Guidewire Software, Inc. (NYSE:GWRE) Q4 2019 Earnings Conference Call September 5, 2019 5:00 PM ET
Curtis Smith - Chief Financial Officer
Marcus Ryu - Co-Founder and Chairman
Michael Rosenbaum - Chief Executive Officer
- 柯蒂斯史密斯 - 首席财务官
- Marcus Ryu - 联合创始人兼董事长
- Michael Rosenbaum - 首席执行官...
Kenneth Wong - Guggenheim Securities, LLC
Jackson Ader - JP Morgan Chase & Co.
Michael Turrin - Deutsche Bank
Christopher Merwin - Goldman Sachs Group Inc.
Matthew Van Vliet - Stifel, Nicolaus & Company, Incorporated
Tyler Radke - Citigroup Inc.
Bradley Sills - Bank of America Merrill Lynch
Joey Marincek - JMP Securities
Dylan Becker - William Blair & Company, LLC
Hannah Rudoff - D.A. Davidson & Co.
- Kenneth Wong - Guggenheim Securities，LLC
- Jackson Ader - 摩根大通公司
- 迈克尔图尔 - 德意志银行
- Christopher Merwin - 高盛集团股份有限公司
- Matthew Van Vliet - Stifel，Nicolaus＆Company，Incorporated
- Tyler Radke - 花旗集团
- Bradley Sills - 美国银行美林证券
- Joey Marincek - JMP证券
- Dylan Becker - William Blair＆Company，LLC
- Hannah Rudoff - D.A. 戴维森公司
Greetings, welcome to the Guidewire's Fourth Quarter and Fiscal Year 2019 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'll now turn the conference over to Curtis Smith, CFO. Mr. Smith, you may begin.
欢迎来到Guidewire第四季度和2019财年财务业绩电话会议。 此时，所有参与者都处于只听模式。 问答环节将在正式演讲之后进行。 [操作员说明]请注意正在录制此会议。
我现在将会议转交给首席财务官Curtis Smith。 史密斯先生，你可以开始吧。
Good afternoon and welcome to Guidewire Software's earnings conference call for the fourth quarter of fiscal year 2019, which ended on July 31, 2019. I'm Curtis Smith, Chief Financial Officer of Guidewire. And with me on the call are Marcus Ryu, Guidewire's Chairman of the Board and Mike Rosenbaum, our Chief Executive Officer. A complete disclosure of our results can be found in our press release issued today as well as in our related Form 8-K 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. 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/A 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 Marcus and Mike for their prepared remarks, and then I will provide details on our results before providing our outlook for the first quarter and fiscal year 2020. We will then take your questions.
下午好，欢迎来到Guidewire Software的2019财年第四季度的收益电话会议，该会议于2019年7月31日结束。我是Guidewire的首席财务官Curtis Smith。在我的电话会议上，我们是董事会主席Marcus Ryu和首席执行官Mike Rosenbaum。完整披露我们的结果可以在我们今天发布的新闻稿以及我们向SEC提供的相关表格8-K中找到，这两份表格可以在我们网站的投资者关系部分ir.guidewire.com上找到。
提醒一下，今天的电话正在录音，电话会议结束后将重播。在电话会议期间，我们将根据1995年“私人证券诉讼改革法案”中有关业务趋势，策略和预期业绩的安全港条款，作出前瞻性陈述。这些前瞻性陈述基于管理层截至今日的当前观点和预期，不应依赖于任何后续日期的代表我们的观点。我们不承担更新任何前瞻性陈述或前景的义务。实际结果可能会有重大差异。请参阅我们最近向美国证券交易委员会提交的10-K / A和10-Q表格中的风险因素。
Thank you, Curtis. I'll provide some commentary on our fourth quarter and full-year results before handing the call over to our CEO, Mike Rosenbaum, to share his observations from his first month leading the Company and to frame our ambitions for fiscal 2020 and beyond.
When I introduced Mike a month ago, I underscored that the transition was motivated by opportunity, not by challenge. Our performance in the fourth quarter in 2019 substantiated our momentum in pursuing that opportunity, while also reinforcing that we are still in the early days of our journey.
Our full-year financial results were ahead of our total revenue and profitability guidance ranges, with total revenue of $719.5 million and non-GAAP earnings of $1.45 per diluted share. Underlying these results was our strongest bookings quarter ever, exceeding our internal targets.
Fully 81% of our new software sales came at subscriptions for our offerings delivered via Guidewire Cloud, bringing the total amount to 65% for the year, well above the 40% to 60% we had anticipated at the beginning of the year.
Since subscription revenue was recognized ratably instead of upfront like our term licenses, our reported revenue would have been meaningfully higher if the mix between subscription and term licenses have been within our expected range. Nonetheless, this was a welcome result, as it substantiates the demand for Guidewire Cloud and for transitioning P&C core systems to the cloud in general.
The primary driver of subscription bookings in the fourth quarter was of course, InsuranceSuite via Guidewire Cloud. These are the most complex and strategically significant transactions in the Company's history. So it was a remarkable result to close six new such deals in the quarter.
It is further encouraging that this number includes four new customers, as well as two customers with existing InsuranceSuite implementations and that it includes one new Tier 1 customer, USAA Group and one Tier 1 insurer migration, American Family.
For the year, we closed nine InsuranceSuite via Guidewire Cloud deals, ahead of our expectations, representing customers of all sizes, including customers from North America and Europe, and with a balanced mix of new and existing customers.
We also introduced the new financial metrics, annual recurring revenue at our Analyst Day at the beginning of fiscal 2019 to provide more insight to our business dynamic through this cloud transition.
As we foreshadowed on our last call, the growth in this metric was below our initial expectations for fiscal 2019, with ARR growing by 13% on a constant currency basis. However, as we also pointed out, our market experience this year has taught us that we can maximize customer alignment and lifetime value by negotiating to ramp subscription fees over a multi-year period to scale with usage. This entails that subscription fees typically reach their fully ramped annual amount after three years to five years, and that reported ARR does not reflect the ultimate value of these transactions until then.
第四季度订阅预订的主要驱动力当然是InsuranceSuite via Guidewire Cloud。这些是公司历史上最复杂，最具战略意义的交易。因此，在本季度结束六项新的此类交易是一个了不起的结果。
We refer to the final annualized value of these arrangements as fully ramped ARR. To quantify this effect for 2019, fully ramped ARR grew 24% year-over-year. For example, the nine cloud deals we signed added approximately $20 million in current period ARR and $65 million in fully ramped ARR.
Taking a closer look at our new business activity, the fourth quarter is typically our busiest period of the year and this fourth quarter was no different with eight new customers, five of whom selected the entirety of InsuranceSuite and four of whom chose to deploy via Guidewire Cloud as mentioned.
We also signed additional business with 23 existing customers who selected 53 additional Guidewire products, including two customers who chose to migrate to Guidewire Cloud as mentioned. Notwithstanding this new customer activity, our customer count ended the year at 380 customers, which is the same as last year.
As discussed throughout the year, we experienced customer attrition, primarily related to proof-of-concept implementations to model risk in the nascent cyber insurance market. However, we entered 2019 with $502 billion in DWP under management, an increase of 11% from a year ago, reflecting our ability to attract new customers and expand within existing customers.
New customers in the quarter included USAA Group, a $22 billion DWP Tier 1 insurer, widely admired for outstanding service and uniquely high customer loyalty. USAA selected ClaimCenter via Guidewire Cloud, predictive analytics, data and digital for their organization that serves over 12 million members, primarily those who serve or have served in the U.S. military and their families.
EMC Insurance, a Tier 2 insurer providing commercial lines selected the entirety of InsuranceSuite predictive analytics, data and digital all via Guidewire Cloud. Also selecting all of InsuranceSuite via Guidewire Cloud in the fourth quarter was Gore Mutual Insurance in Canada, who also chose data and digital.
