscal XX% $XX be to in a percent year. as forward, by the two, million in revenue our that XX% between to as confirming see of this sales are So, there $XX we outlook, Marcus, one, renewal subscription the And new million quarter activity year. subscriptions number this respect foresee volumes and we going to to are high expect we don’t of and stated previously

Michael Turrin

range. there through structure you cloud then is the opportunity all, change just that a ramp in trajectory one that that think of appreciate much, continued more I lower this how to of the there deal thinking range, all one us deal confidence how the also back Thank if strength go QX the target end maybe those about to of just parse guys. at deals, And in is half all and guys. added cloud time, way influencing, you Is for color you, on back increase Okay, and appreciated? took always you’re to more in your

Marcus Ryu

of would the like think more back-end with cloud Yes, respect we is deals I loaded year to ideally than course.

up. forecast discussions up kind our and then where a that to of that taken experience. each passing say challenging, we’re on we of the nature number individually, lessening range of in challenges we calibrating of are would so, And I them, and of based end the will week we number think find in is is the we And quality bottoms additional that each with but the

I countries the pursuing and to of getting more in things geographies requirements growing we’re U.S. think in That more said, the customers different and that but we’re also more cloud to North barrier discussing familiar deals, are practice with just going also down. different not we terms different in are answers. as the as in inevitably that America, or geographies, have other well slow language and us

that factors same of with we put standing up and number all with investor coming are that seriousness the handicapping we forward So, any those range the community. it by and to

Michael Turrin

detailed the Appreciate responses. guys. Thanks

Operator

We’ll take our with next Please ahead. Stifel. go Tom Roderick question from

Unidentified Analyst

spending of the of more are was done and end the there outlook trajectory in any for overall hiring And around first, hiring than year just the in were some hi, the see from of budget, Curtis, terms on, but of the for guess, of serves some very the guys expecting the resulted better I right of Bentley plans stewards thinking that the that if think on most the are hiring obviously good question. curious of that of capital, notice your margin little quarters. the you quarter always quarter about next we’ll within a Matt quarter at more the Yes, the rest for any how on in two it are quarter, the comments for and in thanks timing us just my performance year? and I rest Tom, taking the of

Curtis Smith

of of efficiencies that part we some managing that non-GAAP by outlook the the noted million. hiring our to we of we to the for challenge year. had with is noted, improvement so well. we’re do quarter said, least the trajectory Part for Yes, our in do are both for in always at we and increasing with with Hiring $X.X That us a some expenses, do were of has operating seeing our that the expenses, part that with as this it has to midpoint do has the spend the our and us actively us cost. rest as of the managing quarter about how thinking income and impacts to of

Unidentified Analyst

what just the you’re Great. overall a expectations what conversation opportunity over deal the the bandwidth the curious be Thanks. of been maybe how looking new around is you’re product new some lot is how from And seeing in as next initial then has elements, well. insurance looking I’m customers at Cyence on I do, existing pipeline, months? your built relative may for used much and at cross-sell how of their to your can cyber you XX-XX cases that mentioned know demand

Marcus Ryu

maturation asset relatively year revenue not Yes, this our to to I very surprised for mean, still fundamental a say. agrees need, need I expectations a risks for it’s everyone are are tell as driver indemnified industry by that lines enormous relative are process, know are on their of next and Cyber insurance. for and agrees our learning. relevant our not and categories of course expectations a category or underlying we because about we growth relevant. Cyence customers appropriate it everyone for of way. would emergence as well-established a management very, of growth time, a But hope slow positive will of be are large-scale and other know us different it underwriting, also be fundamentally yet talked you and think that and been do the in data the a be so long be emerging they But the modest to I that areas two, huge of risks it’s it we insurance strategic insurance will that to small the new we’re to of and see has the is approach

distract have degree and the we platform, focused to fair course our a strategic have thing core for with there. as separate do that of our division for operates the with the is on wherein that cloud for in doesn’t such a game it autonomy latitude sure long-term and to and to other long goals, moving we the the make unduly that the that So, that right Company

people success feedback tremendously requires signal category think positive it of about still its about that defines, the product, distinctiveness, the is but who any of gotten insurance that market buy we’ve business to betting approach well, I insurance want ultimately like the about and days. And be we relevant established in same are compensation, to just insurance but insurance auto workers’ the like early lines in huge etcetera. of that’s its that on insurance, not commercial will the conviction cyber that why

Unidentified Analyst

you. Thank Great.

