Guidewire Software, Inc. (GWRE) Earnings Call Transcript & Summary

Everybody, welcome to Nashville. Welcome to Connections. Welcome to Analyst Day. I'm Alex Hughes, Vice President of Investor Relations for Guidewire Software. And I think this is the first time we've had Connections in Nashville, right? it is definitely the first time we've had Analyst Day at Connections, which I'm pretty excited about because I know it gave a lot of you a chance to attend some of the keynotes this morning and breakouts. It's always good to kind of see Analyst Day in the context of the community and the folks that have built around our platform. How many people here had a chance to attend the keynote this morning? Good. So I'm good. I'm glad we did it. For those on the webcast, the content of the keynotes in the next day or 2 should be up on the web, so you can also partake in that. For this event, we are going to probably take about 2 hours, and it's going to kick off with Mike, our CEO, who's going to talk about powering P&C and long-term growth. He'll be followed by John Mullen, our President and Chief Revenue Officer, talking about executing on a large market opportunity. We'll do a little differently this year. We'll have Q&A after the first 2 speakers, just to kind of make it more like a dialogue. You'll see Diego starts at around 5:20 Nashville time for those on the webcast, talking about delivering innovation and scale. And he'll be followed by Christina Colby, our Chief Customer Officer, talking about driving customer success. A little bit more Q&A, and then we'll finish with Jeff talking about growing into the target model; more Q&A, and then we'll break for drinks and call it at night. Before I hand it over to Mike, just a couple of housekeeping items. First, one of the downsides of doing Analyst Day at Connections is deep into our first quarter. And so it's kind of ironic to talk about quiet period during Analyst Day. We will reserve just commentary about Q1 for a few weeks from now when we have our earnings call, but we're going to have a good conversation today about the business, strategy, the model, and Jeff will get into all that, so it should be good. The second, I think we made this kind of clear in the invite that we sent out. But in my negotiation with marketing and getting them to allow us to crash their party with Analyst Day, it's a day 1 event. So you all had a chance to go to the keynotes, the breakouts, attend this event. Tomorrow, though, will be for customers and partners. And the good news, though, is you'll be the first to sort of break out of the hermetic bubble of the day [ Lord ], and you'll have to send us an e-mail and let us know how it is and maybe send some hot chicken while you're at it. And then the last thing I'll say is we have 2 runners with mics for Q&A. I would just ask that when we get to these parts where we're doing Q&A, you allow them to get you the mic so the people on the webcast can hear that, okay? So with that, I will hand it over to Mike.