We have talked about recent retention in investments that new insurtech startups have seen and we mentioned that some of these could be acquisition opportunities, while others could represent new customer opportunities. We signed two such insuretechs as new customers in the fourth quarter, the first, the Silicon Valley insurtech, a sure startup selected InsuranceSuite via Guidewire Cloud for their auto insurance line of business.
Another insurtech, Mango Tech Insurance, based in Russia and funded by Alfa Group, also selected InsuranceSuite this time on-premises to offer a completely digital personal lines product.
Rounding out our new customers in the quarter were Church Mutual Insurance, the leading insurer of places of worship in the United States serving over 90,000 religious institutions who selected ClaimCenter, data and digital, and Heartland Farm Mutual, a Canadian insurer who selected InsuranceSuite data and digital.
Our growth is driven both by new customers such as these, but also from existing customers to expand their Guidewire deployments by selecting additional Guidewire products and across different businesses.
本季度的新客户包括USAA集团，这是一家价值220亿美元的DWP一级保险公司，因其出色的服务和独特的客户忠诚度而广受赞誉。 USAA通过Guidewire Cloud，预测分析，数据和数字为他们的组织选择了ClaimCenter，为超过1200万会员提供服务，主要是那些在美国军队及其家人中服务或服务过的人。
EMC Insurance是一家提供商业产品线的二级保险公司，它通过Guidewire Cloud选择了全部的InsuranceSuite预测分析，数据和数字。同样在第四季度通过Guidewire Cloud选择所有InsuranceSuite的还有加拿大的Gore Mutual Insurance，他们也选择了数据和数字。
在本季度完成新客户的还有Church Mutual Insurance，它是美国礼拜场所的主要保险公司，服务于超过90,000个选择理赔中心，数据和数字的宗教机构，以及选择InsuranceSuite数据的加拿大保险公司Heartland Farm Mutual。数字。
As I mentioned in the fourth quarter, we saw 23 existing customers’ select additional Guidewire products. Among these, American Family, a Tier 1 insurer and 10-year Guidewire customer chose to migrate their InsuranceSuite implementation to Guidewire Cloud, as has The Co-operators, a Canadian insurer who has been a customer since 2007.
They joined long-standing Guidewire customers such as Amica Mutual and TD with very broad adoption of our products who have embraced the full migration of their implementations to Guidewire Cloud.
Our data and digital momentum continued in the quarter as well, with 13 customers selecting Guidewire digital and 12 selecting Guidewire data, including four who selected Cyence products.
Our extensive network of SI partners continues to play an expanding role in enabling our customers, consistent with our strategy to drive an increasing proportion of total revenue from higher margin recurring revenue streams. We had 19 core data or digital go-lives in the fourth quarter.
Our substantial progress this year notwithstanding, we are still in the very early days of our industry platform journey. Not only do we have the vast majority of our customer base and the $2 trillion P&C industry itself to transition to the new technology and division of labor that we are offering with Guidewire Cloud, we have profound efforts underway to evolve our architecture and operations in the service of this demand. It is, therefore, fantastic to have the ideal leader to drive this evolution in Mike, who has done an exemplary job over the last month, engaging our customers and team with his vision.
I am energized to support him in every way possible in my role as an active Chairman, starting with the recruitment of three new independent directors who joined our Board this week, Margie Dillon, Former EVP and Chief Customer Officer for Personal Lines at Liberty Mutual Insurance; Cathy Lego, a veteran Independent Director with several public Silicon Valley companies and a financial expert; and Michael Keller, former EVP and CIO of Nationwide Insurance and CTO of Bank One. I am confident the additional industry expertise and diversity of perspectives will drive and engage an effective Board for the long-term.
Thank you for the privilege of representing Guidewire on these calls since we have been a public company. Going forward, this duty, of course, belongs to Mike, to whom I now turn the call.
他们加入了长期存在的Guidewire客户，例如Amica Mutual和TD，他们广泛采用我们的产品，他们已经将他们的实施完全迁移到Guidewire Cloud。
作为一名活跃的董事长，我有充分的能力以各种方式支持他，从本周加入我们董事会的三名新独立董事招聘开始，Margie Dillon，前任执行副总裁兼Liberty Mutual Insurance个人专线首席客户官; Cathy Lego，资深独立董事，拥有多家硅谷公共公司和一位金融专家;和Michael Keller，前全国保险公司的执行副总裁兼首席信息官和Bank One的首席技术官。我相信，额外的行业专业知识和多样化的观点将推动和吸引有效的董事会长期发展。
Thanks, Marcus, and thanks to those of you joining us on the call today. Guidewire's fourth quarter capped another strong and transformative year for the Company with nine InsuranceSuite cloud deals in the year and now a total of 13 InsuranceSuite cloud customers as of the end of the year, we are thrilled with the demand we see in the market for both new and existing customers.
With a customer base of 380 insurers in a market of nearly 4x that amount, the vast majority of which have yet to upgrade from legacy systems, we believe that we are still in the early days of the transformation to a modern, more agile core systems. InsuranceSuite via Guidewire Cloud and the improved total cost of ownership and business agility it provides insurance carriers will accelerate this transformation.
When I spoke with you a month ago, I indicated that I believe Guidewire was well positioned to extend our long-term leadership in this market with an industry standard platform and that we're further benefiting from the transition to a cloud delivery model. I also mentioned the incredibly strong culture here and the deep sense of customer commitment embedded in that culture. My initial impressions, I have to say have not just been validated, but to a large extent reinforced and amplified.
The dedication to this industry and to the modernization of its core systems is evident throughout the organization and our partner ecosystem. Our singular focus on this industry and the trust customers like USAA, American Family, EMC and Gore are placing in us to run their mission-critical core systems as a service is, I believe truly unique.
I also want to give my initial impressions of some of the exciting innovation and future opportunity we are seeing in our analytics and data services team. This team in partnership with multiple customers has now expanded beyond the core cyber use case, and we are now using our data listening platform for the rating of small commercial lines insurance. This use case is an important milestone, as it demonstrates an opportunity to leverage our large scale data assets for the modeling of potentially any risk.
Additionally, our DevConnect developer environment continues to make progress in the market, with 10 PartnerConnect solution partners signed to develop Ready for Guidewire add-ons.
Four of them, Livegenic, Ontellus, Truepic and WeGoLook have published Ready for Guidewire add-ons to the Guidewire Marketplace. The standardization of these integration patterns with DevConnect APIs and our marketplace points to the additional value we are able to provide our InsuranceSuite customer and ecosystem partners. The data and analytics and DevConnect use cases provide tangible examples of the benefits that an industry platform like Guidewire has the potential to deliver to the P&C insurance industry.
With respect to our financials, I recognize that we are completing a transition to a new revenue accounting standard while in the midst of a business model shift to subscription revenue. This has increased the complexity of our reported results and created some investor opacity.
此外，我们的DevConnect开发人员环境继续在市场上取得进展，签署了10个PartnerConnect解决方案合作伙伴，以开发Ready for Guidewire附加组件。
其中四个，Livegenic，Ontellus，Truepic和WeGoLook已经向Guidewire市场发布了Ready for Guidewire附加组件。使用DevConnect API和我们的市场标准化这些集成模式，可以为我们的InsuranceSuite客户和生态系统合作伙伴提供额外的价值。数据和分析以及DevConnect用例提供了一些实际的例子，说明像Guidewire这样的行业平台有可能为P＆C保险行业带来的好处。
I'm excited to begin consistently reporting on annual recurring revenue, which I believe is the best indicator of the overall health of our business. I believe that we have the potential to achieve ARR growth rates of 20% or higher. Monitoring our progress on this metric will be instructive for investors and something I will focus on with my team and the rest of Guidewire.
As we look to fiscal 2020, we expect to further strengthen our position in this market through continued investments in our core, in our cloud offerings and cloud delivery as well as our self-managed offerings. We also see significant opportunities to offer hybrid solutions that will provide value to our self-managed customers as well as helping them bridge to the cloud.