Operator

We’ll next Jaffray. with Zukin Piper take our question from Alex

Unidentified Analyst

Hey, This is Marcus. Hey, Curtis. Scott for Alex. on

expectation your questions, us of if expectations. take first to call factoring down my just you my the InsuranceSuite So, revenue on, told half apply guidance panel us your cloud that had prior earnings I question, on services one taken a and back

got bit maybe deals So, an are we in have rolled imply that that the InsuranceSuite three than better were from are to and you a I’m rev slower new things out delay that customers up-sell would cloud this indication services we’ve increasing your ago. thought. keeping be quarter, what’s they that which little is than to going months guide, curious

on Just there? what’s going curious

Marcus Ryu

itself because is degree the into one will that business then mean the weeks signed. the guide. the services more forecast aspects when be when our of some start, of immediately the after the of now I not the it is sometimes that’s attach close, or about read weeks deal wouldn’t will delayed deal some timing it’s have that deal when I we after exact to the of on will challenging the particular which but or services project Scott. No, just can deal and

guide harder always one by the been our business of stand but forecast the we parts it’s our, So, we of of to have now.

our conversations three would your changed more confidence and because larger say, about firmed months, the interest a we are of are these that selection how now we’re to are I were the more being last we some bit over the have exchanged, of I we happening. would it’s question of up more, incrementally papers what degree think context call and confident, have negotiations and trending some abstract towards

arbitrary the by something done made progress yes, that of an but the what again, we’ve So fiscal end committed year. deals, on last we getting in but to to our ourselves then of businesses deadline, that by operate have and sometime

I be the incrementally put a remainder will we confident So, have, as those think there that the and relationships more of we are done. we the we of that, of time get and we to think balance, can lot on but work the we

Unidentified Analyst

within might there I’m to that think might products there BillingCenter I post time to launch provide the that of bit, of that taking can and maybe tracked but certainty anticipating on the critical was be not and certain you number being generally with a mass ‘XX ‘XX of acceleration, about how any if InsuranceSuite long-term ClaimCenter of are able a for analogies and launch little Maybe those us you [indiscernible] deals, potential cloud, customers, we PolicyCenter, ramp ‘XX be allowed analogies period available, provide. kind just for a potential fiscal curious there the are how for your any the

Marcus Ryu

Scott. Yes, that’s thoughtful question, a

time things got hard massive very and like, a very, the customer ClaimCenter in want beyond and it, In secure terms brought the was we each lay those to depending few and or how incrementally claims customers we able were we that first right. count until in which easier solution step fact additional out were to first only talk to probably with but to you PolicyCenter, market, really having eight often adopted incrementally, years claim most the all on hence, leading five new the system was

a cloud, transition, be our the for the is for there is significantly both different we I So, from trusted well-established it’ll because think policy. to appetite and Bonafide a that in as a deeper us industry partner launch think I broader faster when

is things for more standardized transformation are think years industry was stronger doing to than the urgency opposed ago. more and that of much digital XX as the I differentiated it

early that things a lot of But So, adoption. cycle still positive is a of terms in happening are there of faster.

And be through progress production it, high-stakes into mission-critical get confident adopter really We are those that is will stage we’re it to phase. and we’re every But of still next day in in to we’re in and is right the customers referenceable bringing turn. the feel that cloud them. referenceable with customers definitively no that. wave have on they’re entrust we’re in we confident and mistake. Make where early partner going something can customers for And the truly

Unidentified Analyst

you. Thank Perfect.

Operator

question take Blair William from our next Furby Justin Company. We’ll & with

Justin Furby

for Hey question. my guys. Thanks taking

it wanted back then And ask the to Just on in now give like Can see lower? mix looks to saw Is you you it look of it Just is sense and does I call in new cloud for from you cloud. that sort of, Europe, quarter a be half business just other mentioned geographies on similar on bookings pipeline any would in alluded you’re Europe? business coming Marcus, of progressing? InsuranceNow, commentary that if XX% what helpful. sort sort you commentary for lot any the of directional you what and a

Marcus Ryu

Sure, Justin.

the market to pressure competitors, rest on and meaningful we didn’t rest by of more Europe, half the respect So, to in the of of of America. of to not we But hugely cloud, one and in only solution to more to will get and and of of it. would second cloud. the pipeline we every here for from InsuranceSuite. confident, but is the unfortunately, in say hard more of first doing, of some We with for that you But ones portion target everything a Europe are still there differentiated are North wins with invest hopeful unlike in with delivery think it’s How the geography respect fact, ideal. from it of the a a we’re are advanced enormous look cloud cloud it’s us, we’re in at fully succeed have that InsuranceNow, respect But a about is not can have we’re what to segment the there than highly year if committed TAM. more unlike We majority that is win to year. of I to them business It’s And to we at in for else there there is a but Europe slower the latter one as significant have the more the still level think close sales in a well. where best we deals Europe. announce. which the conversations our Europe, product that With America. a end offer important close lot have in Europe. multinationals or and that are overall, product But We calibrate, serve, we we remaining the the North year happen bit definitely much discussions so, half

subscription will that I So, modeled. will be two. maybe of I form equalize or next and America. in come in time bit in have that Europe that But year expect we the in pretty over portion the would bookings will difference guess what than be lower it think will that a much North That’s

