Guidewire Software, Inc.

Greetings and welcome to the Guidewire's first quarter 2020 financial results conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your presenter, Mr. Curtis Smith, Chief Financial Officer. Please go ahead, sir.

Good afternoon. and welcome to Guidewire Software's earnings conference call for the first fiscal quarter of fiscal year 2020, which ended on October 31st, 2019. My name is Curtis Smith. I am the Chief Financial Officer of Guidewire, and with me on the call is Mike Rosenbaum, Guidewire's Chief Executive Officer. Complete disclosure of our results can be found in our press release issued today, as well as in our related form 8K furnished to the SEC, both of which are available on the investor relations section of our website at ir.guidewire.com. As a reminder, today's call is being recorded and a replay will be available following the conclusion of the call. During the call, we will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding trends, strategies, and anticipated performance of the business, including the market shift to cloud offerings, our product roadmap, and future product availability. These forward-looking statements are based on management's current views and expectations as of today and should not be relied upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. Actual results may differ materially. Please refer to the risk factors in our most recent Form 10-K and 10-Qs filed with the SEC. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of non-GAAP to GAAP measures is provided in our press release. Reconciliations and additional data are also posted in a supplement on our IR website. During the call, we may offer incremental metrics to provide greater insight into the dynamics of our business. These details may be one time in nature, and we may or may not provide updates in the future. With that, let me turn the call over to Mike for his prepared remarks, and then I will provide details on our results before providing our outlook for Q2 and fiscal 2020. Mike and I will then take your questions.

Thank you, Curtis, and thanks to those of you joining us for our first quarter earnings call. We're off to a positive start to fiscal 2020 with total revenue and EPS that were above the high end of our guidance ranges. Total revenue was $157 million and license and subscription revenue was $82.4 million, both exceeding the top end of our guidance. ARR ended Q1 at $463 million, up from $460 million as of the end of Q4. Overall, we were pleased with our financial performance in Q1, which is always a seasonally slow quarter for us in terms of new sales activity, and we believe somewhat impacted this year by our strong performance in Q4. Connections, our annual user conference, was held just after the close of the quarter, and was the first I've had the opportunity to attend. It was an incredibly successful event and an opportunity for us to lay out our long-term plans for the company and for the product. It was particularly useful for me as it provided an opportunity to hear direct feedback from customers and partners on our vision and plans for the future. This was our largest connections ever with nearly 2,400 customers, prospects, partners, and employees participating in over 100 workshops, panels, and breakout sessions. But the statistic most impressive for me was that nearly two-thirds of our customers were represented at the event, which I think is a great indicator of the value created through our specific and singular focus on the P&C industry. We presented a live demonstration highlighting our product vision, featuring an innovative use case for rapid design, delivery, and testing of new insurance products. It was powered by Advanced Product Designer, a low-code configuration tool that will enable insurers to rapidly design, simulate, and deploy new insurance products, and Jutro, our new digital experience framework for rapidly designing and developing digital apps. We expect Advanced Product Designer for Digital and Jutro will be available to Guidewire Cloud in fiscal Q3 and self-managed customers in fiscal Q4. We also outlined our plan to improve the Guidewire Cloud platform through automation, tooling, frameworks, and common cloud services, and the Guidewire data platform a PNC insurance-specific data repository and factory that continuously collects data from internal and external sources, enabling insurers to leverage up-to-the-minute information to make smarter, faster decisions. We highlighted Science for Small Business, an on-demand risk assessment engine that combines Internet-scale data collection, PNC-specific AI and modeling, enabling customers to quickly understand and underwrite small business risk. InsuranceNow customers and prospects reacted positively to the newest version of the product, which includes a new user interface and our new prepackaged implementation option, InsuranceNow Go, which we estimate will reduce implementation time and expense by 30% to 50%. I was impressed with the team's ability to deliver our message and connect with our outstanding roster of customers and partners. So a big congratulations to the team and a thanks to all of our customers and partners who helped make the event such a success. Connections is not only a forum to exchange ideas and best practices, it is an event that also serves to help customers and prospects firm up future purchase and implementation plans. We are continuing to see the market shift from self-managed to Guidewire Cloud, further validating our increased investment in cloud offerings and delivery. We're still in the early stages of this multi-year transition, and the nature and complexities of these transitions warrant significant consideration by our customers. Therefore, just as we experienced last year, we expect cloud demand in fiscal 2020 to be weighted towards the back half of the year. There are a number of highlights from the first quarter that support our confidence and our expectations for the remainder of the year, as well as our long-term goals. One of our largest tier one customers selected InsuranceSuite Cloud as a platform for new innovative greenfield use case. While the ARR and DWP associated with this use case are small, our platform was chosen to provide an agile framework for the carrier to innovate with. We're excited by this potential the deal creates to demonstrate the value of our cloud solution to a Tier 1 carrier where a much larger overall opportunity exists. Also during the quarter, we signed Pennsylvania State Workers Insurance Fund, who selected our full insurance suite core as well as our data and digital products. With $225 million in DWP, this win illustrates our ability to serve insurance carriers of all sizes, as well as the willingness insurers have to license and implement all of InsuranceSuite as a single project. In the first quarter, we extended relationships with 13 existing customers who chose 22 additional products. Among these are an existing policy center and billing center customer who licensed claim center to expand to the full insurance suite core. We are also happy to announce that an existing customer chose Science for their workers' compensation line of business to provide a more complete view of the underwriting process by augmenting basic company fundamentals with behavioral insights, social media sentiment, and environmental influences. This deal is particularly notable since its application to workers' comp demonstrates continued momentum in our approach to broaden our data listening capabilities beyond the cyber use case. Since references are a critical component of the sales process and a significant factor for our customers in selecting Guidewire, our track record of successful implementations is key to extending our market leadership. Our momentum in the first quarter reflects the strong record of successful implementation with 12 customers going live for the first time on 25 products. In addition, two customers completed major Virgin product upgrades. Our customer success also continues to be recognized by industry analysts. InsuranceSuite was recognized for the fifth consecutive year as a leader in Gartner's magic quadrant for PNC core platforms in North America. Guidewire Insurance Now has been named a challenger in the same report for a third consecutive year. And in Gartner's magic quadrant for non-life insurance platforms in Europe, Guidewire was again honored with the highest ranking for both ability to execute and completeness of vision. This recognition is important to us in that it validates our approach and strategy, as well as for customers and prospects who are evaluating adoption of Guidewire for transforming their businesses. Looking back on my first quarter here at Guidewire, I could not be more excited about the opportunities ahead for Guidewire and the P&C industry. Our cloud transformation is a significant part of that, and while we still have a lot of work to do, it's motivating to see that the industry is welcoming the transition to cloud-based and modern core platform solutions. I'm looking forward to the opportunity to lead our contribution to this industry transformation. I'll now turn the call over to Curtis to elaborate on our Q1 results and financial outlook for Q2 and for the year.