Guidewire Software, Inc.

Greetings and welcome to the Guidewire fourth quarter and 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. 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 host, Mr. Alex Hughes, Vice President, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon and welcome to Guidewire Software's earnings conference call for the fourth quarter fiscal year 2021, which ended on July 31st. My name is Alex Hughes. I am vice president of investor relations. With me on the call today is Mike Rosenbaum, Guidewire's chief executive officer, and Jeff Cooper, Guidewire's chief financial officer. A complete disclosure of our results can be found in our press release issued today, as well as in our related form, aka furnished to the SEC, both of which are available on the investor relations section of our website. Today's call is being recorded and a replay will be available following the conclusion of the call. Statements made on this call include forward-looking ones regarding our financial results, products, customer demand, operations, the impact of COVID-19 on our business, and other matters. These statements are subject to risks, uncertainties, and assumptions and are based on management's current expectations as of today and should not be relied upon as representing our views as of any subsequent date. Please refer to the press release and the risk factors and documents we file with the SEC including our most recent annual report on Form 10-K to be filed with the SEC for information on risks, uncertainties, and assumptions that may cause actual results of different material from those set forth in such statements. We also will refer to 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 the supplement on our IR website. And with that, I'll now turn the call over to Mike.

Thank you, Alex. Good afternoon, everyone, and thanks very much for joining us today. I'm very excited to have the opportunity to report on the results of what was truly a remarkable year. I'm proud of everyone on our Guidewire team for staying focused throughout the year and remaining determined to just steadily continue to execute on our mission to help power P&C Insurance innovation. We had a particularly strong finish to the fiscal year, which was the result of a lot of hard work in the quarter, but also a lot of hard work for months and years prior to this. With the team's execution, I continue to feel more and more confident in the path that we're on and the approach we're taking to reinvent Guidewire and our insurance suite customer base to a modern cloud platform and operating model. Our cloud momentum in the quarter and fiscal year positions us well to continue to accelerate and help drive continued innovation in the PNC insurance industry. Q4 cloud activity was phenomenal with 17 core cloud transactions, bringing our total cloud customer count across insurance suite and insurance now to 92. We closed twice as many cloud deals in fiscal 21 than in fiscal 20 and closed more deals in Q4 than in all of fiscal 20. This momentum gives us more confidence that we will continue to move customers to our cloud platform and continue to attract new customers to Guidewire Cloud. Every new customer helps fuel the Guidewire ecosystem that is so important to amplifying innovation and delivering value to our customers. In August, we also took another important step in enhancing our data and analytics platform by welcoming HazardHub to the Guidewire team. Through its API-based risk modeling approach, HazardHub adds a best-in-class property risk and hazard data service to our analytics offering. And by embedding its data and risk scores into customers' workflow, we will power smarter decisions and better service for end consumers. Turning to Q4, cloud momentum was strong with sales strength on a number of fronts. Cloud sales comprised 89% of new sales activity in the quarter and just over 82% for the year compared to just 70% last year. which illustrates how quickly and clearly we have shifted to a cloud-driven business. Cloud deal volume was also strong. Of the 17 core cloud transactions this quarter, 16 were for InsuranceSuite Cloud and one for InsuranceNow. And the majority of these deals included add-ons for data and analytics. Moreover, we saw broad-based activity, including straight migrations, migrations with significant expansions, and five exciting new customers. Let me touch on our new customers first. In the Americas, we added three. SGI, Saskatchewan's compulsory auto insurer and a property and casualty insurer in five Canadian provinces, adopted insurance suite on the Guidewire cloud platform after a comprehensive process. Guidewire's modern architecture, deep content, and technical vision were important factors as SGI looks to drive greater efficiency and speed to innovation. National American Insurance Company, or NICO, a regional insurance carrier based in Oklahoma, providing commercial property and casualty coverage since 1987, selected the full insurance suite cloud along with reinsurance management and our digital and data capabilities. Qualitas US, a subsidiary of one of the largest carriers in Mexico, selected insurance now. Qualitas is seeking a core platform that will scale with its growth, streamline internal processes, and leverage data throughout its workflow with predictive analytics. In EMEA, a large car manufacturer selected InsuranceSuite Cloud to deliver motor insurance across multiple European countries. And in APAC, Hollard Insurance, a rapidly growing insurer across Australian and New Zealand markets, selected Claim Center Cloud for its comprehensive functionality and ongoing innovation. We are excited to partner with Hollard on this next generation claims project. In addition to these new customers selecting Guidewire Cloud, we also signed another 12 cloud deals with existing customers. As our cloud operations mature and gain traction, we expect the conversion of our self-managed customer base to continue to accelerate. We saw strength across the board in the quarter with migrations occurring in both personal and commercial lines across a variety of tiers and with customers choosing to expand into new core systems not previously managed by Guidewire. Key themes we hear consistently from customers choosing to embrace cloud are the importance of a unified cloud platform, strong product vision and roadmap, and the ability to access innovation faster. I won't cover every migration deal in the quarter, but a few that I think deserve specific mention. Auto Club of