Guidewire Software, Inc.

Greetings. Welcome to the Guidewire's second quarter 2024 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. Please note this conference is being recorded. I will now turn the conference over to your host, Alex Hughes, Vice President of Investor Relations. You may begin.

Thank you, Shamali. I'm Alex Hughes, Vice President of Investor Relations, and with me today is Mike Rosenbaum, Chief Executive Officer, and Jeff Cooper, 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 8K, 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 this call. Statements made on this call include forward-looking ones regarding our financial results, products, customer demand, operations, the impact of local, national, and geopolitical events on our business and other matters. These statements are subject to risks, uncertainties, and assumptions 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 risk factors and documents we file with the SEC in our most recent annual report on Form 10-K. and our prior and forthcoming quarterly reports on Form 10-Q filed and to be filed with the SEC for information on risks, uncertainties, and assumptions that may cause actual results that differ materially from those set forth in such statements. We will also refer to certain non-GAAP financial measures to provide additional information to investors. All commentary on margins, profitability, and expenses are on a non-GAAP basis unless stated otherwise. The 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, and thanks, everybody, for joining today. I'm pleased to report another strong quarter with continued momentum in both sales activity and operational performance. Our results in Q2 put us in a great position halfway through our fiscal year, driven by outstanding execution and progress across sales, customer success, finance, product, and engineering. We reached 800 million in ARR in the quarter, and our performance through the halfway point allows us to raise our ARR guide for the fiscal year. Our continued sales momentum is clear validation of the investments we have made in our cloud platform. The approach we have taken to cloud updates and cloud services enable us to deliver a new level of agility to our customers in the P&C industry and will unlock the innovation the industry requires to continue to transform and evolve. Our suite of insurance products are winning in the market, gaining momentum, and continuing to fuel a very durable and successful business. Increasing market confidence in our cloud strategy was reflected in record sales results in the second quarter, with continued strength in the Americas and improved momentum in Europe. Overall, we closed 11 cloud deals in the quarter. Ten of these were Insurance Week cloud deals, including three in the EMEA region. We were thrilled to close four Tier 1 deals and saw a healthy distribution of demand across migrations, expansions, and net new customers, indicating good traction in each of our core growth opportunities. Some of the takeaways were... Migration activity picked up at larger insurers with three migrations in the quarter, including a Tier 1 commercial and personal lines insurer based in the United States who elected to migrate insurance suite and another Tier 1 European insurer who will migrate their claim center implementation. We also continue to attract net new customers, adding three more insurers in the quarter. This included a rapidly growing newcomer to the home insurance market who adopted Guidewire Cloud Platform for its scale and ability to embed analytics and core workflows, as well as a significant state insurer in workers' compensation that adopted Guidewire Cloud Platform for the maturity of our platform, our roadmap, and the strength of our ecosystem. With the foundation of Guidewire Cloud Platform now clearly established, we are better positioned to layer on additional data and analytics offerings, the core policy underwriting and claims workflows. These capabilities improve customer performance and business outcomes, and it's exciting to see them continue to take shape. Cloud expansion activity also remains strong as customers look to build on their initial success with Guidewire Cloud by moving new lines of business and modules to the platform. Turning to cloud and company operations, we continue to improve and optimize our performance around deployments, utilization, and platform efficiency. We now have nearly 70% of our cloud customers in production and have conducted hundreds of updates to customers' implementations on our cloud platform over the last few releases. This new cloud update capability is starkly different than the upgrade experience of our past. It marks a material change in the ongoing relationship between Guidewire and our customers and creates the framework for us to constantly deliver innovation to our customers and the industry we serve. We also continue to drive improved cloud operations efficiency, which is improving cloud margins. Subscription and support gross margin improved eight points year over year in the second quarter to 65%. This gives us increasing confidence that we have the right approach, the right team, and the experience in place to support our growth and financial objectives through a billion in ARR. In addition to our work to shift our product and customer base to cloud, we are working to better position Guidewire to achieve our long-term model by transforming the services side of our business. We have invested in our SI partner ecosystem to ensure that we are not capacity constrained as our industry adopts cloud. As our partners take on an increasing share of the prime work, the Guidewire services team will focus on a targeted portfolio of programs and strategic roles in customer programs. Our strategic focus is for the vast majority of implementation revenue to be delivered by our SI ecosystem and for our services revenue to be less than 20% of Guidewire revenue. The result will be a more powerful software-oriented business model, better overall long-term gross margins, and a better structure to serve the P&C industry. In the second quarter, we saw lower-than-expected services revenue and And this shortfall impacts our full-year total revenue guidance, which Jeff will cover. But to be clear, lowering services revenue is not correlated in any way to the overall demand we are seeing. We add the most value to the P&C industry by running a world-class cloud platform that can be integrated and configured for our customers by a market-leading and global ecosystem of SIs that it is enabled every day by the Guidewire Professional Services team. This strategy is working well, and I was pleased to see Guidewire's partner ecosystem continue to expand meaningfully in the quarter. We finished Q2 with 24,000 consultants now in the Guidewire SI ecosystem, and there remains a strong uptake in those getting Guidewire cloud certified. Cloud certifications increased 33% year-over-year to nearly 9,000. We also added 15 solution partners in the second quarter, bringing the total to over 200. Here, we are working with partners to drive greater content and coverage across geos and technologies, and this drives greater utility to customers and will further drive adoption. We want customers to choose Guidewire, but also the value-driving ecosystem we are building around our platform. In summary, it was a great quarter and a great first half, and our teams continued to execute well across the key pillars of our strategy. Demand for Guidewire Cloud Platform and our suite of insurance applications remain strong. We continue to drive greater efficiency gains in cloud operations, our cloud platform, and the company overall. We are progressing through a services transformation to better serve the enormous opportunity we see and further position us to grow into our long-term model. I'll now turn the call over to Jeff.