Justin Furby

the you Okay, the go that that’s prospect competitively helpful. versus want decision, versus let’s up they decision new a, how core, cloud Duck the come they you dynamics vendor insurer made against? versus and Creek for other take then, to Majesco has a that like just change any made for once And does markets

Marcus Ryu

the Yes, don’t the I I but it cloud are sales are that the on sales cycles cycle the think criteria, competitive stakes evaluative high we and those to it same being pretty likely cloud we but of will now and questions competitors. essentially same, competitors are in the a scope of think is the dynamic. couple important cloud-focused Obviously, changes changes the other fundamentally ask examined and be competitive

generally far will – evolution, not our now should we know nothing and and do to our think so want at then pattern to all. or at we doing evaluating want this the after versus go cloud discussion. competitors say not are which of versus stage they buying is be say partner market or it that – It’s well, prospects us I what

Justin Furby

the they the something change to partnership in of integration? how willingness that just insurers’ Duck as go terms announced have look well, like does I the know I but how and partnership with cloud think Salesforce that does Thanks. change Creek there? And quickly like conversation the you

Marcus Ryu

like group, with lateral the Salesforce CRM, Salesforce customers and of service from think a is cloud, without but I the for problems – hard horizontal functional need to that proposition but them dimension core policyholder is CRM cloud the hard and the underwriting is question. to with every and power general that The claims agency distribution, Salesforce’s of us feel issue service. of are deep captive is would the that like is prepared insurer environment the a for for insurance especially those, almost a But products or it’s insurance them to But to we of the core distinct Many have still one insurance question. proposition, a bigger a our kind conversations. to their and the CRM cloud like integration discussion especially capabilities is one system. highly relevant. think products of topic ready digital talked of tackle is Salesforce distribute proposition that about they foundation partnership. And capabilities, this the distribution in very the – relevant with their or those insurers that CRM partnership they CRM the to digital distinct about their service, to with of has I bring the with remarks, related, it’s to Not our very respect it agree and

Justin Furby

Got it. Thanks very much.

Operator

Citi. Please our go Radke next ahead. question Tyler from We’ll take with

Tyler Radke

point think digital as at percent like in Curtis, if you could more a that revenue the look just I big taking opportunity hey, bit third become the digital would what business of on I that think do digital customer thanks Marcus, you Guidewire you of using about you this little the business? wondering as roughly could a for my the a base like road? was is question. you talk look how Hey, said Marcus, revenue and down the products see

Marcus Ryu

fascinating scope a is known of insurance, It’s not Tyler, question, because the digital full to yet right.

look – a is would truly like much digital really processes, be being of There still of of really the novel in VX is how digital, insurance always-on, future, based, just insurance like which they think what talking VX or many digital, about. written. protection of grade, I product the that’s and you can how that for Just services advisory how many potential that of but consumer really scratching is, really surface the sell can continuous and online, device have insurers and the offering to are an insurance sort

that – the is it’s unbounded can’t core topic messages policy do a digital very just XXXXs certainly strategic and exciting more have broad digital course, than our mainframe, really if part So, a it’s than that which I opportunity administration I these think have and consensus insurers, most things a of of in right. is think lot is you you of challenging, for we and

on You environment. need admin core it a to modern do policy

core. or But that to range So to underlying our could core of – it sorry, XX% significantly of XX% even increase over digital, today, the – the time what’s I number somewhere our attach will. say, scope digital is as system value the expands “digital” done the in the would worth truly functional in XX% the of XX% as maybe

happening the we functionally and innovation functional of as lot is industry the as so of serve. that’s that’s catalysts And certainly it’s because a under speaking, our user a system the to can the transformation possible, that if spend, business overall experience we But look we’ve the you driving hood. core is domain where into have obviously, the lot digital going towards in allocation and cloud at there’s directed were as R&D much – we

Tyler Radke

on each helpful. I we’ve about just sequentially Cyence thought most lot that subscription a the Great, see slide going noticed out? would Curtis, that like would I subscription it we of obviously, revenue – I bookings then And declined your that’s else line as is kind deck coming churn talked as Is actually with just Cyence. you in a and called have that increase of for or But that on quarter. follow-up in looks the there anything that

Curtis Smith

sequential decline deals saw in The noted the of Yes, two subscription offset said, by ratably And too, million as because that uptick new to in the at the you see recognized, are confirming revenue our that range. $X.X noted $XX in and quarter quarter. beginning the you deals know, that the so from was primary million are towards QX Cyence and the subscription of confident it’s to the feel don’t partially big we churn about we of of the a was $XX end driver QX. things we completed we we ratably year for That the of outlook subscription the million recognized. revenue that sequential,

Tyler Radke

Thank you.