My cool music. All right. Thanks very much for coming. As Alex said, this is the first time we've done this associated with the Connections event, which is great, except for you get to the end of the day, and I'm exhausted. So I'm going to try not to pass out up here. You guys can laugh at my jokes and keep me on my toes. A couple of slides. Just to give you a sort of overall summary of the company, just for the folks that are on the webcast. Some of this stuff is similar to what we presented earlier in the day. Company remains completely focused on property casualty insurance industry. We exist to power innovation in that industry, enable customers to engage, innovate, grow efficiently. I think that we are somewhat unique in this specific focus, and we take that very seriously. The insurance industry is a massive, massive global industry and is also highly concentrated. I think, to really understand our company, to really understand the thesis behind investing in our company, really need to understand the P&C industry. Over $2.7 trillion in GWP written every year. And about 75% of that is written by just about 250 companies. So we have, traditionally, and still to this day, remain very, very focused on the high end of this market, doing everything that we can to support the unique, very complex requirements of Tier 1 and Tier 2 insurance companies. It doesn't mean we don't serve the rest of the market. We do have a platform that scales down to 3, 4 and 5, and we have tremendous numbers of customers in those areas, but I think, specifically have this unique focus on the top end of this market. The other part of this slide that I think is very important is that we are and intend to be a global company. We've got great customers all over the world, and we've got a platform that scales internationally. And that is absolutely the focus of the company going forward is to make sure that wherever property casualty insurance is sold, Guidewire is the logical platform to run that core system. So just digging a little bit deeper into P&C and the P&C industry. It's a very ubiquitous thing, right? It touches almost every aspect of our lives, every aspect of society, every aspect of our economy. You think about all these different lines of business that this industry touches and this -- sort of that concept creates a certain degree of durability to the industry. Very significant amount of the insurance that's written is compulsory, right? So if you want to drive a car, you got to have insurance. You want to borrow money to buy a house, you got to have insurance. You want to run a company, got to have insurance. And so that creates a durability to the underlying industry, which creates a durability to Guidewire and the software we sell and the contracts that we create to support this industry. The other thing that you need to understand, you need to have a certain degree of empathy for all the professionals here at Connections this week, is managing all of this is incredibly complicated. It's a highly, highly regulated industry. And every step of these insurance processes are deeply interconnected. This is a picture that we drew that sort of to take -- to create a representative picture of what it looks like with Guidewire installed inside one of these -- one of our companies. We took -- we have a bunch of these diagrams that we look at and go through when we do a project and we sort of took some of our experts and said, make me a picture of what this looks like generically. So that isn't honestly, like, a representation. It's actually a picture of what it genuinely looks like. So highly, highly interconnected, integrated systems that need to run in order for these insurance companies to operate. I was listening to one of the leading insurance brand's CEO speak. And they said, look, we don't really do anything physical, right? This is a financial transaction. The existence of that financial transaction exists inside a software. We run the business in software. And so these systems, while complicated, are also critical to the ongoing operations of these companies. . It -- when you think about the problem we're solving, right? It's not just complexity. But it's also this concept that this industry needs to evolve. There are tremendous pressures on this industry to change more rapidly, to create more agility in the way that these companies operate, whether or not that means connect with customers with new digital channels, new mobile applications, change rates, change forms, change products in order to keep pace with the changes that our economy and our society push on them. But it creates this tremendous challenge for IT professionals in the industry. And that, one, when you have a super complicated system to support, you really just want to make it stable. You really just want to get it running, make it work, keep it reliable, keep it secure and then don't touch it. And that kind of conflicts with this idea that we should try to make it agile, that we should help people innovate, that we should constantly change it. And that dynamic is a real challenge for our customers and for the industry to grapple with. Our solution and we would -- I'm biased when I say this, but we solve this problem for the insurance industry, right? We've had best-in-class applications to support core business processes in the P&C industry, across policy claims and billing. With the InsuranceNow platform, we do this down market for Tier 4, Tier 5 carriers with 1 application suite. We've got a portfolio of analytics applications that support this. And now as a cloud service provider, we're able to provide scalable services that support these applications. And we're able to -- we're able now to support a very durable, reliable system, but also allow the insurance industry to change it as often as frequently as they need to in order to respond to market changes, respond to consumer demands, respond to the changes that companies need in order to keep pace with things like weather-related risk and climate change. And so we do all this with a world-class ecosystem that, if you're here at Connections this week, you can see the physical manifestation of hundreds and hundreds of partners and tens of thousands of consultants that are all oriented around this application suite delivered as a cloud service to solve this problem for the P&C industry. And I also think this is very important to understand about Guidewire uniquely is we are really the only company that solves this in a consistent way across a complete insurance life cycle, across policy, claims, billing, every step of this journey. You can do it on one consistent platform delivered by one company in one consistent way. You can train up your team, you can train up your IT organization. You can work with systems integrators around one common platform to facilitate this complete life cycle, right? I like to say we enable an insurance company to deliver the right product at the right channel, at the right price, at the right risk, manage the premium very efficiently. And then in the event of a claim, can manage that experience elegantly with world-class customer service. And we can do it in such a way as every single interaction is captured, every single little piece of data that relates to the interaction between these systems -- she's going to yell at them for being too loud. CEO is talking. Sorry. Every single thing that relates to their operation, we can capture in our data platform and use that analytics, use that data to constantly improve the system, right? I don't think -- the way I envision this working and the way a lot of these operations work is it's not like this big effort to sort of build a system, deploy a system and everything works, but this idea that we're constantly iterating and improving, it really, really makes the difference and enables that sort of improvement function to kick in at an insurance company and continue to improve. So Guidewire has been incredibly successful. This strategy that I just described has been deployed for now almost 20 years and has been incredibly successful. It has created very stable, consistent, durable