GWRE - Earnings call transcript Q3 2021 | Guidewire Software, Inc.

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Operator

Welcome to the Guidewire Third Quarter Fiscal 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I would now turn the conference over to your host, Alex Hughes.

begin. may You

Alex Hughes

our Alex Good call to risk and from call conference other Report management’s this of SEC, for operator. Chief year cause the be the our recent press as on welcome of can today business are Guidewire filed and we Executive on with documents regarding Jeff our be on which those name such the that and to of and products, as file results, expectations results date. which on be of and Vice forth are information on and Thank Today’s COVID-XX with the our to SEC, financial refer materially is and our following Relations, demand, section as Form found in results Please our factors on Officer; assumptions, Mike in Annual Investor Report conclusion most for SEC afternoon are statements. risks, our Relations Officer. issued operations, set disclosure as Statements Rosenbaum, well release the including Form and Financial earnings and will is call release representing My XX. the call on Form available of actual These uncertainties to customer may the on should press complete fiscal our views risks, the Guidewire’s being XX-K I third impact statements in X-K differ Software’s based call. to A subject with and be today, am on furnished both upon uncertainties forward-looking ended assumptions XX-Q available Quarterly of not related made and President relied this you, our current recorded Investor me matters. includes statements replay April as and Hughes, any subsequent of is quarter Cooper, XXXX, website. with the Chief of Guidewire’s the of a

to provided GAAP We press information reconciliation turn our over posted additional will and release. A is also that, to measures on of With data Reconciliations non-GAAP to now a also provide call in I’ll non-GAAP to in IR are our financial measures refer supplement to Mike. the website. investors. additional

Mike Rosenbaum

today. ahead subscription a quarter you, we Thank Good thanks of I'm in afternoon, that third Alex. for us revenue to coming great guidance. everyone, and ARR both had say and joining pleased with

to platform, bolster with and migrations, We Cortina Cloud insurers. our over and quarter on to in it yearly momentum release and of color continue build InsuranceNow. QX, P&C sales cloud discuss Starting key eight each in five closed how On InsuranceSuite confidence transformation. Cortina. more as our release about that results and and advances our numerous includes deployments third Jeff why these talk financial We and to us threeX deals our areas for provide I'll outlook. increasing I'll Then cloud for performance Cloud the in our of on activity. cloud gives and innovations the in call, latest leading cloud position our Platform twice the wins, for notable cycle a for is solution cloud today's Guidewire the cloud cloud our turn with

to highlights. its billing activity market Cloud provided quarter in Platform Sarasota, system strength RLI Guidewire and in a ClaimCenter BillingCenter ClaimCenter to customers to insurance with middle in And increase year-to-date, Illinois, impacted Washington, X factors their a their Cloud was and specialty the owners, continue research, This existing them how in framework. migrate the Guidewire competitive that for dealer Earthquake the included Florida, healthy is Tier InsuranceSuite cloud. provides adopting their conducts our customer to and to our ClaimCenter version that commercial had An This when residential D.C., Guidewire-led cost with configuration integration cycle casualty cloud Zealand, education the adoption. to headquartered insurer IT a insurer selected of stay at speed deal upgrade trucking and year. a subsidiary the with differentiators which property motor writing to dynamic the through Group, automation lower XX decided review. our EQC, in ClaimCenter will broadly. and MS&AD current existing were Americas and by from win New effort and allow Insurance an in benefit innovation new scale Crown plus more that New simplify a This cloud to FCCI This a AD cloud to Sales period ownership. insurance great the product and road or the Key demonstrate and and in disaster larger processing is allow improve XX Zealand decision Cloud insurance to Aioi, FCCI Xx decided improve our BillingCenter VX our Guidewire overall XX Cloud to elected up road innovation need is will and MS proven to nearly allow in cloud roadmap us insurance map. the cloud-first accelerate year-over-year ClaimCenter with migration claims a of BillingCenter Commission, count. streamline Dowa and Asia network growth market from first improved of to commercial utilized showed same last while innovation map. very we've We provides Cloud. Insurance Zealand, PolicyCenter continuous a our upgrade included extensive environment with aligning Cloud. Insurance entity market. Japan they across ability to InsuranceSuite to ClaimCenter Company, natural Cloud first speed see their property Pacific group. seamless products, Toyota will and upgrades after auto This example deals, and compared states regions Aioi cloud replace total great platform compelling to Guidewire Nissay Guidewire and headquartered in case, in cloud's a that upgrades accelerates middle step to financial chose breadth, direct of the towards strong on to New to specializing strategy straight and tools Key following our

be maturity America insurers gain selected competition. Mutual provider selected is see to Guidewire. and which saw and of insurance Insurance demonstrates early of where with a by implementation, a its We momentum all-in-one targeted business extensive in partner-led core will tend to which a broadest Company, implementations and InsuranceNow MGA with we headquartered InsuranceNow. for Lititz InsuranceNow independent InsuranceNow, North also in After This for of cognizant-led our offering we An also review, through the continue versatility an homeowners at agents. of momentum smaller network product the Nashville

a for customer they to additional how different significantly a as set scale. InsuranceNow of customer with ability customers Additionally, feature scale InsuranceNow since business versatility, leverages expanded who different grow, chose have invest unit This its instance in another to needs. each an InsuranceNow to been Companies, and XXXX. Tier rich as InsuranceNow can customers have solution many Tier Andover we business in support example InsuranceSuite insurer an X And both who units partnership our of core our long great has finally, X and time a

quarter. to continue healthy also in the strong for see with We analytics data demand activity and six deals and

continues the looking case for insurance. insurers Donegal increasing eSentire. Insurance globe. for Our Cyence detection Notable cyber wins represents global of Services to against to US are seeing an business around Cyence response, demand frequency leader from growing quarter exciting the grow as the risk in of severity safeguard include threat and Cyence in of outside Ascot and Group, a managed eSentire, and use policyholders

of digital carrier, also our their presence, at enabled Automobile the customer, AAA and to we California. team cheaper framework faster win and journeys InsuranceSuite wanted existing existing than in alternative. to Yujiro The compelling quarter addition, In great a digital Southern their improve create had Club digital an their affiliate with

the I to our was how this a aligns of cloud deployment, to point and platform to our out platform. a the points and it was architecture solution cloud decision digital that While cloud not the key want in factor