We are excited to share details on all of this at our upcoming Connections user conference in November. We see before us an extremely positive and unprecedented opportunity to continue to invest and grow and increase our share in this market. I am honored to have the opportunity to lead this community of professionals serving the $2 trillion global P&C insurance industry.
I'll now turn the call over to Curtis.
Thank you, Mike. Total revenue for the year was $719.5 million, an increase of 10% from a year ago and above the high end of our guidance range. Fiscal 2019 license and subscription revenue finished at $385.3 million, representing a 25% year-over-year increase.
As we have previously noted, year-over-year license and subscription revenue comparisons are impacted by the adoption of ASC 606, which affects the timing of revenue recognition of our term license contracts.
Additionally, fiscal 2019 growth benefited from the reclassification of $12 million in hosting revenue from services, license and subscription and from the 10-year term license deal signed in Q1, which was previously discussed. Normalizing for the impact of these items, the growth rate would have been 18%.
Subscription revenue for the year was $65 million, representing 95% year-over-year growth. As Marcus discussed, subscriptions as a percent of total new sales were above our expectations at 65% for the full-year, reflecting the increasing demand for our cloud-based services.
Perpetual revenue for the full-year was $2.1 million compared with $11.8 million in 2018, and consistent with our intention of reducing perpetual license sales.
Maintenance revenue for the year was $85.4 million, representing a 10% year-over-year increase and was above our guidance range.
Services revenue for the year was $248.8 million in the upper end of our guidance range compared with $266.5 million a year ago. This year-over-year decline was largely driven by investments to ensure the success of cloud customers, increased SI participation and the aforementioned $12 million hosting revenue re-class.
Turning to profitability. We will discuss these metrics on a non-GAAP basis, and we have provided the comparable GAAP metrics and a reconciliation of GAAP to non-GAAP measures in our earnings press release issued today, with the primary differences being stock-based compensation expense, amortization of intangibles, the amortization of debt discount and issuance costs from our convertible note and the related tax effects of these adjustments.
Non-GAAP gross profit was $442.6 million for the year. Gross margin for the year was 62% compared to 61% a year ago. Overall, gross margin benefited from a revenue mix shift away from lower margin services revenue, which was offset by declines in license and subscription and services gross margins.
License and subscription gross margin for the year was 89%, a decrease from 95% a year ago, a trend we expect to continue as we add new cloud customers and invest in cloud operations to support these customers.
Services margin for the year declined from 16% in fiscal 2018 to 11% in fiscal 2019, again mainly the result of investments in ensuring the success of our cloud customers.
Total operating expenses were $320.5 million for the fiscal year versus $298.8 million a year ago. The growth in spend was driven by headcount expense, increases in IT spend and costs related to our new headquarters. Additionally, we had the full-year impact of Cyence operating expenses in fiscal 2019.
For the year, this resulted in operating income of $122.1 million or 17% of revenue and net income of $119.9 million, or $1.45 per diluted share, all of which were above the high end of our guidance ranges.
Turning to Q4. Total revenue for the fourth quarter was $207.9 million, above the high end of our guidance range. License and subscription revenue was $127.7 million versus $143.7 million a year ago. This decline which was anticipated was primarily the result of revenue, which would have been previously recognized in Q4 that was recognized in Q1 under ASC 606, $3.2 million in perpetual revenue recognized in Q4 of 2018 versus $0.5 million in Q4 of 2019.
In addition, the increase of subscriptions as a percent of new sales with ratable revenue recognition minimized the impact of new sales on recognized revenue in the fourth quarter.
Maintenance revenue was $21.8 million, an increase of 6% from a year ago and was also above the high end of our guidance range. Services revenue for the fourth quarter was $58.3 million. This anticipated decrease from a year ago was due to factors previously discussed.
Q4 comparisons in particular were impacted by a benefit we received in Q4 of 2018 related to implementation work for a large German insurer, where we were required to delay revenue recognition for work completed throughout fiscal 2018 until Q4 of fiscal 2018. Operating income was $51.1 million and net income was $46.3 million or $0.56 per diluted share, all of which exceeded the high end of our guidance.
Turning to our balance sheet. We ended the quarter with $1.3 billion in cash, cash equivalents and investments, slightly higher than the $1.2 billion we had at the end of the third quarter. Operating cash flow for the year was $116.1 million compared to $140.5 million a year ago.
Free cash flow for the year was $90.9 million, excluding $24 million in build-out expenses associated with the new headquarters, compared to $128.4 million a year ago. This was below our expectations due to a customer payment of $12 million scheduled for Q4, but collected after the close of the quarter.
Due to the timing of payments for our new headquarters build-out, we only paid $24 million of the estimated $35 million in new construction costs in fiscal 2019. We now expect to pay the remaining $11 million of one-time costs in Q1 of fiscal 2020.
As Marcus mentioned earlier, ARR grew 13% on a constant currency basis and 12% on an absolute basis. As a reminder, ARR represents the annualized value of recurring term licenses, subscriptions and maintenance agreements at the end of the quarter. There were several factors discussed on our Q3 call that have impacted this metric. Most notably is the impact of ramped deals on ARR.
New customer contracts typically include multiyear pricing schedules that outline escalating annual payments during and beyond the committed contractual term. Future annual payment expectations at the fully ramped value outlined in these agreements represents our definition of fully ramped ARR.
Under this definition, fully ramped ARR in fiscal 2019 grew 24% on a constant currency basis compared to fully ramped ARR in fiscal 2018. We think investors will find this metric instructive as we transition customers to the cloud. We believe it represents a tangible measure of the strong new sales activity we experienced this year.
Now turning to our outlook. I first want to address our full expectations for the year. I will then speak to Q1. As a reminder, we want to reiterate three factors we discussed in Q3 that will impact our 2020 financial results. One, a mix of term and subscription new sales; two, significant cloud operations and supporting organizational infrastructure investments, and three, stronger SI enablement.
As Mike mentioned, we believe that ARR is the most effective way to evaluate our performance over the long-term. With respect to fiscal 2020, we expect ARR to grow between 14% and 16%, accelerating from 13% constant currency growth this year.
In fiscal year 2020, we expect fully ramped ARR to continue to grow faster than ARR. For the full-year fiscal 2020, we anticipate total revenue to be in the range of $759 million to $771 million, an increase of 5% to 7% from fiscal 2019.
We expect annual license and subscription revenue to be in the range of $443 million to $455 million, an increase of 15% to 18% from fiscal 2019 or 18% to 21% adjusted for the 10-year term license deal signed in Q1 last year.
This is lower than our preliminary fiscal 2020 view due to increased demand for cloud which drive subscription revenue and is ratably recognized instead of upfront, and refinement of our estimates related to allocations between term license revenue and subscription revenue for our cloud migration agreements.
As the guidance shows, our forecast is highly sensitive to the percent of new sales sold as subscription agreements. We currently expect to see 55% and 75% of new sales as subscriptions, with the midpoint roughly flat to 2019.
Based on our forecast model, achieving the high end of this range would result in approximately $30 million less in fiscal 2020 license and subscription revenue than achieving at the low end of this range. The timing and linearity of deals would affect the exact impact.
For example, if cloud bookings are more backend weighted than our current assumptions, then the impact of license and subscription revenue would be larger. We expect subscription revenue to be in the range of $105 million to $115 million, an increase of 61% to 77%. We expect perpetual license revenue to be less than $5 million for the year.
Our fiscal 2020 outlook for maintenance revenue is $85 million to $87 million. As we have said before, ongoing maintenance activities are included in the subscription fees, thereby, impacting maintenance revenue.
Our outlook for services revenue is $224 million to $236 million, representing an 8% decline at the midpoint. This moderated outlook reflects our long-term goal to enable our strong SI partner ecosystem to deliver cloud implementation services.