growth. And you can see here, back in Q4 of 2017, we started our cloud journey. And when you zoom out and look at this, you say, like, we didn't really miss a beat, right? We started the cloud journey. We started to get customers. We started to learn how to do this about, I don't know, what is that Q1 '22 -- Q1 of '22, we announced Guidewire Cloud Platform, our first release we called Aspen, and just continued the progression, continued the opportunity to sell this system, sell this solution to the industry, and we have been very successful just continuing to reinvent the company as a cloud service. That cloud transformation is going incredibly well right now. We are at now over 100 customers on the InsuranceSuite cloud. And as you can see, ARR for our organization on the cloud is now outstripping our on-prem ARR. And that's a super, super milestone for us to achieve. We expect, and I have every ambition, to ensure that every single one of our on-prem customers eventually migrates over to our cloud service. We have architected the system to support that, and we work with every single one of our customers to make sure that, that's occurring. But this growth that we've been able to achieve has been a mix of moving the existing customers to our cloud service but also continuing to win our fair share, and maybe more than our fair share, of the competitive deals that come to market. So I also want to talk just for a second about a really important milestone that we're all very, very proud of. Embarking on this cloud transformation at the company was a bold thing to do, okay? We had to invest a very significant amount of dollars, resources and focus to ensure that we were able to create a cloud platform that every single one of our customers could trust to run their most important operation. And that investment, that focus caused the subscription and support gross margin of the company to drop. We effectively invested ahead of the curve. But as you can see from this chart, we are now through the trough, right? We are now through the critical phase of investment where we are able to, every single time we sell this solution, amortize that investment across a greater scale of revenue, across a greater number of customers. And you can see, we have every intention of continuing to expand this gross margin. You're going to hear from Diego about the focus that he has put into this and the focus that we have put into this as a company. And this statistic, this measure, let's say, is probably the most important thing that drives the rest of the margin improvement at the company. And we are all very proud of the success we've created both in the implementations, but also now being able to show very concretely that this margin is now improving and is on the way back up. So just summary of the momentum that we're seeing across the company. 400 -- excuse me, 540 insurance companies now under the Guidewire umbrella, across 40 countries, 23,000 consultants trained on the system and certified to implement Guidewire; $600 billion in direct written premium attached to that ARR that drives our revenue; and over -- or a little bit over 190 solution partners. And this -- that solution partners kind of lends to this next slide, and it's kind of a hard slide. I'm going to have to walk you through this slide. This is a drawing we made, when I joined the company, around what's the thesis behind the investment in cloud and how is that going to start to create a sort of flywheel or a positive life cycle. Maybe similar, if you were here today, to Reese Witherspoon's idea of how she's created a great business. But it starts with the leading P&C customer base. And Guidewire -- that asset of Guidewire's is probably the most valuable thing that we possess, is that customer base of companies that trust us. And we can move those customers. We can use that experience, we can use that customer base to seed a cloud customer base. And that's going to create the excuse that we needed to be able to invest in creating a better and better cloud platform, a better and better cloud platform attracts new customers. And if you see and you think about the history of the cloud transformation at Guidewire, this is exactly how it played out. We went to a couple of the long-standing trusted customers. We worked with them to establish our experience as a cloud vendor. And now those new customers, the net new customers are coming to market, and more often than not, choosing Guidewire as the cloud platform that they trust. This creates a potential for us to share data, share analytics across the ecosystem. So our access to these implementations, our access to this data gives us the potential to create new insights with our analytics department, create new predictive models that we can share across customers. And that, in turn, creates more value in the cloud platform, which attracts more customers. The other part of this that's very important is the marketplace partners. We are not doing this alone. We have absolutely no ability to do every single thing ourselves. We try very hard to ensure that the platform is open. As I've told you before, we have -- typically, these systems are integrated into 50, maybe 100 other applications. And we expect and encourage other entities, other application providers to add value to the system. We talked this morning in the Connections keynote about Betterview, right? A great example of a company that's augmenting the value of Guidewire plugs right into the system. And as the marketplace applications, as the power of that community increases, it just makes it more likely that we're going to be able to attract more customers to the Guidewire platform. And last but not least, the last little loop on this diagram is our SI program, our SI ecosystem and the 23,000 consultants. It's actually a huge advantage that we have, right? That companies that come to Guidewire know that there is an incredibly large bench of experienced professionals who are going to be capable of augmenting their teams and providing the thrust that they need to ensure that their projects are successful. So this whole thing works together. And I think you can really feel it here physically at a Connections event, and it's always a great time to sort of see it in real life. But it is, I think, starting to kick in for our company and starting to see this all manifest as a cloud service provider. So execution priorities for me and for the team, number one, maintain our lead as a core platform and application suite, right? This all works if we're the best choice and we have every intention of maintaining and investing as necessary to ensure that we're the best choice for every P&C company in the world. Number two, continue to drive efficient scale and margin improvement at the company. I told you before, a lot of you have been focused on us for a long time as we sort of dipped down on the margin and are now kind of coming out of that trough, but we have room to grow in that respect, and Jeff is going to talk to you about that. But that definitely remains a key focus for me and for the management team, is continuing to expand the margin profile of the company over the next couple of years. I want to continue to enhance this ecosystem. I see this as a real important strategic differentiator for us. It's a real differentiator, when it comes to winning new business, and we will continue to focus on expansion of that ecosystem. And last but not least, definitely not least, fostering more of a sort of concept that we can sell more products to this customer base, whether that was our data products, analytics products or other just operational add-ons that we can build and deploy where, basically, the concept is that if integration to Guidewire and the Guidewire application suite is very important, maybe that gives us a good excuse or a reason to sell that as a first-party application. And so that's going to become more and more of a part of our focus going forward to help augment our growth. Okay. So that is the end of my section, and I am going to now turn it over to John Mullen, our President and Chief Revenue Officer.