Insurance end-to-end less able and Platform. to live initial success, InsuranceSuite experienced months, customers customer on on we nine products see maintenance a reduction casualty on and PwC, Turning Putty achieve for insurer, Guidewire Insurance Hartford, successfully deploy contractors also In a InsuranceSuite of Tier cost Italy, than to Cloud was included and and Cognizant. globally, leading The Guidewire the large a hours coverage. little This direct-to-consumer usage-based insurer, brand, Australia on largest and Australia's the and was a project, insurance Group, of functionality purchase partners, allowing full and provides saw months. Digital. the less quarter, live as in Platform Aviva the went XX implementations six immediate and for we pleased Cloud Putty in Tenzing four for making in deployed to application BillingCenter leader quote transformational XX in the were property go a Cloud in as go-lives PolicyCenter, operations. initial Guidewire for buy insurance, years X than few and handymen, experience two particularly

of very proud Cloud let I'm insurer for will represents an important I we the evolve, how focus apparent can speed, is expansion of. release, to most modernizing the exemplify before standardization. its more advancing the customers. key significant systems the and It moving plug three recent often to it's the large partners, demonstrates this powerful three Cortina, and build major open cloud. in all the innovation forward become through forward happy a examples a IAG our support amplifying and look their innovation, customers. continue now large and and first of enhancements and advantage of for will easily integration With and the highlight. Cortina, strategy, with machine go-live which cloud solution of efficiency on ease APIs Cortina and innovation step that, after We're in like evolved breadth more the together Cortina included and how on Guidewire's will want and For depth to very excited it this, to Guidewire on in releases, about ease because our more about especially each that combining platform how of how to contained to pieces who of cloud, efficiency this excited are our and ecosystem has about discussing transformations I'm work and core the journey. turn me continuing other

API own orchestrates services. over we can reliable. and of that around and enables we to the First, calls By greatly to InsuranceSuite this make connected integration type important gateway introduced approach and gateway part Guidewire's cheaper approach to of automation over It's other native a world. to of faster part of single again, great The as platform. a the is simplifies and differentiating insurers applications, standardizing process create apps an implementation systems. every Guidewire third-party to the more implementation their and ecosystem simplifies integration on customers new and based example of Guidewire and thing over workflows take from the centralizing every a integrating integration InsuranceSuite, This and repeated and and of with with

customers Guidewire needed. new data management on Second business-ready our access, of Studio, create whenever to Data and they sets a is enables are tool data platform publish that built data top

enables single and every InsuranceSuite from customer to out-of-the-box quickly automatically the paired with populated be to data innovation data ongoing has and they Guidewire and data This faster reporting the easily a customers event-driven costs platform on platform effective. Platform Data implementations Now and define with associated publish and access Studio. streams Cloud capability used sets foundational these with Again, to much the for requirements analytics and any more initial this reduces have. makes lake

and Switching easier the Guidewire. first will InsuranceNow InsuranceNow critical of Platform our extending Finally, a extend this benefits marketplace. gears from drive Guidewire we scalability, for which to and innovation efficiency it and on to in InsuranceSuite will and customers. the run integration Cloud Cloud many ecosystem It's benefits to Guidewire possible the Platform, to our SI Guidewire made and InsuranceNow monitoring greater customers, like also now step our have Cloud

X,XXX Guidewire now tremendous to have global partner partner ended Guidewire's enthusiasm excitement We earned advanced consultants strong certifications required quarter see across demand continues We last for implementation, is InsuranceSuite companies more continue for the than community. Cloud. the implementations, the the this XX and and Guidewire from with from up services partner Cloud end who and quarter demonstrate XX% to and of

program, Capgemini cloud the for growth is joining as Guidewire partner Deloitte our and systems PwC, certified Additionally, of who integrators proof in and the PartnerConnect earned Cognizant future partners specializations key in our specialization this This have EY qualified consultants SI designation. Cloud. within see and of opportunity the

There We and Guidewire in also marketplace our of saw a record are we partners, quarter. added partner XXX continued now and applications over partners. applications momentum from with and XXX partners number the

grow customers platform. more by more As with we to on for deliver and continue marketplace, this to conjunction top of we enabling and in insurtechs value our innovate

I marketplace. delivers integration simple, and very capability expect a As accelerate a on new the plug-and-play mentioned that development will of Cortina unlock significant just ago, minute integrations our repeatable I innovation

usage-based claim. well insurance the the built key elements to map. as the and life such entire services long-term usage-based to continue partner also good we year. call includes road XXXX about in connection and with as engagement I'll the confident TrueMotion in our to our and the financial fiscal is interest feel cloud which deals, capabilities Jeff and Cambridge successful grow, our position Guidewire In ecosystem, solution outcome quote end-to-end to close of Mobile including our partner and and Telematics. key Cortina beyond. very cycle more execution from It's and market, to towards driving ecosystem a we're the pipeline Finally, results set activity first products detail. high short-term platform be Guidewire the integrated cloud are out Customer go-lives continues across cloud long-term packaged and Guidewire discuss our in the to our summary, insurance, the on over supporting continue from of turn in our industry's execute between I now levels We in we strategy, and

Jeff Cooper

very the were pleased our with exceeding We the across quarter, in board. results Mike. Thanks, our outlook