Of the five InsuranceSuite cloud deals signed with new customers in fiscal 2019, three are expected to be led by our SI partners and we expect that trend to continue in fiscal 2020.
We expect total gross margin to be 58% to 59% in fiscal 2020, reflecting an anticipated decline. We expect license and subscription gross margin to be between 75% and 80% this fiscal year. Approximately a 12 percentage point decline at the midpoint on continued investments in cloud operations and supporting organizational infrastructure and the accelerating shift to ratable subscription revenue. We expect services gross margin to increase to between 15% and 16% this fiscal year.
From an operating expense perspective, we continue to execute on our investments that were initiated in fiscal 2019. In addition to cloud operations, R&D continues to be a key investment area. We expect operating income from fiscal 2020 to be $96 million to $108 million, representing an operating margin of 13% at the midpoint. Both gross margin and operating margin are sensitized to mix of subscription as a percent of new sales and decrease as subscription sales increases.
We expect free cash flow to be between $90 million and $100 million, excluding the one-time impacts associated with the build-out of our new headquarters, which is expected to be $11 million.
Fiscal 2020 free cash flow expectations are positively impacted by ARR growth and the previously mentioned late customer payment. This is offset by ongoing investment in cloud and lower year-over-year services billings.
In addition, our outlook for non-GAAP net income is $92.4 million to $102.3 million, or $1.10 to $1.22 per diluted share based on approximately 83.8 million diluted shares and an assumed non-GAAP tax rate of 16.8% for fiscal 2020.
Turning to Q1. We anticipate total revenue to be in the range of $149 million to $153 million. This represents a decrease from a year ago due to the $10 million license agreement signed in Q1 last year and decline in services revenue.
Within revenue, we expect license and subscription revenue to be in the range of $78 million to $80 million, representing a 17% decline at the midpoint, primarily due to the same 10-year deal last year. We expect Q1 maintenance revenue of $19 million to $20 million and Q1 services revenue of $51 million to $54 million.
For the first quarter, we anticipate non-GAAP operating income of between – net operating loss of $3 million to an operating profit of $1 million, and non-GAAP net income between $0.6 million to $4 million, or $0.01 per share to $0.05 per share based on approximately 83.1 million diluted shares.
In summary, we were very pleased with the progress we made this year and our execution during this ASC 606 transition. And I'd like to thank the team for all the related extra effort and work. We look forward to providing more detail at our Analyst Day scheduled for September 26 at our new headquarters in San Mateo, California. Thank you.
Operator, can you now open the call for questions?
对于第一季度，我们预计非GAAP营业收入为 - 净营业亏损300万美元至营业利润100万美元，非GAAP净收入60万美元至400万美元，或每股0.01美元至每股0.05美元基于约83,100,000股摊薄股份。
Yes. Thank you. [Operator Instructions] Our first question is from Ken Wong with Guggenheim Securities. Please proceed.
是。 谢谢。 [操作员说明]我们的第一个问题来自Ken Wong和Guggenheim Securities。 请继续...
Hey, great. Thanks a lot for taking the question. The first question maybe for Marcus or Mike. I'm just wondering, what do you guys think drove the heightened cloud activity in the quarter? And as far as Tier 1s, do you think the TIA – the USAA signing will kind of – you'll get some halo effect there and drive more customers from the larger customers to cloud?
嘿，太好了。 非常感谢你提出这个问题。 第一个问题可能是马库斯或迈克。 我只是想知道，你们有什么想法推动了本季度云计算活动的增强？ 至于第1层，您认为TIA - USAA签约会有什么样的 - 您会在那里获得一些光环效应并将更多客户从大客户带到云端？
Yes, Ken. This is Marcus here. The demand for cloud isn't really a quarter-to-quarter phenomenon. It's a much longer horizon kind of phenomenon than that. And as we talked about in previous calls, we've been seeing heightened demand for quite some time, driven I think by secular factors, by our maturation in the capabilities, and as well as our kind of assertiveness that the cloud was going to be the primary locus of technology innovation for Guidewire in the industry overall.
We worked hard to bring a lot of these conversations to fruition and to get them done within the year to live up to the commitments that we had made. And it was fantastic to be able to close six within the quarter. It was very, very demanding for the team. But I think the sense was that we were not so much constrained by – not at all really constrained by demand, but just by the – as we've talked about before by the sheer complexity of these really strategic relationships.
So the kind of trends we're looking at is much more than a one quarter phenomenon and we're really gearing up many facets of the company for this to be a longer phenomenon.
我们努力将这些对话付诸实践，并在一年内完成这些对话，以兑现我们所做的承诺。能够在本季度内关闭六个人真是太棒了。对团队来说非常非常苛刻。但我认为我们并没有受到这么多的限制 - 完全不受需求的限制，而只是受到 - 正如我们之前所谈到的那些真正的战略关系的复杂性一样。
Let me just add to that. I think the demand that we saw is a great validation for the strategy of the company. And the talent and especially, as you mentioned, the wins at these Tier 1 insurers really point to the validation of that strategy and the commitment that we've made to be able to successfully deliver these systems via Guidewire Cloud. So we're certainly excited about the momentum that we see.
让我补充一点。 我认为我们看到的需求是对公司战略的有力验证。 而且，正如您所提到的那样，这些一级保险公司的胜利真正指向了该战略的验证以及我们为通过Guidewire Cloud成功交付这些系统所做出的承诺。 所以我们对我们所看到的势头感到兴奋。
Okay. Got it.
A little additional commentary, Ken. As you highlighted, we were thrilled to secure a mandate from them. They are hugely respected insurer in our market as well as one of the largest players. And it was striking that they wanted to start a relationship with us in an entirely cloud-based fashion that was one of their starting assumptions for this core system initiative on their part. And it was fantastic to be able to convert that and get it closed within the year.
I do think it will be a much noted transaction and of course, we have to deliver against it, or to be the positive that we expect. But it was definitely one of the highlights for the year.
还有一点评论，肯。 正如您所强调的那样，我们很高兴能够获得他们的授权。 他们是我们市场上备受尊敬的保险公司，也是最大的保险公司之一。 令人惊讶的是，他们希望以完全基于云的方式与我们建立关系，这是他们对这一核心系统计划的首要假设之一。 能够转换它并在一年内关闭它真是太棒了。
Got it. And then Curtis, you touch on the ARR growth that you saw, the fully ramped ARR growth. Any kind of rough quantification of what those ARR numbers were last year and this year? Or perhaps maybe just a sense of what total cloud ARR for your 13 customers look like?
得到它了。 然后是柯蒂斯，你谈到了你所看到的ARR增长，ARR的全面增长。 去年和今年这些ARR数字的粗略量化是什么？ 或者也许只是感觉13个客户的总云ARR是什么样的？
Yes. In a few days here, Ken, we will be publishing that ARR number in our 10-K. So you'll be able to see that then when it comes out. We just want to provide the growth rate today both on a constant currency and on an absolute basis to understand that and some of the things that were impacting that we talked about in Q3. And then we will have an opportunity when we get to Analyst Day to talk a little bit more about our fully ramped ARR transition metric.
是。 在这几天，肯，我们将在我们的10-K中发布ARR号码。 因此，当它出现时，你将能够看到它。 我们只是希望今天以恒定的货币和绝对的基础提供增长率，以了解这些以及影响我们在第三季度讨论的一些事情。 然后，当我们进入分析师日时，我们将有机会更多地讨论我们完全提升的ARR转换指标。
Got it. That would be helpful. Thanks a lot guys.
得到它了。 这会有所帮助。 非常感谢你们。
Our next question is from Sterling Auty with JPMorgan. Please proceed.
我们的下一个问题来自Sterling Auty和JPMorgan。 请继续
Hey, thanks. Hi, guys. It's Jackson Ader on for Sterling tonight. So the net customer count ending the year flat at 380. What about gross customer additions? How did that track maybe versus both your expectations and in previous years?