Southern California, a nearly $5 billion DWP carrier, and the largest of the AAA Federation, had previously decided to upgrade their claim center instance to version 10. But prior to starting that project, changed course to ultimately decide to migrate claim center to Guidewire Cloud, while also adding policy center and billing center in the cloud. This exciting deal represents a significant increase in our footprint at this customer. Similarly AmeriSure who has served the commercial lines market for more than 100 years, not only elected to upgrade its claim center implementation to Guidewire Cloud, but after a comprehensive competitive review decided to also buy Policy Center and Billing Center to take advantage of a single unified cloud solution and to facilitate greater speed of innovation. Pekin Insurance Group, a regional Midwest PNC insurer decided to migrate their insurance suite instance to Guidewire Cloud after a review of their overall cost structure to support their core system framework in a self-managed mode, yielded significant cost savings by moving to our cloud offering. And finally, California Casualty decided to migrate their full suite to our cloud. For over 100 years, CalCash has been a provider of auto and home insurance to educators, firefighters, law enforcement, and nurses across the country, and is also one of our earliest customers, having adopted Claim Center in 2007, and then expanding to Policy Center and Billing Center in 2017. We are thrilled with the partnership here and excited to work with CalCash on this next endeavor. At the end of fiscal 2021, $539 billion of direct written premium was under license for at least one Guidewire core application. I've said for a while now that with Guidewire operating as the core system of record for many of the leading insurers around the world, we have an enormous opportunity to instantiate cloud with our customer base and to leverage this success to drive new customers to our platform. It was great to see this play out in the fourth quarter. Additionally, demand for Guidewire's data and analytics solutions was healthy in the quarter. As we grow cloud adoption, we have the opportunity to leverage Guidewire's position as the core system of record to embed both data and analytics throughout the core workflow to drive greater customer insights and better decisions. I was pleased to see a number of customers take this approach by including one or more of our analytics offerings in their cloud transactions. Ten of the cloud deals that we closed in the quarter included analytics products. And in addition, science continued to show momentum in the quarter with two notable deals. Aon's Reinsurance Solutions, a leading global reinsurance broker, We'll collaborate with Guidewire's science team to help cyber insurers better quantify their exposures and manage their risks in the face of rising ransomware and evolving cyber attacks. Aon chose science for its cyber model transparency and maturity in addition to Guidewire's technical expertise. Emerging Risk, part of Ryan's specialty group, selected science after comparing cyber risk selection and portfolio aggregation tools. And also of note, In early August, we deepened our longstanding relationship with S&P, enabling them to expand their use of our science cyber risk analytics to help power S&P's global rating service. In addition to growing cloud adoption, we also continue to drive customer cloud deployments. We had 11 customers go live on 26 products across both cloud and self-managed. We saw four cloud go lives, bringing our total to 16. We saw two customers go live on insurance now and two customers go live on insurance suite, a tier one insurer and Gore Mutual. The cloud deployment at Gore Mutual really speaks to the power of our cloud platform. They have deployed insurance suite in the cloud to help transform a national scale purpose-driven and digitally led insurer in just a few short years. Already Gore Mutual has seen time to quote reduce from an average of over 30 minutes to about eight seconds. And the time from app in the door to coverage issued improved from several days to about 15 minutes. A fundamental pillar to driving cloud adoption and deployments is our growing partner ecosystem. Upgrading the core to the cloud represents a large and complex project for many insurers. So it's important to bring a deep and talent-rich SI partner community to the table. We continue to see very healthy engagement from this community in both our deal flow and cloud deployments. We finished the fourth quarter with 13,500 SI consultants from over 32 partners, and the number of Guidewire cloud certified consultants grew 157% year over year to 2,315. 11 SI partners are now involved across 29 cloud projects. At the same time, our solution partners and the Guidewire marketplace continue to be important to powering PNC insurance innovation for our customers. We finished the fourth quarter with 731 apps from Guidewire and over 130 solution partners, while growing the number of solution partners by 43% in 2021. Before handing it over to Jeff to cover our financial performance, I'd like to briefly discuss why cloud matters so much for Guidewire. our customers, and the PNC industry. Cloud is a fundamentally more efficient mechanism for delivering technology innovation to our customers. Every six months, we seamlessly deliver updates and new innovation to our growing cloud footprint, while at the same time, solution partners can efficiently plug in through a common API-based framework, which amplifies innovation on our platform even further. As a cloud service provider, we also have significantly better access to usage data, and the real-time customer feedback necessary to further improve adoption, drive innovation, and help our customers achieve the business outcomes they're targeting. The transformation of Guidewire to a cloud service is such a monumental task that it often sounds like it's our primary goal, but it's not. Our ultimate goal is to help power innovation for our customers, to help them achieve their objectives and improve the state of the insurance industry. The cloud is an essential step in this larger mission And while I'm very excited to see cloud momentum across deal volumes, ARR growth and other quarterly results, it's important to realize that there's a larger goal of empowering innovation alongside our customers that we're focused on, making progress against and very, very proud of. I'll now turn the call over to Jeff to discuss our financial results in more detail.