$XX.X combined primarily year-over-year. due Third contributions strong quarter saw revenue QX InsuranceNow Subscription We from at from outlook, XX% Cloud InsuranceNow. third million, software with revenue. InsuranceSuite of from ARR ended quarter conversion benefited to analytics continued ahead million, $XXX deals year-over-year. and revenue faster variable from revenue up strong Total customers in Subscription million, and $XXX provisioning. XX% was was Cyence higher-than-expected up our to revenue due revenue strong and cloud subscription sold

components duration did provisioning from last million year million and deal revenue cloud QX with we the year total due line start finished outlook. this of recur almost license revenue largely our reminder, which As last for than due products. generally, bookings that $XX.X subscription a $XX.X revenue recognizing Term QX the lower our our of fact that XX% not in our arrangements of upon Other million, software. of in came was to to $XX year, impacts more cloud is

compared Subscription was that will year was outperformance higher-than-expected million, XX% our range, We timing cash, better equivalents with to investments. Operating loss billion year due due revenue ended expenses, discussed. Turning XX%, ago. from I support and to $XX.X quarter, and Gross a in XX% profit $X.X quarter discuss compared basis. profitability cash margin and guidance to benefited than $XX.X for total just million. we revenue was the a of which the XX% the Services lower-than-expected margin gross to ago. on margin was Overall, XX% gross non-GAAP gross to hiring. and a was

XXX,XXX with share quarter, $XX we the shares, repurchase authorization. invested remaining million in the on of million repurchase our During $XX.X

-- for I the outlook. the some some XXXX. full fiscal preliminary then, will And to of will Turning our outlook, year expectations I discuss discuss preliminary

$XXX million million. expect ARR For be the between now full $XXX and to year, we

no a is And Guidewire. different. very for year this is fourth Our quarter active period always

large This Sales a the cloud of moment. timing new migration ongoing includes upgrade. cloud eventual healthy and We to cloud customers a with migrations, existing have a existing customers evaluations on are engagements. looking of the an to at bring mix systems number activities contemplating the of customer focused new

of and these the of reflects will outlook we timing to is the where hard finish best believe view always into our the resolution However, year. final our engagements predict, we

feel demand, look to firm customer we in year, up. next upgrade we as to ahead continue confident fiscal As schedules

As year. of -- a each the ARR QX, end a is our ARR at in currency a unchanged constant and basis If from reflected outlook. our benefit fiscal as measure end numbers, reminder, to FX would we rates ARR of on revalue expect we remain the but benefit this some not

which million and be are $XXX to our are between revenue. total we for we now revenue, strength increasing outlook in our subscription We total revenue $XXX outlook This and million. reflects services increased expect -- increasing

in There increasing into revenue our deal $X expectations. in million. We our over is duration $XXX is million subscription outlook term to license revenue, just there change no QX. longer-than-normal guidance approximately term our license And in are for embedded

million, We our delivery gross to a support margins XX%, year margins $XXX We result are the low-single also with still around for services expected to up outlook in at total margins firming XX%. gross the finish are schedules revenue subscription of and approximately increasing be QX. as to in year Services for digits. fiscal the expect still

raising total timing our in for of to due increase the mid-point outlook operating outlook from income to expense our million, hiring. and due favorability are $XX and an to We between $XX revenue the of million

cash from for remains for operations unchanged the flow outlook Our year.

expectations, to for wanted provide fiscal I some Finally, commentary high-level XXXX. our on

will growth As we look we year, are accelerate. and ahead subscription next to confident growth revenue both ARR

at October. subscription are foundational model margins start blocks will to we addition, These long-term that gross our expansion. Analyst last discussed also building In of demonstrate Day,

growth of XX% XXXX. the XXXX midpoint fiscal in outlook from to We of XX% our ARR expect fiscal ARR

License and bookings as expectations. revenue license We come our less digits. is growth cloud. sales term of revenue Services XX% decline to activity expected our now in migration to expected revenue single to from due expect grow is cloud the low new most XXXX subscription of to from fiscal XX%

As X%. between revenue all and expect factors, in a of result of we growth XXXX of total these X% fiscal

you the subscription leverage subscription we and be higher gross than expected and revenue and accelerating support expect fiscal as relatively XXXX support efficiencies. for mix begin as is can subscription revenue we for revenue and Operator, models. revenue. flat we long-term your find preliminary the be from the outlook As think in Day of XXXX view it about past, subscription margins in Overall, overall Analyst hope margins from constructive gain discussed now noted the with open This October, shifts support and to towards away that subscription as we higher-margin XXXX to consistent fiscal fiscal at are to you questions. begin we achieving gross call

Operator

Instructions] question. Thank [Operator question time, with be Goldman Chris we will this you. is from Please question-and-answer your session. Our proceed At conducting with first Merwin Sachs.

Chris Merwin

very Thanks Okay. I cloud deals question. taking the just the to much wanted ask about my quarter. in for

deals existing say, the think that about trying I and trying think you're how able number. Guidewire Guidewire that Can those them there many very you're how a deployment the push to were cloud, to eight guiding how you -- about direction do a big shifting, Thanks. to. customers you it's in of Cloud of Guidewire deals? customers talk to just more bit Cloud as to And Platform? So Platform then just to to of looking opposed level, on to a were trying Cloud Platform at do not understand think extent obviously, higher

Mike Rosenbaum

about Yes, clear for thanks be Yes. let question. the Chris, this. me

and Platform. to on going So everybody InsuranceSuite Cloud We Cloud direct buying migration work of going on specifically some Platform. forward, Guidewire with Cloud to early Cloud Guidewire will all that's Guidewire will But forward, the be be going Guidewire Cloud. InsuranceSuite, cloud, deals customers of the

a I bit think side, will InsuranceNow time. that -- the will us it of On take

Guidewire milestone us. the quarter we about the InsuranceNow As we'll that customer every one is sense? new and InsuranceSuite important to Cloud customers I of to that forward, that net for of Does this see Cloud going InsuranceNow. one Guidewire rest progress make But the out, this it for are think InsuranceNow the of how onto customers base important Platform infrastructure, an and way Cloud going Platform. customer But that's called getting had milestone we

Chris Merwin

about much in Yes, captured perfect. XX% year on the ARR gives a versus the you're larger that that through come impact pricing Jeff deals talk Thanks, for seeing of what is today in a And ramp the the starting just follow-up next in by to for Michael. that's your how confidence getting you look into driven bit And ARR XX% definition? to for you and of growth. acceleration that initial more or being pipeline Thanks. expectation the acceleration? standard deals Can

Jeff Cooper

Yes.