嘿，谢谢。 嗨，大家好。 杰克逊·阿德今晚将迎来斯特林。 因此，截至年底的净客户数量持平至380.客户总增加量如何？ 这个跟踪可能与您的期望和往年相比如何？
I'll take it. I would say, first of all, I think it's important to understand that we did add a significant number of core suite customers during the year. And I think when you look at the actual count of customers year-over-year, what we saw was a significant number of proof-of-concept deals that were really just validating a use case for cyber. But what's exciting is, is that the ones that where we're able to really establish a strong partnership with those become much more meaningful partnerships.
And I think that those customer counts are more in line with what you would typically imagine, the definition of a core suite customer is for Guidewire. But to answer your specific question, 18 gross customer adds during the year, which I think is a very positive sign.
我要买它。 我想说，首先，我认为重要的是要了解我们在这一年中确实增加了大量核心套件客户。 我认为，当你看到实际的客户数量同比时，我们看到的是大量的概念验证交易，这些交易实际上只是验证了网络用例。 但令人兴奋的是，我们能够与那些人建立牢固伙伴关系的那些伙伴关系变得更有意义。
Okay. Great. And then just a clarifying question on the mix that we should be expecting of new sales being cloud going forward. I think there was a mention of the outlook, but I didn't quite catch it.
好的。 大。 然后只是一个关于混合的澄清问题，我们应该期待新的销售是云未来。 我认为有人提到了前景，但我并没有抓住它。
Yes. So last year, we provided a range of 40% to 60% new subscription sales as a percent of total sales. And we ended up for the year above the top end of that range at 65%. This year, we provided a range of 55% to 75% of new subscription sales as a percent of total new sales.
And initially as we indicated are targeting the midpoint of that range. For now, we give that range again because as we experienced this year, if we see much stronger subscription sales, that's a good thing, but it does have a negative impact on the recognized revenues for the year.
是。 因此，去年，我们提供了40％至60％的新订阅销售额，占总销售额的百分比。 我们最终以65％的成绩结束了该范围的最高端。 今年，我们提供了55％至75％的新订阅销售额，占新销售总额的百分比。
Great. Okay. Thank you very much.
大。 好的。 非常感谢你。
Our next question is from Michael Turrin with Deutsche Bank. Please proceed.
我们的下一个问题来自Michael Turrin与德意志银行。 请继续
Hey, there. Good afternoon, and thanks for taking the questions. Can we first talk more about the ramped deal structures? Are the fully ramped deals already under contract? Are those projections based on what you would expect to see as usage grows? And it sounds like somewhere between year three and year five is when you would expect those deals to hit fully ramped, is that right?
嘿。 下午好，谢谢你提出问题。 我们可以先谈谈更多有关交易结构的问题吗？ 合同已完全达成协议吗？ 这些预测是基于您期望看到的使用量增长吗？ 这听起来像是在第三年和第五年之间的某个时候，你会期望这些交易完全达到顶峰，是吗？
That's right. It's somewhere between year three and year five. And for these subscription customers, we always provide a five-year pricing schedule. But when we are doing our fully ramped ARR calculation, it may not be part of the contracted term. So some of these contracts maybe three years, but we will still be looking at the ARR amount in years four or five when it gets fully ramped, when we calculate that fully ramped ARR.
So most of our contracts are moving in the direction of five years. The ramps – typically, the ramps for these companies typically take place in years three to five. The fully ramped number typically happens in years three to five.
那就对了。 它介于第三年和第五年之间。 对于这些订阅客户，我们始终提供五年定价时间表。 但是，当我们进行完全斜率的ARR计算时，它可能不是合同期限的一部分。 因此，这些合同中的一些可能是三年，但是当我们计算完全斜坡的ARR时，我们仍然会在四年或五年时看到ARR数量完全增加。
因此，我们的大部分合同都朝着五年的方向发展。 斜坡 - 通常，这些公司的斜坡通常在三到五年内发生。 完全倾斜的数字通常发生在三到五年。
And just to be clear, I think you were also asking, it leaves open the opportunity that we'll sell additional products into those customers during that period of time.
Right. Okay. And then, thinking about margin trajectory from here. If guidance holds, this will be the third consecutive year of margin declines. I understand there is a lot of sort of moving pieces in terms of this model and the move to 606 on top of everything else. But is there a point at all where you're expecting margins can trough, as we work through these transition impacts? Or does that three-year to five-year ramp in ARR mean this transition could continue to play out over that timeframe as well?
对。 好的。 然后，从这里考虑保证金轨迹。 如果指引持续，这将是保证金连续第三年下降。 我知道在这个模型方面有很多移动的部分，并且在其他一切之上移动到606。 但是，当我们努力解决这些转型影响时，您是否期望利润率可能会下降？ 或者ARR的三年到五年的增长意味着这种转变可能会在这段时间内继续发挥作用吗？
Yes. Thanks for the question. We've noted. And before and today that while the increased subscription demand is happening and that's a positive thing, it does have a shorter-term impact on our profitability. And that said, we remain confident about our long-term profitability levels.
The other thing I would add to that is that this is one of the reasons we're emphasizing ARR, fully ramped ARR and free cash flow as indicators of our progress. And when we get to Analyst Day in a couple of weeks, we'll be able to provide some more discussion around that point.
是。 谢谢你的提问。 我们已经注意到了。 在此之前和今天，虽然增加的订阅需求正在发生，这是一件好事，但它确实对我们的盈利能力产生了短期影响。 这就是说，我们对我们的长期盈利水平仍然充满信心。
Okay. Got it. Thanks. Good luck to both Marcus and Mike to transition.
好的。 得到它了。 谢谢。 祝马尔库斯和迈克过渡顺利。...
Our next question is from Chris Merwin with Goldman Sachs. Please proceed.
我们的下一个问题来自Chris Merwin和Goldman Sachs。 请继续
Okay. Thanks for taking my question. I think you mentioned that if the cloud transition accelerates, revenue could be $30 million lower. And it seems like in the last few quarters, the execution has been great. And you've been trending ahead of expectations on cloud. So when we look at this updated guidance for fiscal 2020 on license and subscription revenue, how would you qualify your visibility into that relative to prior quarters when you were earlier in the transition? Thanks.
好的。 谢谢你提出我的问题。 我想你提到如果云转换加速，收入可能会降低3000万美元。 似乎在过去的几个季度中，执行情况非常好。 而且你已经超越了对云的期望。 因此，当我们查看有关许可和订阅收入的2020财年更新指南时，您如何在转型初期获得与之前几个季度相关的可见性？ 谢谢。
Thanks, Chris. I'd say – Marcus here. I'd say that we've really updated sense of the shape of the demand is coming to us now. We are still in the early innings of the transition, both for us and for the market, but substantially more clarity. And I think an improvement in our ability to guess what form the demand will come as opposed to guessing at it.
Also I'd point out that we were only really enthusiastically in the market with respect to the cloud in a broad-based market way, halfway through the year and our Connections user conference last year. And so that kind of threw a – that created a wrinkle relative to our starting year assumptions.
I think there was a great deal of market learning in the latter half that's now been internalized and is reflected in our outlook. As you see, there is a pretty meaningful step up in the proportion of our bookings that we expect to come in subscription form and that's just going to continue to increase into future years.
I think we've bracketed it pretty – it's a fairly broad bracket, but right now from where we sit, we are pretty confident it's going to fall within those. It's always possible that things could accelerate even further. But I think we've had enough conversations with our customer base now to know that it's not yet a complete binary switch from self managed to cloud and that the mix is likely to fit within that range that we put out.