Okay. So now the test, whether not I can see the slides with or without the glasses. There we go. Glasses on. It's getting worse. Okay. Really, thank you all for being here. I'll share with you that it's a shift in focus. I spent the last 20 or so hours with 3,000 of my closest friends, trying to figure out how to make market with them. And I take a lot of energy from that. So now big shift in focus. So I'm going to talk a little bit about what it means to execute against the opportunity that Mike shared with you. I'll start with the year-end reflection. I am -- really, about a year since I last talked to this audience. and I really want to share with you how proud I am of the team and 3 really key components of where we are as a team. So number one, the formation of a field team, and I think really some really strong advancement of our sales capacity capability globally. And that's to me, number one, and it shows up in the sales results. Number two, product maturity. Diego will talk about that, and you'll see that, and you'll hear that from the customers you talk to. Hopefully, you're talking to many of them here. That, to me, is something I'm really, really pleased with, not the least of which is the conversation update, which has been a dominant conversation amongst our customers and in the discussion here at this session. This, to me, is the single most important piece of engineering that I've seen in 20 years of doing core systems replacements and core system projects in the property and casualty insurance industry. And it's hard to -- it'd be hard for me to stress that anymore. This is a huge value proposition and nobody else comes close on it, so I think it's absolutely critical. And then the third element is organizational maturity. Where we are in the journey from a defensible, scalable secure cloud platform, focusing more on insurance outcomes and our ability as an organization to now take more signal from the market, put more of our energy into insurance outcomes and really address those Tier 1 and Tier 2 problems and also other more dynamic elements of the market really puts us in a unique position. So those are some of the topics we'll talk about as we go through today, and we'll have some Q&A right after this, so. Large market, you've all known that. Those of you who know us know this, this is not a material change to the size of the market. But the -- but it is an increasingly accessible opportunity to us, not just because of the maturity of our market, of our product but also the markets' need and appetite for moving towards a SaaS solution. And not just a cloud solution, but definitively a SaaS solution. Is it as fast as I'd like for it to be? No. But the market is understanding the value of this more today and every day as we go forward. So let's put some geographic scope on that. No surprise, right? This is exactly if you model it out, and you've seen this before, no surprise. This is exactly how you would expect the market to adopt this move this move towards cloud. But the premium size, consistent; penetration, growing, growing nicely; but exactly what we would expect geographically. We'll talk later about our investments in EMEA and in APAC to unlock that opportunity, which I'm extremely optimistic about, and we'll share some of the details. Okay. By tier, again, not a surprise. Tier 1 and Tier 2. Tier 1 hard to move. Tier 2 aligned very well. As we solve these problems, we're talking about the deals in the market, the accounts in the market and how we move markets with the solutions that we bring forward, we'll dig in on that in a second. But certainly, the logic you would expect and the logic you've seen over prior years. But what's changing? There's an immense pressure, as you all know. There's an immense pressure on carriers. And that pressure is materializing in an increased alignment and increased need for what Guidewire brings to the marketplace. I'll hit on regulatory, macroeconomic and geopolitical risk. That's a big one, right, beneath that social inflation in nuclear verdicts. Okay, is this a new normal? Are all of these pressure points a new normal? I don't know. I don't know. Our industry has been very good at finding equilibrium on rate with regulators with the market. But the convergence of all of these is quite substantial probably 30 to 40 years in the past before this substantive of a pressure point has come to bear at the same time in the market. But what does it mean? It means that this pressure is creating a discussion. The discussion is swiftly changing from under this pressure, what actions do we take. Actions do we take to be more offensive, actions do we take to be more opportunistic, how will we create opportunity from pressure. And more and more, we are at the table having that conversation with carriers about creating opportunity from pressure. And business agility and operational excellence in concert is absolutely required. No longer are customers talking about, I'm an insurance business professional versus I'm an insurance IT professional. Those things have come together, and I think they are inextricably tied long into the future. Innovation connected to insurance outcomes. This is not a technology problem we're solving. These are higher order business problems we're solving. And I think that really lends towards our ability to create a partnership with them. Look, what insurers do, what we do is hard, okay? What insurers do is very hard under this construct. More and more the formation of a partnership for us to take on more of that in service of their outcomes is something we are uniquely qualified to do. And the pace which we're addressing that problem is increasing now that the substantive components of the Guidewire Cloud platform are behind us, and we can take more signal from market and do more with that signal. And that leads to some really cool opportunities. So I'll share with you growth priorities the way I think about it. Number win -- number one, well, always win. Number one, win net new deals. This has been the backbone of this market. When a deal comes to market, it gets fiercely competed. And the ability to win that, as Guidewire has proven time and time again, that this is part of who we are. The deeper our customers go, prospects go, the better we show, okay? And that will always be a part of who we are. But accelerating migration portfolio, this is an important topic for all of us, is how are we doing the long-range planning with customers to get them to the point where they really see the benefit of this platform partnership. We've made tremendous progress on this over the year, and I look forward to more of that. We'll get into some more detail on that. Portfolio expansion inside of existing accounts. Still yet a large number of our customers have only a couple of our products. And as we think about adding products to our product roadmap, portfolio expansion will be an efficient model for us. Accelerating international growth, okay. This year, we -- in the last fiscal year, we met our sales objective in all regions, okay? That's a very important milestone for us from a momentum standpoint. And we will accelerate that international growth by continuing to invest in the content that drives those markets and then growing the analytics business, which I'll talk about specifically in a minute. So expanding our market motion is extending our leadership position and putting us every day deeper into the fabric of these customers. Deals I talked about, how we're driving -- we're investing quite a bit in upskilling our sales team to talk more about value propositions for when that deal comes to market, okay, again, standard motion for us. We've been pretty good there. We'll talk about win rates in a second. Continuing to invest in global consistency and talent is important. When we talk about accounts, this is more about shaping deals to come to market, okay? Long-range planning for -- with customers driving value of business outcomes, taking signal, working with them on EA -- on early access projects, and making sure that we're taking less friction out of the conversation when that account -- what that customer conversation matures to a deal. So we're making tremendous -- we have made investments in that, and we're upscaling our focus and customer success with what Christina's team is doing, and we're making progress on that, both on mid- and long-range planning with these customers. And then the final one is markets. How are we investing every day in country-specific and line-of-business-specific content so that we become the destination for those markets? London markets had some great success. We'll talk about some of those. But that idea of getting ahead of signal from the marketplace to create the destination for a specific line of business or geographic market well in advance of when a deal might ever otherwise come to market under the friction of heavily burdened procurement processes is a real value lever for us, and we continue to focus on that as a company. Some of these accounts I talk about are markets unto themselves. The top 25 global carriers represent over $900 billion in premium. 22 of those 25 are Guidewire customers today, and 17 of those 22 have a cloud agreement in place with Guidewire of some type, size or form. So we are learning, and we are in a unique position to continue to accelerate and expand that footprint and that journey with those customers. I'm not going to tell you it's easy. These are demanding customers. But solving the journey with these customers is really -- puts us at the forefront of being able to address where this industry is going. This is a quote from a partner of ours, Byron Olexa at Progressive Insurance. "Many, many years has Guidewire sought to understand what makes these large carriers tick. And Progressive, in particular, was a build-first shop." So winning that space with them, we're extremely proud of. And partners like Byron are extremely important to us to give us the signal of where we're going. However, it's not just about the biggest end of the market. Because of where we are with the platform today, we are able to address other more dynamic parts of the market. On the left side, you'll see some really important success factors that we hit in FY '23 and areas where we continue to invest as we go forward. So the OEM market is very important to us. Excess & Surplus, there was a phenomenal win rates last year in Excess & Surplus with go-lives under 8 months. 10 wins in Tiers 3 through 5. That's a great fact pattern for us as we go forward because it proves our ability to operate at both ends of the market and translate signal to better execution. Emerging lines of business and countries. Again, we will be investing there. Work comp is an investment category for us in London market. I'm extremely optimistic about what is an extremely dynamic change in London market and how financial transactions occur through the syndicates and with reinsurers and our relevance in this marketplace, it's growing every day. And the team executed against it, I'm extremely proud of. The next is our analytics portfolio. Okay. Very simply, Guidewire is increasingly the platform upon which the P&C industry is standardizing, okay? We have the largest volume of high-fidelity data and service to this industry. And we own the screens upon which the decisions are made and work gets done, okay? That is a phenomenal platform for us to travel this journey with our customers. So what does it look like? We're winning at a high rate. Core systems decisions by instance on the left and by DWP on the right. You've seen this slide in the past. What I will simply say is we continue to gain market share. And how does that manifest? So I think about it, and Jeff -- and as Jeff and I talk, I think about it as adding net new, fully ramped ARR. Jeff will take you through the dynamics of ramping. But are we adding more value and fully ramped ARR every year. And then that leads to fully ramped growth, 17%; and then obviously, ARR growth. And I mentioned how proud I was of the team. This -- as you know, these are complex deals. These are complex accounts. These are complex customers. And the portfolio of products has really evolved fast to allow us to position for these conversations. Really proud of the team's execution there, and we still have a distance to travel. So what's required for these growth priorities to hold true this year and long into the future? Winning net new deals, just continuing the pace, product pace and relevance toward industry standard solutions. Continuing that, I'm very confident in our ability to do that. Accelerating the migration portfolio, building the tooling to ease that path towards first cloud release and the [ snowcat ] releases after that. We'll continue to invest in that. We'll continue to invest with customers to understand their value and pain points, and that's a journey that we're progressing on nicely. Portfolio expansion of existing accounts, business outcomes, digital and data. Those of you who are in the session today, in the keynote session today, heard about our future on digital. It is precisely the platform that our customers want us to provide. Their ability to make changes in their interaction patterns without having to touch the core system. This is very specifically what positions us well to be a part of the fabric of their of their future, particularly in these large carriers that have a wide array of demands. Exerting international growth, country-specific content. We've also made an investment in having managing directors and formulating leadership teams in these regions. This is absolutely critical to us because it is important that we are every day, ever more global in how we show up, culturally, contextually, insurance content-wise, and that's paying off. And then finally, investing in a relevant and dynamic portfolio. These decisions around data and analytics can be quite complex. And we've talked a lot about that. You saw HazardHub today, those of you who haven't seen it. This is something to look into. It's a great product. And that growing portfolio of data and analytics products is driving a tremendous amount of relevance, C-suite relevance, for our conversations with our customers and prospects. So with that, I'll just say simply that I am confident with where we are on the platform that we can continue this growth pattern. I am confident that we can continue to outrun any otherwise alternative in being a part of the fabric of the strategic planning of the world's largest carriers and increasingly, every day, smaller carriers and that puts us in a great position. So thank you. I think we have some Q&A next. Yes? 15? Why don't we go back to -- what slide do we want to leave it on. We'll leave it on Diego's slide.