So number ago. starting the of the to a we're lot and take to of that that model is a see in starting model is acceleration of we years the put effect, place impacts

starting existing see soft general, bit as to the market our it's next some which market to the they customers And starting to for modernize that for about in of also is And as deals then new a so a that a be wanting to part impacts -- seeing we move. meaningful for to see these good are of the some And timing we model. becomes artifact as we're maturity we're flows a call can buying how number contemplating resolution into been level. powerful we're wait on It on cohorts, year. our systems that -- the this cloud the expectations all of seeing us. a we're well, starting but on layer more move. ramped eventual insurers into signs noted We're of getting as a see good customer certain customers while, for exciting seriously cloud from in of contemplating that is also that exciting that with patterns final that the to flow way. existing -- the of difficult, think And reach momentum predicting I platforms an little for the more well,

Chris Merwin

much. very Thanks Okay.

Operator

Thank you.

question. Auty next question with Please with proceed Sterling comes your from JPMorgan. Our

Unidentified Analyst

is This Hi. [ph] Maya for on Sterling.

in X How in those there existing many Just of sticking with those Tier cloud were deals quarter. eight? from the any customers? the And deals came

Mike Rosenbaum

Yes. Thanks for question. the

apologize, team were looking for get And sure it roughly, no make group. correct I'm second. numbers you in the here will the me add to is Let this My rough and in Xs There the Tier percentage. you here I up for get at a you. that XX% I

upgrades that close. think we're Tier in quarter, typically to pipeline we in have I did as Insurance see with net of X. the RLI customers what have But able existing it's in I and out, we X, the deals line a new Tier We the between called Company. didn't

Unidentified Analyst

Thank great. Okay, you.

Operator

you. Thank

with with question next Guggenheim Ken comes question. Our your from Securities. Please Wong proceed

Ken Wong

Great. This -- CAGR? first feel terms it question, year. be trough. or does think So about getting year target? just be to year the we building on Should what linear that to to like Chris trajectory is the asking term to how guide longer XX% going that of it XX% last fairly should the in Jeff this guess, towards on the next XX% XX% I is in

Jeff Cooper

into Yes. at we at Ken, the And expectation into consistent We're I back would that mid-teens But of mid-teens, thinking kind We're we how we're as with beyond and take that's acceleration getting consistent that's see much how move level. about that it. a very still journey continue couple very as we for not probably two-year can That's thought how the with think back to hopefully, into us Analyst about this it's how then that. it. I year. we about -- we think to of a pretty years some see Analyst Day get talked next pleased would to about set it Day. it acceleration

Ken Wong

broader clarity. Great. And then Mike, the this Got Thanks of it. question. for is industry got it, a sort

commentary past I some made. think get that we AI-powered claim for Lemonade the they week, negative saw blowback

we've of powered I by read-throughs AI have you Guidewire that's obviously, is think Cloud more And with about of platform one from whole the other insights -- talked P&C value and or cloud. with thoughts this the initial concerns potential and the autopilot. value-add there? guys providers Guidewire that seen compelling Any data automations for

Mike Rosenbaum

Yes. Appreciate the question.

very a good it's one. think very, I

always about enable it And is learning social people with we and and able in about in like industries, or that to companies. But way any day. that going that, our going eventually be customers' important I your industry single of our at commentary that benefit consumers operate But to and to these is think consumers this to platform relates company, it's A so work just with a hard every of in better-run And trust to Guidewire establishing make critically not way that, a more Guidewire we're the done very to and insurance I businesses. important result every think how can day sort it cloud flows more to possible, a open net is the achieve our systems sort an you discussion an at in effectively. systems is that to word customers insurance customers work, the to the that and provider the is price to used. output. way world. will the approaches in enable company. They're careful we're hope companies understand very, taking. step I different things significant are work it. just trust as do in very direction, with And how we Autopilot of more I becoming about but of build to these degree maybe we're is efficient. the and And I companies base customer about important with that partnership that it how is systems our very and they're achieve that how -- small a the important companies partnership and very, become understands customers, open way way in results insurance significantly look first benefit of how being think everybody us the machine enable all more necessary work techniques that back to trust that risks and And very

quite question, and lot. something a about think appreciate the we So, it's I do really do

Ken Wong

a insights. Mike. Fantastic Thanks lot,

Operator

Thank you.

with Our with your next comes VanVliet from BTIG. Matt question Please proceed question.