谢谢，克里斯。我会说 - 马库斯在这里。我要说的是，我们现在已经真正了解了需求形态的感觉。对于我们和市场而言，我们仍然处于转型的早期阶段，但更加清晰。而且我认为我们猜测需求形成能力的能力会有所改善而不是猜测它。
另外我要指出的是，我们在广泛的市场方式，年中半年以及去年的Connections用户大会上对云的市场真正热情。所以那种投掷 - 相对于我们的起始年假设产生了皱纹。
我认为我们已经把它包括在内了 - 它是一个相当广泛的支架，但是现在我们坐的地方，我们非常有信心它会落在这些范围内。事情总是可能进一步加速。但我认为我们已经与我们的客户群进行了足够的对话，知道它还不是从自我管理到云的完整二进制转换，并且混合可能符合我们推出的范围。
One thing I'd just add to that is that the range we gave, the $55 million to $75 million and the $30 million number, that is if we came in at the very top of that range versus the very bottom of that range, the revenue difference would be $30 million or more specifically a 1% shift in that subscription as a percent of new sales would equal about $1.5 million shift in revenue.
Okay. That's great. Thanks and then just a follow-up on margins. Yes. As you might speak to this more at Analyst Day, but thinking about that gross margin for the cloud business at scale as you sort of ramp up hiring there and I'm sure there's still a lot of visibility to be gained, but how are you thinking about that?
And I guess, when we think about the margin, your updated margin guidance, was that more a reduction in gross margin or is that more a reduction due to higher OpEx? Just curious, what was the main thing driving that? Thanks.
好的。 那很棒。 谢谢，然后只是对利润率的跟进。 是。 正如您在分析师日可能会更多地谈到这一点，但考虑到大规模云计算业务的毛利率随着您在那里招聘而增加，我相信仍然可以获得很多可见性，但您怎么样？ 想着那个？
我想，当我们考虑保证金时，您更新的保证金指引是更多的毛利率减少，还是因为运营支出较高而减少？ 只是好奇，驱动它的主要原因是什么？ 谢谢。
Yes. So we're definitely seeing and we noted in the quarter, right, our gross margin overall was 62% versus 61% last year That was largely because the cloud operations hiring that we expected in Q4 got pushed into this year. So as we've noted, a big part of our hiring will take place in our subscription COGS related to our cloud operations as we ramp up now for the demand we're seeing there.
So that will put overall pressure directly on our subscription margin, but then that will impact our overall gross margin. So we see that happening in the near-term here. And we expect that until we start to see some of these other efficiencies from our operations going forward.
是。 所以我们肯定会看到并且在本季度我们注意到，正确的是，我们的毛利率总体为62％而去年为61％。这主要是因为我们在第四季度预期的云业务招聘被推到了今年。 正如我们已经注意到的那样，我们招聘的很大一部分将发生在与我们的云运营相关的订购COGS中，因为我们现在正在为我们在那里看到的需求提升。
因此，这将直接影响我们的认购保证金，但这将影响我们的整体毛利率。 所以我们在这里看到了近期发生的事情。 我们希望在我们开始从运营中看到其他一些效率之前。
Okay. Thank you.
Our next question is from Tom Roderick with Stifel. Please proceed.
我们的下一个问题来自Tom Roderick和Stifel。 请继续
Matthew Van Vliet
Yes. Hi, Matt Van Vliet on for Tom, tonight. Thanks for taking my questions. I guess as you look at the overall demand pipeline that you're seeing out there, how would you – or how much you donate the demand across your major regions? There's been a lot of talk obviously around Europe weakening from a macro standpoint. Curious if you're seeing that much in overall demand or what those conversations are looking like between U.S., Europe and APAC, in particular?
是。 嗨，Matt Van Vliet今晚给汤姆。 谢谢你回答我的问题。 我想当你看到你在那里看到的整体需求管道时，你会怎么样 - 或者你在主要地区捐出多少需求？ 从宏观角度来看，欧洲有很多关于弱化的言论。 好奇，如果你看到整体需求那么多，或者特别是美国，欧洲和亚太地区之间的谈话是什么样的？
I can offer some commentary Matt. I'd say, so far we've been – this has been true for most of our history. We've been kind of buffered from the macro and political questions that maybe other companies are a little more vulnerable too that it's just generally not foremost on insurers' minds. But Europe is still a more challenging frontier for us in general, not so much for macro reasons, but just because of the difference in requirements regulatory regime, et cetera.
And we continue to just put additional effort into that – into the continent because it's such a large portion of our TAM and because we had – we continue to get very encouraging signs for the demand. We did not close quite as much in Europe as we might have hoped at the start of the year. But I think our outlook overall on the TAM and the demand for what we can do there is really unchanged.
Also there has been a natural – there was a very concentrated company focus on making our internal and externally communicated targets for new cloud relationships. And it was natural to do that, focused in North America.
Of course we did have that one very substantial European cloud deal that we talked about in Q3, MACIF. But that was another factor, I think in the shape of the bookings that we ultimately quoted in the year. But every outlook that we have over a multi-year horizon relies on probably faster growth in Europe than in North America, at least with respect to our progress of the company.
我可以提供一些评论马特。我会说，到目前为止我们已经 - 我们的大部分历史都是如此。我们已经从宏观和政治问题中得到了缓解，也许其他公司也更容易受到影响，而这通常并不是保险公司的首要考虑因素。但总的来说，欧洲对我们来说仍然是一个更具挑战性的前沿，不仅仅是因为宏观原因，而是因为需求监管制度的差异等等。
而且我们继续只是付出额外的努力 - 进入非洲大陆，因为它是我们TAM的很大一部分而且因为我们有 - 我们继续得到非常令人鼓舞的需求迹象。在欧洲，我们并没有像今年年初所希望的那样关闭。但我认为我们对TAM的整体展望以及我们在那里所做的事情的需求实际上没有变化。
此外还有一个很自然的事情 - 公司专注于为新的云关系制定内部和外部沟通目标。这样做很自然，主要集中在北美。
Matthew Van Vliet
And then a quick follow-up, on the ramped deals, is there a potential that those ramp more quickly? Are they tied to specific milestones? Or are they truly calendar based ramp-up deals?
然后对交易量的快速跟进是否有可能使这些交易更快？ 它们是否与特定的里程碑相关联？ 或者他们是真正基于日历的提升交易？
You can generally think we are going to date certain relationships that may have an out. And that out is something that would only be exercised if the program were to severely disappoint expectations. I think even our ability to negotiate those out will be – will only be enhanced with greater market progress and customer referenceability in the cloud. But they are almost always just kind of date certain markers and a schedule that's rolled out over time.
你通常可以认为我们会约会某些可能有关系的关系。 只有当该计划严重失望时才能实现这一点。 我认为即使我们谈判这些问题的能力也只会通过云中更大的市场进步和客户可参考性得到加强。 但它们几乎总是只是某种日期的某种标记和随着时间的推移而推出的时间表。
Matthew Van Vliet
All right. Great. Thanks.
行。 大。 谢谢。
Our next question is from Tyler Radke with Citi. Please proceed.
我们的下一个问题来自Tyler Radke和花旗。 请继续
Hey. Thank you. Can we talk a little bit about the ramped deals? I'm just curious if you have had to kind of – if you're finding ourselves having to either extend the longevity of the ramps or may kind of incremental more ramped deals than you were previously.
And then just a follow-up, as we – just to kind of understand the mechanics behind the new ramped ARR number. I guess, what gives you the confidence that those customers will ultimately pay that, given that it appears that year four and year five are beyond what is contractually committed? Thank you.
嘿。 谢谢。 我们能否谈谈这些交易？ 我只是好奇你是否有必要 - 如果你发现自己不得不延长斜坡的寿命，或者可能比以前增加更多的交易。
接下来就像我们一样 - 只是为了理解新增加的ARR号码背后的机制。 我想，鉴于第四年和第五年似乎超出了合同规定的范围，是什么让你相信这些客户最终会支付这笔费用？ 谢谢。
Sure. And let me just explain on the ramps. They are more pronounced for our migration customers. And there are logical reasons for that. Our existing customers who are migrating to the cloud, they're already paying a full fee for their term license in year one of their cloud transitions.