No, no, no. Put it on the growth priority slide.

Okay. All right. Let her rip.

I don't want anybody to get confused.

Okay.

Sorry. So John, you're talking about how you guys have revamped the field services team. I think one thing that, Mike, you've been calling out this year is trying to get deals closed sooner in the pipeline, not wait until the end of the month, end of the quarter. I guess, one, what were some of the efforts that you guys put in to make those motions effective? Is there -- and then second, I just wanted to ask about the Tier 3 through 5. How much of that incremental adoption by that lower tier has been because you guys have lowered the TCO for GWCP versus validation of insurance now for that lower tier?

Good question.

Okay. So on the -- what we refer to as linearity, linearity within the fiscal year and linearity within the quarter. So David Laker joined us actually exactly a year ago yesterday and implemented, very quickly, the measures that drive linearity within the sales team. Adherence to their forecast, making sure that we weren't pushing things to the back of the quarter and pushing things to the back of the fiscal, although Q4 was quite a nice Q4. So measuring that and instilling a much higher degree of portfolio discipline, pipeline discipline, forecast discipline and measuring and also rewarding the sales and sales ops teams on linearity was the fundamental reason for that change. On the other one, Tiers 3 through 5…

I'll answer it. Let me answer that one.

Yes. Go ahead.

And I really would stress, like, John and David, just -- it's not -- somewhat, like, is this a mindset issue, it's like you just put your mind to it and just commit yourself to getting ahead and staying ahead in Q1, Q2, Q3. You're going to have a better chance at making the year. And that shift has been very positive for us. And it's really just worked. Even monthly -- even kind of driving a monthly cadence has been very beneficial for us. So with respect to the TCO question, and let's call it going down market. There certainly was a degree of our approach that necessitated us being willing to price deals at a point at which we were confident they would be profitable in the future, right? There was, like, a bit of a focus on saying, hey, where do we think we can get in terms of the margin around running these systems at this scale, and therefore, should we be able to price to win in the Tier 3, Tier 4, Tier 5 segment. And that is specifically an InsuranceSuite comment, but it has enabled us to be very competitive and also is proving to be valid. Those assumptions are proving to come true based on a lot of the hard work that Diego is going to talk to you about, that, that sort of projection that we made about the improvements that we can make to how the system would operate gave us confidence that we could go compete there and win, and that's playing out pretty well. InsuranceNow, over my tenure at the company over the past, let's say, 3 or 4 years, is really starting to see an uptick. We had a period of time in which we just -- there was some doubt about our commitment to that platform. But I think refocusing on that platform, refocusing on the go-to-market associated with that segment and really learning how to segment the deals as they come in to what's going to be the right fit for InsuranceSuite, what's going to be the right fit for InsuranceNow, has helped us see a resurgence in that particular product line.

David Unger, Wells Fargo. Is there a consolidation opportunity for Guidewire as it become that's more top of mind for IT decision makers? Consolidation opportunity.

Consolidation of core systems opportunities?

Yes. Yes.

I think, maybe. We talk about it. But I looked at it more -- I honestly -- I think the strategy for us is it makes more sense to win core systems like on our core system, not sort of confuse ourselves with multiple core systems, but instead think about ways that we can add more value to our customer base with add-ons, data, analytics, other offerings. It's certainly things -- we look at it, we think about it, we consider it. But I think that there's much more benefit to our customers and to our shareholders in the sort of product strategy that involve -- that revolves around the consistent core system, one where the investments that we're making are shared across the entire portfolio and then an add-on strategy around data analytics and these other core applications. So it's possible, but it's -- like I'd say, less likely than a more add-on strategy with respect to new product addition.