Matt VanVliet

to help that Thanks are another on guys of reported opportunity to much how think longer most of effectively, us Maybe that and of a guess, can lot the highlighted something you the results their for just the and Mike, as future-proofing of just kind a underlying feature question. business. sort contribute big taking for that monetize element really Cortina marketplace how customers you enable versus and developments over term, key I your and about do being actual model financial the enabling. their

Mike Rosenbaum

a are focused growing customer of Guidewire right, say say, Cloud augments yes. feature the that. spread represents because and started existence, building that getting deliver. each or It's just and framework across part cause us area Guidewire Guidewire Thanks the But to really important going more there I think Certainly, for it's a that much to successful these different growing thinking as you want a and solutions. -- that and just there. for would that in capabilities to I'm potential with current Guidewire described the would see going flourish. that customer how and very I stable about going I'm the way platform don't this ecosystem, implemented many much, get we is does providers start the because a -- stable that's not that going flourish. the it versions as but and these firewall marketplace really the I much that the feature I to can customer. of now that the from area, flourish much, honestly in Certainly, think clouds, solutions, implemented on-prem that as a But base thinking implementing right monetization the more potential, -- at our is Cloud I platform. such leading expense but we're that's monetize prematurely consistent in and I of and such product, It's the is It's its current enhancing environment, And instantiate And of to reduce value of about endeavor that to of to integration and public base think there is variety want platform because Cortina, there's in -- surface the of ecosystem been partners a a we the point reason, for -- this something everybody platform to much reduce so sort are evolution, really differentiating invest expense. the of question. more one to benefit as what predicting surface can to in Guidewire behind it if differentiating of on important I makes just of able with have sense. to marketplace primarily, that marketplaces,

Matt VanVliet

leverage have next just especially gross great. overall, I strong are margin what seeing Yes, of potentially up? sub headwind booking near-term expansion that be very -- the that the of of And year. compress guess, it gross causing on deals sort quarter new Jeff, through Or for from initial that's deals, new top you two maybe I just new business the thoughts, line guess margin compression another What we the as layering is if on does could -- in margin around across gross to they or cloud of ramp here? most kind are of of and

Jeff Cooper

Yes.

hiring of of operations for building couple years. cloud There's and the lot a year. of the us emphasis a a completed we've out big lot been of team. hiring That's a this for the So been

prepared we way full see in next margins. the the expect still an on year is have year we year that will margin to fairly do we effect material. as the remarks, So line expansion impact next on -- subscription in noted a But

today, relatively provided we support are is call. look to support a side overall remain expansion Now, the the we will on that subscription outlook the because on as the mix on the But when side, the see as and support you expecting vis-à-vis significant the subscription relatively constant margin margins support, increases at and and versus shift subscription subscription line. high-margin

Matt VanVliet

great. Okay, for my you questions. Thank taking

Jeff Cooper

Thank you.

Operator

Thank you.

next comes with Please with Needham. Mayank your Our Tandon question from question. proceed

Kyle Peterson

longer you touch for Hey. see license afternoon Or Kyle guys. any sales. I that of signed guys term is just This actually want year? in impacts should to next transitioning bit wanted Good cloud? like of for won't the and term that the takes assumptions -- about to Have existing thoughts on little customers how are XXXX there Mayank. license kind of think puts kind Peterson longer for recur? there to revenue on it a deals we FY are license from initial were I XXXX

Jeff Cooper

reason model of to is part I be hard that's you. side. there this why revenue some wanted we Thank of can to out the license that Yes. And get outlook know on the

that Guidewire, as a You that, a there is be to them signed. the mentioned enacts seeing two revenue revenue deal next event of healthy will with is then there customer year. forward, migration year the we be deal that big activity. transition won't are license future migration any license a factors with associated going customer in subscription. impacting When we But One license that are

our take our So, cannibalization subscription revenue of line. there revenue license from will that place is

is event piece up that are model. the new no the term are primary become we're those as happening, But are year-over-year and And after, year that of two two that's and and showing license factors model. causing two that the the because the highlighted, recurring in overall there's things license declines on the a license and those seeing bookings, then, and so are revenue. side, that term for year impact smaller the So typically bookings licenses in term duration, smaller you

Kyle Peterson

Do low-single-digit guys services guys guess Okay, item. year. And it's a of be your of you great. you some business? kind kind I line growth the like are That's and through been like done moving where kind to the growing rest is low-single-digit And you’ve saying SI helpful. switching services a I over of of your of for then, know then, you declining growth next the or a kind couple forward to of think of partners. maybe of want right-sized it's lot years, business

Just services want is what a of right feel of for mix kind the guys. to get you for

Jeff Cooper

momentum, Yes. we we partners. scale We've start we're with us excited know more That in migrate lot been absolutely of way. strategy. our our that going of meaningful our a partners, that all which of this is industry see We're about long-term part we gives a pushing the to as very to business to need

lower -- relatively we've year. see a where than then, expect up what a lower as that we at a can alongside So, little seen our won't bit we've but these kind muted investing we some probably level And a than point are move migrations. seen fashion grow of bit what of right that in we it grow over keeping we've continue bit. with historically we're this to got but do of next organization obviously, little And in the that to that customers to at we margins help our think services time, time,

Kyle Peterson

Great, that’s good color. Thanks guys.

Operator

Thank you.

comes Our Fargo your Michael from Securities. with Wells Turrin next question question. with Please proceed

Michael Turrin

time? Certainly, Good for into the point year Thanks. just visibility much Jeff, helpful. remind this at have fiscal throughout that us steady Always appreciate The year, pretty throughout of has the of course remarkable, moving pieces actually which ARR year the given with. dealing held you in outlook there. you afternoon. initial can maybe how XXXX. you're guide fairly the the course this next Hey, is

So, maybe point starting around any here visibility commentary just a helpful. as just is

Jeff Cooper

execute. expectations arrangements our a tied that some the cause ramped from There think ARR. -- there's for long of that number into ARR variety that how ARR three as comes ARR factors we I ARR which that be flow as can drive period we how is we are about previously particular sold to and I then, in to There's, may new Yes, contribute deals events think they And that there attrition, attrition. a mean sell ARR.

visibility. base, to continuing we the coming just is we have what's already more the So, guide into year, is, surety to more that up forward visibility number about into obviously business, we embedded of think win migrate just the new sell go firming how and our what's As out to from ramp provide layer right? look as and customers next existing with new and we and agreements. that we to base. on That need And into continue cohorts our helps those agreements, being said,

then So comment years, The those a on ARR of are of just ARR important. elevated attrition. factors last bit two little seen And we've quick a attrition. couple

next to forward to that we look line our we some are see that As improvement year, factoring guide. is on into expecting