And so those are where we saw those ramps more pronounced. The timing of the ramp is pretty consistent though on being three years to five years. But a little bit of a steeper ramp for those migration customers for the reasons we just talked about.
The second part of your question around the fully ramped ARR. For all of our end customers, we include a five-year pricing schedule in there. More and more of our contracts now are moving to the five-year committed term, but some of them have less than that.
And so these customers are very committed to that cloud journey. We are with them, too. And our expectation and moving into the arrangements with them is two years or three years in. They will continue to focus on that ramp and on the implementation. And that's why we put those pricing schedules in place. Going forward, we do expect too, that those pricing schedules will be part of the actual five-year contractual term.
One thing I'd add just because this was one of the things that I've dug into a little bit. Very specifically in the first 30 days. I think you want to understand or think about consider the nature of the implementation of the partnership and the commitment that Guidewire and the customer make into these systems.
The track record of the Company as it relates to successfully deploying these core systems and those systems then lasting very, very significant periods of time. I think lends itself to the surety associated with that financial metric. And so I think that's an important thing to consider when you look at this metric.
我添加的一件事只是因为这是我挖掘过的东西之一。 特别是在前30天。 我想您想要了解或考虑考虑合作伙伴关系实施的性质以及Guidewire和客户对这些系统的承诺。
公司的成功记录与成功部署这些核心系统有关，而这些系统则持续非常非常重要的时间段。 我认为适合与该财务指标相关的担保人。 因此，当您查看此指标时，我认为这是一件非常重要的事情。
Great. Thank you. And maybe I might have missed this, but did you talk about the expectations on a number of InsuranceSuite cloud deals for fiscal year 2020. Do you think that's still a good metric to track or would you encourage just to look at kind of this ramped ARR number? Thank you.
大。 谢谢。 也许我可能错过了这个，但你是否谈到了对2020财年的一系列InsuranceSuite云交易的期望。你认为这仍然是一个很好的追踪指标，或者你会鼓励只看一下这种倾斜的ARR 数？ 谢谢。
Yes. Thanks for the question. And we did in the last couple of years talk about the number of IS cloud deals as a transition metric. And so we reached that transition when we talked about the four to eight IS cloud customers last year and coming in at nine at the top end of that range.
And so we think that was helpful. And in the first couple of years – but it was a transition metric. And now we think what will be more helpful is a focus on our ARR and our fully ramped ARR metric going forward. So we will not be providing that number of IS cloud deals forecast going forward. We will however, at the end of every quarter report the number of IS cloud deals that we signed up in the quarter.
是。 谢谢你的提问。 我们在过去几年中将IS云交易的数量作为转换指标进行了讨论。 因此，当我们去年谈到四到八个IS云客户并且在该范围的顶端九点进入时，我们达到了这种转变。
所以我们认为这很有帮助。 在最初几年 - 但这是一个过渡指标。 现在我们认为更有帮助的是关注我们的ARR以及我们未来完全提升的ARR指标。 因此，我们不会在未来提供大量的IS云交易预测。 但是，我们会在每个季度末报告我们在本季度签署的IS云交易数量。
Our next question is from Brad Sills with Bank of America. Please proceed with your question.
我们的下一个问题来自Brad Sills和美国银行。 请继续你的问题。
Hi, guys. Thanks for taking my question. Just wanted to ask about the implementation cycles for InsuranceSuite cloud, I know it's a limited sample set. But how are you feeling about kind of the learnings you've had there? What are some of those learnings and your confidence level and maybe seeing more compressed cycles and then also kind of channel readiness to take on more of these implementations?
嗨，大家好。 谢谢你提出我的问题。 只是想问一下InsuranceSuite云的实施周期，我知道它是一个有限的样本集。 但是你对那里的那种学习感觉如何呢？ 有哪些学习和你的信心水平，可能会看到更多的压缩周期，然后还有一些渠道准备好承担更多这些实施？
Yes. Brad, I'll speak to kind of the experience to date and then maybe Mike can comment on his outlook and intentions for the future there. I think the – as we've always said, the cloud is not some silver bullet that makes a complex transformation program suddenly simple.
There is still a vast amount of business change and an integration work. And just core operational transformation that has to have – that always goes along with one of our programs and all of that is the same in a self-managed or a cloud mode.
That said, because we take on full post-production responsibility in the cloud for the project, if you will, we kind of exert a greater moral authority to insist that the program conform to certain standards. And I think we have greater leverage to drive us to a highly standardized program.
And we've been able to do that with our – to an increasing degree with each of our cloud relationships. And we're certainly starting the newer relationships very much in that shared spirit with the customer that they recognize they are better off, the more conform and the more standardized they can be.
Now in terms of really driving a step function improvement in total cost of ownership and the speed of implementation, that requires certain product enhancements and architectural platform improvements that are at the top of our priority list and we'll be announcing a couple, I think.
I think we really see consequential changes in that direction at Connections that we're excited about. And that will really be an important part of driving the long-term demand and economics that we want out of the cloud transition.
是。布拉德，我会谈到迄今为止的经历，然后迈克可以评论他对未来的展望和意图。我认为 - 正如我们一直所说的那样，云并不是一个让一个复杂的转型计划变得简单的银弹。
仍然存在大量的业务变化和集成工作。而且只需要进行核心运营转型 - 这与我们的其中一个程序一致，所有这些在自我管理或云模式下都是相同的。
Yes. I'd say, if you think about the overall story of the situation right now, you've hit on what I would describe as my number one priority, is to helping to ensure that were continuing to standardize in a line and drive the type of collaboration that we need between all the teams necessary to ensure that these are implemented successfully and efficiently each and every time. We're seeing steady progress.
And then as Marcus said, we're excited to talk about some pretty innovative new additions to the approach that will continue that track towards more efficient delivery and better execution in terms of the overall system implementation. The centralization of that work that's represented through our participation in running these systems is just overall a very, very beneficial thing for the whole industry.
And aligning the teams here in our product development organization around that exercise is going to be very, very positive for all of our customers. So I'm excited for that to be top of my list in terms of coordinating and executing here at the Company.
Great. Thanks, guys. And then one more if I may just on digital and data. It sounds like that business is really going well. It's close to 100% attached it sounds like on these new deals. Are there any use cases you would point out that are – you're seeing some commonalities there and how has that changed over say a year-ago or even a couple of years ago? Thank you.
大。 多谢你们。 如果我可能只是数字和数据，那么还有一个。 听起来这个行业真的很顺利。 它接近100％附加它听起来像这些新的交易。 是否有任何用例你会指出 - 你在那里看到了一些共性，一年前甚至几年前有什么变化？ 谢谢。
Yes. Brad, I would say that every insurer right now has – is engaged at some phase of what they would call in their own language a digital transformation, reinventing themselves for a new digital era of customer service.
Even the most kind of business commercially focused – commercial lines focused insurers still thinks about kind of consumerization of the experience that they have to provide to all of their counterparties. So digital is a predominant theme across the industry as it is in other industries, I'm sure. And so more and more digital is just a native part of the program and data is close behind that.
And one of the other catalyst for the cloud, I think is a promise that we still have to fulfill, but the promise that by having a much more standard and conforming implementation running in the cloud that our customers' access to their operational data will be dramatically enhanced, as well as all kinds of options to syndicate and experiment with the data in ways that the industry is really hungering for.
So I think data and digital are becoming less and less add-ons to a core system project as inherent to the rationale for the programs to begin with. And I think we're very well – we've been very well positioned for that and more and more, they will just become kind of native parts of the whole offering.
是。布拉德，我想说现在每个保险公司都有 - 他们会用他们自己的语言称之为数字化转型的某个阶段，为一个新的数字时代的客户服务重塑自我。
即使是最具商业价值的商业领域 - 专注于商业领域的保险公司仍然在思考他们必须为所有交易对手提供的体验消费化。因此，我确信，数字化是整个行业的主流，与其他行业一样。因此越来越多的数字只是程序的原生部分，数据紧随其后。
因此，我认为数据和数字化对核心系统项目的影响越来越小，这是程序开始时的基本原理所固有的。而且我认为我们非常好 - 我们已经为此做好了准备，而且越来越多，它们将成为整个产品的本土部分。
Great. Thanks, Marcus.