Operator

Sills Brad We’ll with Bank Please take from America. ahead. our of next go question

Brad Sills

sales for your question. thanks deals cycle? influencing them also together that translate sales my to to implementation of to Hi, earlier, the in and cloud on I up of kind preparedness more up becoming is guys side. an channel taking on SI cycle, some the the on market wanted words, of follow other in Does kind Marcus, going of comments in asset the ramping these

Marcus Ryu

look we’ve rates trending think executive shows would were last on that – that it’s really to services would think spent focused they appreciation It great say community. that bit Alliances in-depth road maybe – we one at but I not with the can organization of a cloud I direction. and our convey transition to understood, how that made a and of they cloud our kind to like competitive aligned now if quarters lot that, interest with And their year with I effort by that if that’s – leader strategic was a on have how SI really urgency. the year and transition to real a the enhanced not and model last or to it’s We internalized has such a prior, misperception sure that we’ve to confidence challenging the like that that them It’s were make involved work our on – X underestimated discussions of they the the across new not been – them aligned and we the think any quite are is to lot feel journey And worked hard correct Absolutely. we of be didn’t took that long-term our it’s attach count. all. I where progress – before will time Guidewire’s has over really economic been

Brad Sills

hitting with seen you’ve success organization this would one like That’s a may, in of know, stride Thank if of I you Do you. its I year the more that feel much some great. in then Thanks, now the earlier Marcus. for you that organization? execution digital. you And is that attribute the here offering? organization new to separate formed just How

Marcus Ryu

a the – data, data Well, was if point clarification, I services think called of and focused new you the analytics are is on organization to as group, which referring ADS

Brad Sills

Yes.

Marcus Ryu

with a that in the of ones were bit half churn, a that blow the first wasn’t the body Cyence as they year took of And the expected.

think potential team understood team is we’re It’s serving emerging the that the understands I just reassured or like applications, that contribute it’s we a in think by platform serve we well lost and team. think separated and able the long on to, we’re delivery. term, as get one can so we give markets shuffle applications that did progress insurance in and them persuade been talent not that’s to the know I that’s data making find in of this opportunity them but I of data, and pursue have they unless signal invest product to in with didn’t and been fascinating more and manifold the But to they won’t the be customers the there’s think we not right now other the long-term that our there’s they encouraging it. new – and and that to we’ve a been main cloud a autonomy the reasons for all volatility really bit about other strategic the whole kinds and of generalize is thrust execution the potentially

Brad Sills

Great, thanks again, Marcus.

Marcus Ryu

Sure.

Operator

Pat take question Please We’ll our Securities. go next ahead. from JMP with Walravens

Pat Walravens

have other cloud question, are to X. CFOs Workday the and when sort CEOs of companies like which I Anaplan selling a and that Marcus, of bit the Great, financials you bigger the say? put what their last the that’s in would was true not of asked of it’s how recently little a year I thank insurance like you it’s or in same, response picture I’ve quite congratulations. sensitivity about financial is industry, the data far said cloud come the from amazing for the Anaplan this is

Marcus Ryu

Pat, I that. think increasing agree is comfort that, broadly there I would No, with that

actually safer think own trust can I than a quest will care at that is is that respect kingdom to There that to that deeper a public exercising endless it what have that. I is thinking keys perhaps that the they doesn’t to a not services, to we’re even it’s is when it’s all in necessity point, mission-critical on much right the are IT we’ve and every much own. are perspective, get evolution financial in consumer when me, infrastructure customers our work the duty your often to – And think make just rapid other noticed, and think an very just internal believe are other leaders perfectly over there’s but fine. the are are that services the your to capabilities parties insurance with there’s burden of think on that that third-party that data is from organization very – security on is understanding if that controls, recognition you that of you But a there handling a everything cover done too and your strategic any actually hand significant industries, too this public and I with a, key can perfectly achieve other healthy. the a rigorously. And infrastructure, operation work mean risk secure sure come legal bring I since they often or be security just you recognizing own, and and very house duty right capable a that’s their framework for pattern other in there IT seeing

Pat Walravens

Alright, for great. you that Thank perspective.

Operator

this time this turn I gentlemen, like conclude session. Mr. Marcus conference to does and Ryu. back question-and-answer for the to would Ladies closing remarks, At today’s

Marcus Ryu

today. participating comments. other earnings call No for our Go in you Thank on.

Operator

conclude this your ladies and We And conference. today’s does participation. appreciate gentlemen,

Guidewire Software (GWRE) 6 Mar 192019 Q2 Earnings call transcript