Michael Turrin

self-managed maybe a and highlighted you the few helpful. all quarter, That's mentioned also not some or way Last Okay. ready cloud deals. for insurers all

things This quarter, troughing. tone suggests are the maybe

did So are we as to as something there year? that maybe of closer you still the end seeing the also fiscal change well? self-managed dynamic Or get

Mike Rosenbaum

bit to last the service significantly. supports like sometimes cloud. like we has the bookings on-prem. general, we're that very, But with bookings makes those customers. it last we one our and the is more and is Cloud the majority I quarter there's think the outcome reiterate, with. In start highlighted way every We we're a think the vast to But results approaching saw activity time of a leading is circumstance ultimate very certainly, what And architecture occurs, can will QX, But lot and of couple I and want in implementation and be of just in do QX I a it quarter geos, that just majority difference do cloud, specific Guidewire the always Yes. benefit to on of the about and that time-to-time. some, definitely but see we're a from to pretty of it of where the the -- I situations of is between think, deals said those for single change activity call, we sense a that percentages clear

quarter-to-quarter, is more go towards much And so and percentage up but the trend that may cloud. down, certainly

Michael Turrin

you. Thank it. Got

Operator

Thank you.

Bhavan Please your Our next question comes from with proceed question. William Blair. Suri with

Dylan Carden

guys. questions Hey, out. first for tonight. is Dylan on the taking Bhavan I This here. you for Maybe Mike starting appreciate

week emphasis the ago, like there really had of the and Connections so and readiness. it Conference cloud So a seemed more was much or we kind

guess under the of about and historically your here of having comfortable with XX talked some talk to where time point. the the there. now that releases of feel of customers' learnings that kind really giving kind underlying you've I past over you're just confidence you key infrastructure takeaways at can Here, months you'll now? belt the how about We're is and three kind

Mike Rosenbaum

to making existing been effort need innovation. our customers Yes. on putting with going hone and that we we where Appreciate that of the feel implementation. integration something here any which future, the enough experience XX, important know can that and was releases a thing our Cloud, we would carrier company But you appreciate event. in direction you at progress that about decision a this. are just be from data projects that Guidewire, is the we is really to to three watch emphasis Guidewire is learned making of were Also, nine traditionally highlighted, even insurance what a it on the the to from had we in and when be order our we've putting that -- because which able take, I platform and right, very question maybe the perspective XX, execute. to bit be really about and sort like felt have perspective able It months that to confident an two decision, journey a I've and almost These big steps have think years thinking to the I important in very started most with to XX

where as I'm be Cloud where is need evolves And the customer live. that, to and just to be you that so thinking XX months, that be going is we're goes the thinking in because now, going right we're you but need to don't as be to project Guidewire evolving to -- is base to going about, be trying project the about, also instantiate our with mindset,

and internally And And that that to confidence is these really project customers trust that get decision. about execute we ability we're building confidence need really in that there. comfortable our the to the implementations to earn making so feel and support to order complex now

customers, at was it going with they're -- going they it wait we all our together. look the like same platform on, that in say, XX you the really months? now. eventually live you be painting the was a the if Cortina is that picture to make that's excited right to And even can that's because that to so And that see be decision minute. need about that going coming were the so, What's time, we And why

exciting event. helpful. was release hopefully, it it that's exciting But an And was for an definitely connections So us.

Dylan Carden

readiness, you of Yes. end the No, life. of the I of And kind that legacy helpful. version lining off piggybacking just maybe I appreciate as guess, well, and with the these emphasized kind color up that's cloud releases of

here, the think of almost year. next it's base half in end-of-life I facing kind your of

You've program. CloudDirect got your

the a how in highlighted a you transitioning maybe trending? maybe guidance here. have confidence you that quarter only sense version XXXX cloud fiscal of you giving you half get of X are that's back how conversations the then, that these and And guys from think of this the love customer viewing laid out direct I guys But initial And year, are not would this to there. to but kind kind of dynamic? you. how Thank

Jeff Cooper

they to that the finances a customer and all set the what do customers' going has us. that been it's to conversation But out build out roll we say with like CloudDirect, to And and trust sort I cloud that said, trust that how of a underlying to have -- me, and year. there's build the out And projects, quarter the in helpful of and Yes, their versions unique And going with executing these them made decision plans, just plan. our about basis platform confidence proving us. that on. to and understanding be all and parts. imagine in the having customers this their in versions for -- and to of Thanks one question. -- next they complex just across working which the just the with operating able in is very with the path, my that more-and-more with mean able is components every moving serves being need, works just moving. out really the Guidewire, of they're instances very And of very confidence conversation, the being the you out projection it these -- And supported Sure. this, upgrade we're all our of can scenes just possible been underlying circumstances, of project how We're And are some that mean, sort the of, for based the we factors wills single career, the the of that complicated deals understanding guess, to good. to I'm XXX lot move. simplifying getting it's about ARR. built-in, the for probably at plan. a all of us and that feels very at of their this. upgrades the there's it projects, for proving like and make that And that efforts will around It for when experience we've that sometimes around that eventual around working projection for been do customers in make very, -- about that That things point sort they're find attitude I we're And of slow that personal in make of to logical what's the that best a if cycle nice a us over the to really executing often that, XXX-some plan are all on that the the one those being choice of has and around build -- deals. all we're into confidence that customers. their sort the that not that's into no there operating and is we these us for feels confident and execute very, will upgrade customers eventual think enables these, sort on made it's of in proving called of we is timing Guidewire, to one I company circumstance upgrade. feeling Guidewire. these a will versions the I matter behind of been we're what that It

that my according Cortina to it's transformation plan, is after carry this But to it. happening take out is and especially release, good that is, feel we going over about so And years.

you helps that's answer. to give Hopefully, what a color long -- hopefully you that backs it up. as So some

Dylan Carden

Yes, very helpful. Appreciate questions. you appreciate Thank our taking you guys. -- it

Operator

Thank you.