The only thing I'll add to that is that, particularly in global carriers, it still holds that the vast majority of the premium that we want to go after is that which is maintained by homegrown systems and very aging systems. It's a much more efficient pursuit pattern for us and one that we're very getting -- we're very good at. And the answer, the destination of the landing spot is certainly becoming much more enticing to those that have to get off of or need to address business agility. I just think it's a more efficient pattern for us to hit those pieces.

Matt VanVliet from BTIG. I guess as we talk to customers here, there seems to be a mix of we know we have to move to the cloud, but we're not necessarily like rushing to do it, per se, because there's a very tangible cost and there's a lot of, I guess, workflow friction. So what are you guys doing from a sales perspective and really a messaging of long-term value to unlock that decision-making process? And how much of that is getting all the right people aligned versus thinking about ROI or cost of moving? And where are you pushing on the technology side there?

I'll hit the kind of interaction, you can hit the technology side. So the first one is that difference between treating it as a deal versus treating it as an account. So it'd be a little -- with my team, we talk a ton about knowing when you're in a deal motion, knowing when you're in account advisory motion and knowing when you're in a market-shaping motion. And so more and more, that conversation -- yes, there is -- the pathway to getting there, there's a lift to the value pattern in your first cloud release. There is some learning experience in getting through your first 2 or 3 updates. And then there is really unlocking the value of innovation and that cycle of the flywheel slide that Mike showed. And when we treat it as a deal, when these customers treat it as a deal, high-friction deal transaction, we're talking about cost avoidance and cost dislocation. Call it what it is. That's a very difficult conversation to get past, but it's very real because that's their experience. When we are working more and more with customers about the destination and the business outcome value and the cost of business change, TCO being not just the technology cost, but the cost of business change and the value of that change over the top of the platform, we start to get into a much better conversation about strategic planning and roadmapping with business and IT together. So it doesn't mean that we don't end up in a friction-based procurement-led conversation, because these are big decisions. There's always going to be that part of the conversation. But when that sponsor moves more into the heads of underwriting, heads of product, heads of distribution, so they can enter and exit markets faster, we start to unlock a different conversation. It's a qualitative answer. That's very real in what we're driving towards, and we're seeing more and more of that conversation. And the product and the technology is working more towards that. There is a clear area of investment. We're getting to that first cloud release, whether it's focusing on APD, focusing on integrations, focusing on data platform. Those areas, we are, every day, working not just ourselves but enabling the SI ecosystem to make it predictable, at pace and at an affordable cost basis for our customers to get to that first cloud release. And really, I think I would -- if you talk to the folks who are here, I think you'd see the SIs are moving there faster, and they're moving with a ton more leverage, global leverage, and that really drives down that cost basis to get to that first release, which is really important to us and to our customers.

I'll add something. I think it'll be quick. There was a phase of our development as a cloud provider where we needed to focus on maturity, security, scalability, just to prove it that it works. And you can only do that with experience. And I think we're there. It's never done, but we feel very, very good about where we are, right now. And so just checking off all these kinds of questions and requirements that customers have about, are you truly ready to support us as well or better than we can support ourselves currently? Now we're into the phase where we can really start to add incremental business value through all of these kind of things that we talked about this week, better rating engines, better workflow engines. Things are going to have real business impact for them and add value to that side of the equation. So that's kind of answer number one. And answer number two is just getting really good at what we call cloud upgrade assessments. Turning this into objective facts based on the experience we've had now doing dozens and dozens of these upgrades and really understanding what's at stake, like, how long is it going to take, how much you're going to spend, what are your choices. And like John said, partnering with those customers, I just had a meeting today on this exact same subject, partnering with those customers to meet them in a place where it makes sense for their business and not making it feel like we're forcing them to do something they're not ready to do. I think we can play the long game here, and we can create something that's very durable and ensure that we legitimately do not lose a single customer. If we get to the point where we've got 100% of this customer base that have moved along with us, that's the success. And that's what's going to create the next 20, 30 years of Guidewire's success is that culture and that attitude.

Dylan Becker with William Blair. Maybe kind of compounding off of that. You talked about, John, market signal and product maturation. We're at a different stage in the transformation than we were 5 years ago. So how do you think about the value or that flywheel compounding and fueling the product strategy on a go-forward basis? And then I think a part of the Innsbruck release today, more now business use case application for the end consumer versus the plumbing and the integrations that were needed to be built originally as well, too, to align with that value, if that makes sense.

Okay.

I mean, do you want to answer…

Yes, I mean go. He asked you so you have to take it.

So I'll answer the product question. Signal from the market is critically important to us and amplifying the signal from the marketplace, I mentioned at the very outset of my commentary, the thing -- one of the things that I'm most proud of for this company over the last 12 months is the maturity of the field interaction with product and solution engineering is how we're really crystallizing signal from the field to help us prioritize. It's harder, let's be clear. A big decision around we have to build a defensible scalable, secure, updatable platform, those are big decisions that are hard to execute against that volume and scale. But it's a decision. It's a clear decision. There's no rearview mirror on that when we go. As we look at the things that add business value, some for commercial lines, some for personal lines, some for -- whether it be London market or other geographic interests, our ability to suss out that signal and crystallize it in a way for what has both the most value to the customer and value to standardizing the platform or standardizing the industry on our platform is a really cool conversation, and one that, frankly, 18 months ago, I joined I -- we weren't ready to have. We just weren't ready to have, but we're getting better at it every day. And customers are starting to understand how do they step forward into that early access conversation. And customers are more and more volunteering to take a little risk, take a little leap of faith and do some of that early design and co-development with us, and that will inherently create that effect of getting them a much more valuable outcome and a much more clear representation of their interest in our product roadmap.

