• ARR (Annual Recurring Revenue): Finished at $918 million, with a net new ARR addition of $45 million.
• Total Revenue: $289 million, up 20% year over year.
• Subscription and Support Revenue: $178 million, reflecting 35% year-over-year growth.
• Services Revenue: $48 million, in line with expectations.
• Gross Profit: $189 million, representing 25% year-over-year growth.
• Overall Gross Margin: 65%.
• Subscription and Support Gross Margin: 69%, compared to 65% a year ago.
• Services Gross Margin: 6%, compared to negative 11% a year ago.
• Operating Profit: $54 million, ahead of outlook.
• Cash, Cash Equivalents, and Investments: $1.4 billion.
• Operating Cash Flow: $86 million, ahead of expectations.
• Convertible Notes: Retired an additional $100 million at face value, with a $53 million charge to other income on a GAAP basis.
• Fiscal Year 2025 ARR Outlook: Raised to $1 billion to $1.01 billion, reflecting 16% to 17% growth year over year.
• Fiscal Year 2025 Total Revenue Outlook: Between $1.164 billion and $1.174 billion.
• Fiscal Year 2025 Subscription Revenue Outlook: Approximately $653 million.
• Fiscal Year 2025 Subscription and Support Revenue Outlook: $718 million.
• Fiscal Year 2025 Services Revenue Outlook: Approximately $210 million.
• Fiscal Year 2025 Non-GAAP Operating Income Outlook: Between $175 million and $185 million.
• Fiscal Year 2025 Cash Flow from Operations Outlook: Between $230 million and $260 million.
• Q3 ARR Outlook: Between $942 million and $947 million.
• Q3 Total Revenue Outlook: Between $283 million and $289 million.
• Q3 Subscription and Support Revenue Outlook: Approximately $178 million.
• Q3 Services Revenue Outlook: Approximately $52 million.
• Q3 Non-GAAP Operating Income Outlook: Between $36 million and $42 million.

• Warning! GuruFocus has detected 5 Warning Signs with TSNDF.

Release Date: March 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Guidewire Software Inc (NYSE:GWRE) reported strong sales activity with ARR finishing above the high end of their projected range.
• The company closed 12 cloud deals, including four full InsuranceSuite deals, indicating strong demand for their cloud offerings.
• Guidewire Software Inc (NYSE:GWRE) welcomed five new customers in Q2, including international expansions in Brazil and Belgium.
• The company reported a 20% year-over-year increase in total revenue, with subscription and support revenue growing by 35%.
• Guidewire Software Inc (NYSE:GWRE) has a growing cloud ecosystem with over 26,000 practitioners and more than 10,500 cloud-certified professionals, enhancing their market presence and support capabilities.

Negative Points

• The company faces challenges in migrating their on-prem customer base to the cloud, which is a multiyear process.
• There is uncertainty regarding the impact of geopolitical events and natural disasters on Guidewire Software Inc (NYSE:GWRE)'s business.
• The company experienced a $53 million charge related to the retirement of convertible notes, impacting their financials.
• Guidewire Software Inc (NYSE:GWRE) has been slower than expected in hiring for product development teams, which could affect future growth.
• The company anticipates a $9 million negative adjustment to ARR due to foreign currency exchange rate fluctuations.

Q & A Highlights

Q: How does Guidewire view the transition of on-prem customers to the cloud, and what is the company's approach to these conversations? A: Michael Rosenbaum, CEO, explained that there is a growing recognition among insurers of the need for modern platforms to enhance agility and competitiveness. Guidewire is engaging in mature and careful discussions with customers about transitioning to the cloud, providing them with ample time to plan. The company is confident in its ability to support this transition, which is reflected in the positive feedback received from customers.

Q: How is Guidewire balancing margin outperformance with the opportunity to reinvest in growth? A: Jeffrey Cooper, CFO, stated that while Guidewire is focused on driving margin expansion, the company is also committed to reinvesting in growth opportunities. This includes accelerating R&D investments and hiring in the second half of the year, particularly in product development teams, to capitalize on market opportunities.

Q: What impact do the California wildfires and insurance market dynamics have on Guidewire? A: Michael Rosenbaum, CEO, noted that while the California wildfires are catastrophic, they highlight the importance of a functioning insurance market. Guidewire's technology helps insurers price risk effectively and manage claims efficiently, which supports the company's core value proposition. The situation in California is seen as a dynamic that aligns with Guidewire's mission to modernize the insurance industry.

Q: How is Guidewire positioned to leverage AI and data to create value for customers? A: Michael Rosenbaum, CEO, expressed optimism about the potential of generative AI to enhance productivity in development teams, claims processing, and underwriting. Guidewire is collaborating with customers to apply AI to insurance use cases and sees opportunities in both generative AI and traditional machine learning to improve business efficiencies.

Q: What is Guidewire's strategy for expanding its market share in the insurance industry? A: Michael Rosenbaum, CEO, emphasized Guidewire's goal to capture more than 50% of the market by leveraging scale benefits and network effects. The company aims to provide significant value to customers through shared data, a robust partner ecosystem, and a commitment to successful core system implementations. Guidewire's strategy is to continue pushing its market share higher by delivering tangible benefits to the P&C industry.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.