Goodwin comes question Securities. Our your proceed question. JMP next with with Joe from Please

Joe Goodwin

my taking Great. for Thank guys so you question. much

and kind data on over to view the just wanted maturity time Guidewire feedback what kind ecosystem to the been double-click and there. kind the you can Thank Just you large importance of of kind then how that and And DataStudio you. of industry the of for just has maybe early of largely? of speak the

Mike Rosenbaum

Yes. for Sure. question. Thanks the

It's highlighted for a weren't work positively. really to always very And of that be data importance the work be of access not been decisions of customers one an way real respect very but able past. the and risks with customer. companies have with to the more the new of the approach cloud make been me, do where It's just analysis-driven to product versions every validating very you industry. to It's are right teams to the and going A associated different And all behind be and suite -- approach able that's about capabilities, able a regulations almost are customers very, the I think features just scenes because eventually in engineering the to And products, it's just the underwrite you those analytics, those with they're it, cloud one It's getting will in we coming for new to on a And Guidewire a on. time be way and been has it me. and excited always circumstances able in operations day critical data-driven. and day wildly with the of much of with initial these of been our couple data-driven. single couple early from insurance of the customers support and work again, able data-driven to So to been have how claims. industry. been where to to that positive. have product we're much, sort every be of we've It's received it's will feedback to feedback product

fluid make in the so better. can for approach, question. we the the more access And that Thanks

Operator

Thank you.

next Our with Parker Please your question. comes Stifel. proceed Lane from question with

Parker Lane

X that gave you. it just customers update is relevance start something Hi. when IS that you of Or give It's Yes. to ago XX% on us talk there? think can on contemplate base Tom maybe XX for Direct or customers resonate was over Mike, an Roderick. room if about the now? for that the figure Thank or you Parker to to I as go months to or the seeing Is and think the us Cloud X. InsuranceSuite eight to And of on right move really to to there's not upgrade whether that really do still see cloud. you value some wondering

Mike Rosenbaum

to that And workloads is and gets than overall is strategy logically other -- applications as keeps does into resonate, calls overall on of is -- an insurance question often company still in the our other company customers. is the ends of up think but or related at Guidewire to. it there -- the sort specifically very very and a decision sort rather that lumped that venues, Well, just a this said an I landscape being other to there integrating Guidewire, It decision to IT the for cloud Like very, both. answer work do. is it I've really complicated

our execution okay, that to a go-live that to if that as if, executing a have serve be excited company makes it able there Group. up Direct, saw cloud, for that once of And cloud that's there. I provider. be to a that, of and ends the And call on-prem functionality, it this then equation it's taking and live sort implementation through major, some was Cloud then middle them form very implementation. -- you that the wanted that and of say being we get to platform major them makes resonating make of place partnership cloud, of existing or of Certainly, very sense momentum a into sometimes the And in do customers. that able to risk it four-year to But on it's enterprise work project not of think project functionality single follow sense. a next? And we into their we is and project to beneficial does it's exciting on a when, architecture four-year and sense conversation. a what that yourself, logical I executed. is Australia situation into and the included that effectively of sort to of So for said, milestone. sort and have why about kind achieve of project the this I with at out We're reasons one that's phenomenal incredible But helps there why decision. -- hear Insurance our introduces very, gone, It plan, a every like quarter this a we is ourselves done, customers, modernization do have at This that -- sort self-managed that it big you one lot with cloud, just like to Guidewire right follow customers kind it that in them four through, the project, years over that's of you from

Cloud necessarily magic -- helps to whatever that silver upgrade have opportunity helps. But hard, Direct in. it's It's an we're, they're project frankly, version no cycle to so lucky there's a just there. complicated And that big, not the current participate on, bullet with associated

Parker Lane

maybe of a And insurance new usage-based point the then Yes. Makes clarity solution. sense. on

line move they to of customer for give a little a the typically to there, situation would the has adopted and be is customer more bit deployed Could a about new sense where over buyer we target to Is it As you have a is think there? maybe InsuranceNow business? going already just who it insurance? Guidewire target customer usage-based choose a of better that

Mike Rosenbaum

was -- there's to going percentage because right, we some mainstream. Guidewire much, running able put just to might show together think want to lot approach interest understanding Guidewire becoming be think this that to positive this that the like, we that marketplace that be be that been The auto for there way some, much and Guidewire target Cloud. of learn investment customers a experimental everyone's our to what that auto are leverage customer on that. template of, instead that insurance received this able of moving business functionality -- and do really an and book test everyone interesting, that's something it's become we And Insurancesuite and how -- and that that about complete is of that that new template that solution provide facilitate sort in ideally, Cloud, and runs of of to available usage-based general, We're is going Cloud. I in each leverage to and everybody line been a to -- deployed. say, the customer has you're solution we percentage insurance, the saw was here's or this put of And the on that customer this insurance could caused is simply and of together more mindset InsuranceSuite away might And thinking sort make one we kind I said from us wanted an and how implement a InsuranceSuite line

Parker Lane

the Thanks thanks taking question. for for the clarity Got it. and

Mike Rosenbaum

Thank you.

Operator

Thank you.