Only thing I'll add to that last comment he made is something really interesting to think about is we had to learn how to work with what we call early access customers on these products. And in a way, this is, like, a new muscle for us to learn as a company, as a product organization, partner with somebody, get something in their hands. We know it's not quite yet finished or ready, but get their feedback, work with them to evolve it, work with other customers to evolve, get it to the point where we're really comfortable with it. And what's exciting is, right now, you're starting to see across the whole suite of products, all these things coming to bear kind of at once. And I think that we're going to see a real, I don't know, change, call it prompt change, renaissance in the way that we take the product to market in the way that we're able to create value for customers as they think about what's life going to be like with Guidewire in the cloud, so thank you.

Thank you.

Diego.

Thanks, man. Okay. Afternoon. Let me check what the -- what is better here. It's also getting worse. And this is the perfect worst distance that you can imagine because it's not fish and it's not meat. That's what we say in Italy. Typically, it's in between the 2. Okay. So I'll do -- maybe I'll have to put them back-and-forth a couple of times. There will be a little bit of repetition of what I said today, so bear with me. But in general, what I want to tell you basically are 4 things, just to simplify. Number one, through this journey, did we had a strategy to convert the company; were we able to sell this to enough customer; were we able to do that at the margin from a product gross margin perspective; and number four, can we build more product on top of that. So from a strategy perspective we discussed this morning, we anchored that into InsuranceSuite. We said API first. We wanted to enable that to kind of create extension. We wanted to be the best platform in the market. And as I said, we wanted to have it as a foundation for innovation. We build this platform across 3 angle: platform, application, and content. A platform that we wanted to run efficiently and safely and secure. And what John said, very flattering, opening -- solving this problem about update. We had the vision 3 years ago, 4 years ago that we wanted to make sure that we could do updates. So that was bucket number one. Bucket number two, we wanted to make our application easier to configure, but more important, flexible and extensible. And bucket number three, we wanted to short implementation time. A lot of our customers were saying, you've got the best product, but it takes an arm and a leg to implement. And once we implement it, we are super happy. These things never breaks. It's rock solid. It's so rock solid, that now we have a little bit of problem into the question that you just asked about convincing them to move from self-managed to cloud because it was built perfectly in the first place. So the goal was really platform, efficient and secure; extension and extensibility of the configurability to make it easier to do those things; and number three, faster to implement. And we got all those 3 things. So you can see that 3 years ago, 4 years ago, in a meeting with you guys, we said, once we got 10 customers, we can build the platform. Today, I said, once we get 100 customers, we do have a platform. We can prove now that we have 100 customers, 14,000 environments at the same time, 48 updates in 10 regions. We truly have a platform that we run 24/7 worldwide across all our customers. So the next question is, we do that at the margin and a profitability that makes sense. So last year, we mentioned to you that we had a few important functionality at the platform level that were critical to shift in that direction. Probably the #1 was to be able to offer our customers the capability to self-deploy the production. You can see here, we have roughly 70 head count were allocated on a yearly basis to simply support that. We have that capability today. It was critical and it's still critical to move customers from classic to GWCP. Last year, when we had this meeting, I don't remember exactly if we were 7 or 6, we got 2 more. And so now we have, like, 4 to go that are still on classic. And then we worked a lot on the platform cost optimization from an operation perspective in the way that we have restructured completely our first-level support and second-level support that now is completely structured in a different way where we kind of gained a lot of advantage of the way they were operating. So the results to date is that we lower the platform cost while maintaining same head count at the operational level on the cost of goods sold. And we are definitely ahead of the product gross margin and reduction target. And as I said, we have 100 customers running on the platform. So this slide is my favorite slide here, and we said the 75% gross margin now in sight. So first bucket is really cloud ops optimization. We've done a lot of things in the last 12 months. We restructured completely the operation team, like, April this year. The team got operational into this new model by August. So we have a lot of things that we seeded that we're not harvesting yet. And -- but in the last quarter, we've been seeing a lot of improvement already. So a lot of the results that we saw from last year fiscal are yet not, how to say, harvesting all that work, because that work we started to see it in the last quarter. From a platform optimization, I know that 3, 4 years ago, a lot of your questions were about multi-tenancy and all those kind of questions. What we built on top of Kubernetes, I personally think -- I'm super biased, is being -- is second to none. If you want to understand Kubernetes in a very simple way, it's about dealing Kubernetes and images is basically about density. So we figured out a way to optimize the density of the resource across all our customers in a very advanced way. So think in terms of selling every single seat of your plane all the time. You're a plane and every seat is sold. Now of course, if you want to kind of build the best system possible, you can say, plane of one, you're just yourself flying, and assuming that yourself, flying, cost equally to everybody, that microservice is great. Imagine that you are a plane and you can sell always every single plane -- every single seat. That's what Kubernetes has been doing. The super interesting things here is that if we look at the target and the outcome, if we look at the cohort of the last 6 months, just a cohort of the last 6 months, and if we're running those last 6 months customer and we use, as a reference, their fully ramped up ARR, so take the last 6 months customer running on the most advanced version of the platform, because keep in mind that every time that we move the platform ahead, we need to roll all the customer into this new advanced version, right? So every time they introduce something new, it takes some time before we can see the cost of materializing across because we need to roll all the customers. Now if you take the customer from the last 6 months and you combine them with the ARR of those customer projected in 2 years, we're already at 75% right now. And that is kind of go back to the story of did we have a strategy? Yes, we got the strategy. Can we sell it and get the right adoption? Yes, we can sell it and get the right adoption. We have more than 100 customer. Can we do it at the right margin? Yes. We are now totally confident that we can do it at the right margin at the 75%. And there is a lot of things we're working in the labs that makes us even kind of more confident that we can do better. But I don't want to go too much ahead. So that's why today we said is the world-class platform on P&C, and all that, we have not yet touched anything about the last leg of the stool, so to speak. That is, what can we build on top of this. So today, we talked a little bit about Jutro in digital. Jutro in digital is going to be a game changer, not only for our customer building digital experience, but it's going to be a game changer for us to build application. We're going to be able to build a new class of application on top of our platform, leveraging the Jutro infrastructure and the Jutro digital platform. The data platform is going to kind of -- is coming to a level of maturity that we're just at the beginning of what we can build on top of that platform. So number one is really -- we talked this today about the 7 core service, but independently from the 7 core service, really digital on top of our platform is opening up a door for a set of new applications. In this example, we are leveraging and we're pointing out on the writing war bench. We have a vision mock up, and we have something in the making right now. But today, during the keynote, we talked about pricing. There are at least 4 or 5 things that are really add on, on top of the core that we can think about really simple addition to our core value product that could be simply sold on top. Number two is the data and analytics kind of opportunity. Again, today, we showed for a portion of the demo. We showed Explore and how the revitalized Explore is giving great benefit from a business perspective to our customer. But Predict is just at the beginning of the curve. We have a product called Compare, that in the absence of the maturity of the data platform, couldn't really fulfill the vision that we had, Azure top as well. So really look at this as a 4 steps, as I said. Strategy, we got that. Number of customers adopting, we've got that. Profitability is moving in the right direction. Number four is really harvesting the opportunity of building new product and new capability and we're just at the beginning, because none of those things yet are being kind of started to sort of create the level of traction that we believe they're going to create. And today, I mentioned that -- and there was a question also among you a second ago. If you look in the last 4 years, give or take, if you shave off the investment that we needed to do to just kind of for maintenance and support of the existing customer, the vast majority of the investment at the beginning was really tweaked to the platform. In the last year, we started to shift. We sort of saw an inflection point, a little bit of the inflection point that you saw into the margin that kind of rebounded. We start to see the beginning of this rebound on the investment of the business functionality. It's not something that is like this, because it's not like that you move x amount of people from one thing to the other one overnight, but we start to see that inflection point. And I think across the next couple of years, the new capability and business value that we're going to add on top of the platform is going to become even a bigger leverage for John and team to kind of, how to say, drive the transformation to the customer that are being a little bit kind of dragging their feet, so to speak, so far. And last, but not least, is the opportunity that generative AI is creating. Again, Mike mentioned today, I'm a big believer that, really, generative AI is not the strategy, it is a tool, and it's a tool that is going to enable to make -- to take advantage of our platform even better. If generative AI will have come 40 years ago, before that we figured out a way to sort of restructure our platform in a set of externalized service, we could probably not take advantage of almost anything, because the platform was monolithic, closed and there was nothing that -- there's sort of nothing. There was very few scenarios that generative AI could help us to do better. Now we're in a position in which we can think of a scenario like today, we show the simple things about searching, but we can think about generative AI to solve and to help coding and Gosu, for example. Gosu that has been, traditionally, a little bit that kind of limiting factor into our own platform. You can imagine sort of copilot that helps developers to develop in Gosu language. And so the opportunity that is moving ahead, from my perspective, is really, really interesting. So if you're going to continue to come to Connection, not sure if we're going to continue to have this approach into which we do the keynote and so on. Personally, I'm exhausted. So I'm kind of losing a little bit few beats. But if we continue to do that, you're going to see, across the next couple of reiteration, that we're going to shift more and more and more on new application and new opportunity that we are now able to build on top of what Mike called this morning the sort of the facts of the P&C industry. We have all the data. We have all the transactions. We have the best platform. The journey is just at the beginning of the opportunity that we could start to think of to make this solution even more compelling. And with that, with 13 seconds to spare, I think I'm good. Christina, you're next.