Our next question is from Pat Walravens with JMP Securities. Please proceed.
我们的下一个问题来自Pat Walravens和JMP Securities。 请继续
Hi. This is Joey on for Pat. Thank you for taking our question. We are wondering how competitive the cloud wins in the quarter were and if maybe you can provide an update on the competitive landscape? Thank you.
你好。 这是乔伊对帕特的看法。 感谢您提出我们的问题。 我们想知道云计算在本季度的竞争力是多少，如果可能，您可以提供有关竞争格局的更新？ 谢谢。
Certainly, a number of the cloud wins were actually directly competitive. No new names that you wouldn't be familiar from following us, but a number of them were competitive, including even existing customers. That said, well now that we're contemplating the cloud, we know, let's revisit, let's check out our options across the market. We had a couple of those as well as net new customers that of course, compared us to competitive choices.
The second part of your question, I'd say there is really no change in the competitive landscape. I mean, we say this pretty much period after period. There aren't really new entrants into our market there. Every deal is very consequential for us and for any of our competitors. So of course, they are all very fiercely contested. But I'd say the dynamic is pretty much exactly the same as it has been for quite some time now.
当然，一些云赢实际上是直接竞争的。 没有一个你不熟悉的新名字跟随我们，但其中一些很有竞争力，甚至包括现有客户。 那就是说，现在我们正在考虑云计算，我们知道，让我们重新审视一下，让我们看一下整个市场的选择。 当然，我们有几个以及净新客户，将我们与竞争选择进行比较。
问题的第二部分，我会说竞争格局确实没有变化。 我的意思是，我们在很长一段时间之后说这个。 我们的市场并没有真正的新进入者。 每笔交易对我们和任何竞争对手都非常重要。 所以当然，他们都是非常激烈的竞争。 但我要说动态与现在相当长一段时间完全相同。
Our next question is from Bhavan Suri with William Blair. Please proceed.
我们的下一个问题来自Bhavan Suri和William Blair。 请继续
Hey, guys. This is Dylan Becker on for Bhavan. Thanks for taking our questions. Just one quick one here. I guess it sounds like the mix of new deals versus conversion is about 50/50 for this past year. As we look forward, how should we expect to see this mix going to continue to develop? And yes, just kind of interested in how you guys are kind of viewing that opportunity over time.
大家好。 这是Dylan Becker对Bhavan的看法。 谢谢你提出我们的问题。 这里只有一个快速的。 我想这听起来像过去一年中新交易与转换的组合大约是50/50。 在我们展望未来的情况下，我们应该如何看待这种组合继续发展？ 是的，只是对你们如何随着时间的推移看待这个机会感兴趣。
Well, I think, first of all, I think it's an incredibly positive sign that we're adding new cloud customers just directly, right? And it kind of speaks to what I was saying before about how the improvements that we're able to make to the overall system, total cost of ownership and implementation expense that are delivered via cloud should accelerate demand for core systems migrations in the first place.
So I'm excited about that mix and excited to see that the opportunity for us is most definitely not just a conversion of the self-managed on-prem installed base. So we'll see how that ratio develops over time, but I think it's a very, very positive sign what we were able to achieve for the last fiscal year.
And then a quick follow-up if I may. Just – I know, Q4 of this past year was very cloud heavy. Looking into 2020, should we expect to see any more – any kind of linearity around cloud deals are expected to be Q4 heavy again. Any insight there would be helpful? Thanks.
如果可能的话，我会快速跟进。 只是 - 我知道，过去一年的第四季度非常沉重。 展望2020年，我们是否应该再看到 - 围绕云交易的任何类型的线性预计将再次成为第四季度。 有任何见解会有所帮助吗？ 谢谢。
My sense is that you shouldn't expect a change in the business dynamic associated with the way the company operates. And I think that is based on, I would say the complexity of the decision-making process for our customers. These are long sales cycles. These are very deeply considered and studied. And I don't think that we are yet at a point where that business dynamic is going to change.
我的感觉是，您不应期望与公司运营方式相关的业务动态发生变化。 我认为这是基于，我会说客户决策过程的复杂性。 这些都是很长的销售周期。 这些都经过深入思考和研究。 而且我认为我们尚未达到业务动态将发生变化的程度。
Great. Thanks for taking my questions.
And our final question is from Rishi Jaluria with D.A. Davidson. Please proceed.
我们的最后一个问题来自Rishi Jaluria和D.A.戴维森。 请继续
Hi, guys. This is actually Hannah on for Rishi. Thanks for taking my questions today. Just first one, as you look into 2020, what do you think are the biggest headwinds or risks to hitting your fully ramped ARR goal?
嗨，大家好。 这实际上是汉娜为Rishi。 谢谢你今天提出我的问题。 首先，在您展望2020年时，您认为达到ARR目标的最大阻力或风险是什么？
Well, I would say for our migration customers, it's the steepness of the ramp. And so those are one of the things that we're focused on here going forward. There was a lot of learnings that came out of 2019. And then we have a much bigger set of customers that we can talk to when we're contracting with our migration customers going forward.
好吧，我想对于我们的移民客户来说，这是陡坡的陡峭程度。 所以这些是我们今后关注的事情之一。 2019年出现了很多学问。然后，当我们与移民客户签订合同时，我们可以与更多的客户交流。
Okay. Thanks. And then Mike, just broadly speaking, could you share anything that surprised you in the quarter either for the could…?
好的。 谢谢。 然后迈克，从广义上讲，你可以分享任何让你感到惊讶的事情吗？
Sure, any surprises. To be honest with you, I've had an experience in the last 30 days, it has been much more about validation than surprise, which I think speaks to the – I don't know the very – is a deep consideration in study that I did as a company during the process of considering joining.
But also I would say, just the handle on the business that both markets and the Board had, just time after time where there was a product or the execution or the cloud opportunity, it was more validation than surprise maybe just because we haven't talked enough about it. I mentioned it in the remarks. And I wouldn't say this is really a surprise as much as it is, I think an incredibly innovative opportunity for us in our data and analytics unit.
I mean, we have this small thing about being able to take our data listening platform and apply it to risks beyond cyber, I think may sound like a small thing. But I think it points to something very, very transformational, not just for Guidewire, but for all of our customers. And I'm incredibly excited about that. So I wouldn't necessarily say it was a surprise, but it was great to see that, that use case validated and real because it points to a positive future for that team and for that use case.
当然，任何惊喜。说实话，我在过去的30天里有过一次经验，它更多的是关于验证而不是惊喜，我认为这对我说 - 我不知道 - 在研究中是一个深刻的考虑因素在考虑加入的过程中，我做了一家公司。
Great. Thank you.
I would like to turn the conference back over to Michael Rosenbaum for closing remarks.
So I just wanted to say thank you all for joining us on the call today. We're excited about the opportunities ahead and look forward to seeing those of you who will be attending the Deutsche Bank Conference next week in Las Vegas, as well as our Analyst Day later this month here in San Mateo. And if you have not already registered and are interested in attending, please let us know. So thank you all very much and goodbye.
所以我只想感谢大家今天加入我们的电话会议。 我们对未来的机遇感到兴奋，并期待看到那些将参加下周在拉斯维加斯举行德意志银行会议的人，以及本月晚些时候在圣马特奥举行的分析师日。 如果您尚未注册并有兴趣参加，请告诉我们。 所以非常感谢你们，再见。
Thank you. This concludes today's conference. You may disconnect your lines at this time and thank you for your participation.
谢谢。 今天的会议结束了。 您可以在此时断开线路，并感谢您的参与。
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