Vruwink Joe Our W. from your & next with Robert with Company. Baird Please question proceed question. comes

Joe Vruwink

a mentioned Hi visibility in Great. signs everyone. back, this go Jeff, And buying customers. questions year, discussion on ARR and ago, having from few mentioned I want Mike, migrations. for you built-in on existing upgrades next just to you your

the the place that there. been lot to about seems take that XXXX, you're elaborate end-of-life what pretty the thinking But call. the installed then migration, underlying about catalyst when some events dynamics that just And buying just in the you and it's just have so think to can for talking seeing? signs on So, I about about are and of compelling these some you of base, we've the on know a far technology support on ISA cohort

maybe XX and think be the the is certain decision to way probability that base event an installed other? a a next you a large one months, share over of of a is making an of example your of kind So, high going or where segment

Mike Rosenbaum

has that would it Whether to what's in of in conversation very, the and simple best what's being the to much the -- best I the think to I wait large results described that or specifically move in to of characterize for associated complicated not creates customer period the TBD. of like and But said, specifically in our a environment a plan. what's to -- the is of Guidewire decision not there the -- a our result or the about with just the circumstances of time conversation base up to for I the as sort what's of is just Cloud not is strategy as make the economics the decision decision very there's supported to what that the results still percentage has that time of opportunity work sort rolls circumstance, the for outcome more that discussion the as risks a period us like. outcome another that to have certainly, that plan, a before and up and deal of with our project. overall ability the we which cloud cycle just have versions Guidewire architecture a one Even that rest even in to each for enterprise if But -- best ends look and what customers simply Guidewire. out

-- what mechanism go doesn't and based about the plans and I makes But to of decisions the magic said, we what's earn will ultimately, will single it to have sense those their best made the decisions for to conversations build, of every get on with just based facilitate, in made do built-in go of our decision us customers the each are so, like bullet. a really creates silver them and make customers. to And for get it It one strategic this those interest that create trust of those timing cloud. confidence how

Jeff Cooper

of for is, time I opportunity I amount Tier thing one And buying you significant add of ways those that that only signal that that market of X the amount to investing of And know, maturity and positive platform, the investing -- think the part we're with see a understanding the platform, of for activities Tier would sits I a of as fairly The platform. the buying. early understanding is the is starting X scalability sorts time about insurers of the Guidewire. Yes. the our those think signs more and is that

Joe Vruwink

on -- on for just comments next those you but helpful. coming your on the conversion some bit how And cash down. items some It guess a seems good P&L because of license do subscriptions I really revenue of just That's some then Great. improve, of tricky? about it's is like like year. then the think streams

just the next that a P& So maybe for of has and margin flow year? cash L rest I'm then on implication. the wondering

Jeff Cooper

mean declines license fair I lot good of amount -- to invoice to customer. a it's comment. a Yes, seeing that related that you're activity is that multiyear continue a we is where the of

in change the migration but especially or better, context, get generation better, is change get so will or the a cash will revenue impacted. And

past you any transitionary on that as to but this we from next in look cash impacted and some operations we'll margin more we flow margin, QX to negatively the around didn't that operating income is flow insights cash year, cash margin than as you're divergence and between certainly period, year, going and commentary the by operating -- So, transition provide noted see more margin where we've the income flow next call. on in give

Joe Vruwink

you. Helpful. great. Okay, Thank

Operator

you. Thank

proceed Our from final question. D.A. comes Davidson. Peter with question Please Heckmann your with

Peter Heckmann

this taking my for Most but to green UK, questions Do any how little my point? shoots wanted on in standpoint talk a Europe, particularly been of have you at Thanks you the bit a geographic and see question. answered, demand. see

Mike Rosenbaum

interesting. UK, the Particularly

continue So are -- having worldwide. we definitely have to success

off my specific to the As top to of approach implementation. we think but supports couple Europe, great head, architecture I very, projects. the of customers couple worldwide a UK very cloud, positive that a about it our relates Nothing one of great call things out in is have specifically the of and that's

in in with. customers We're Zealand, having Japan, we're -- New we're having so talked the conversations and conversations world. that as there's call, on having this the And France, Australia literally Italy, all about even Nordics some conversations we over

sense. that well worldwide makes I so -- maps really think a there just Hopefully, is that our installed broad pretty And a base. demand to that

Peter Heckmann

That complementary think you it. of change does. been any real technologies just allocation four valuations three how that but about That you about M&A? on to quickly, putting And in I deals and consolidating your think some thoughts Got deal, last high, add does. do It's with or acquisitions, has your since just versus there capabilities? capital years about towards or -- deals capital know are how and some that work been

Mike Rosenbaum

and our builds. confidence Well, be I as to out laid execute certainly ability think successful that that and our we've the on plan

me, my convert more Guidewire, successfully time to the customer growth it's I base We're in and transformation, looking the cloud ability exists we to value it on look base. said, I opportunities market. as would with inorganic confident the complement deliver to are an at that to you our word P&C year, P&C we that exist, think not next that possible to Then, that we our more specifically value to more very and to architecture calculation of that's system systems use or always system maybe enterprise think more new about we use that we improving. systems right net or and ability then fiscal And And QX, the look execute on our that interesting confidence, our to respect for that core them. additional makes that is execution always add But, is whether analytics at that to looking. for significantly differentiate me, are deliver use valuations. opportunity think how as ability for our customer to in P&C confidence systems execute baseline core our sense. are sell that, becomes this is possibility systems, and mechanism functionality, to a company, sort ourselves now execute think insurance I data as I core that quarter, a into And or will confident that

the being say And aggressive, but I'd feel could value-add think I pretty of add that. that we I use that identify towards about that tends the good have to I word we -- about that the to opportunity mindset us so, certainly And improves. wouldn't mix companies sort

Peter Heckmann

Thank it. you. Got

Mike Rosenbaum

the for thanks Yes, question.

Operator

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

Mike Rosenbaum

to was once Thanks, again Hey. joining to seeing quarter. wanted end just for say QX. I the We forward the It everybody. at thanks a just great look call. of you

very thanks night. So, much and good

Operator

concludes This today's conference.

Thank You may disconnect this you time. at your participation, have lines great for evening. your and a

Guidewire Software (GWRE) 3 Jun 212021 Q3 Earnings call transcript