Hi, folks. I'm Christina Colby, Chief Customer Officer. It's nice to see so many of you again. As the gentlemen have mentioned, it's been a long day. The only thing that would disappoint me about not doing this in -- with Connections again is you may not get such fancy footwear next time for me. So again, thank you so much for spending the time with us today. Mike made reference earlier, too, in one of the questions about the amount of experience that we've been able to gain. And so that's really what I wanted to focus on and emphasize very much about the value that our customers are able to glean from that. So first of all, I wanted to talk about, really, the momentum that we're seeing around the initial go-lives that John is making reference to as well. We've just seen a phenomenal amount of momentum associated with go-lives. As is noted here, either with net new customers who are coming to Guidewire and Guidewire Cloud for the first time or those who are transitioning from on-prem. I think probably one of the most fundamental things to point out here is that our customers successfully go live. And that's something that really can't be taken for granted. It's an extremely complex, challenging process to go through. But all of our customers successfully go live on Guidewire Cloud. And that is extremely important. And the fact that they do that now in a manner that is much more predictable and reliable because of the number of customers that we've been able to take live brings them a tremendous amount of confidence as well as really helps them to plan what they're going to do on the platform now that they are live. So the fact that we've been able to take so many live -- take many of them through the ski resort updates subsequent to that talks about all of the value that they continue to unlock. I also want to talk about the experience in terms of really truly what it means. And it's been a tremendous amount of insight that we've been able to gain, patterns that we've been able to understand, and working through that in order to figure out how to leverage that experience for the benefit of those customers who still haven't made the move and transition to cloud. As you can see noted here, 3.5 million code -- lines of code that we've touched and really understood what it would take in order to optimize those and run them as efficiently and effectively as possible on GWCP. All of the database upgrades that entails. Now we're seeing a phenomenal throughput in terms of the number of API calls on working days from all of those integrations that have shifted over as well as the fact that, on top of that, the efficiency and the benefit that we see in the ease of the update process means that it truly is the totality of the road map that we've laid out before coming to life for our customers' benefit and value. So it's great to talk about all of the things that take them through the transition, what that looks like. But from our standpoint, the go-live is really actually the launch of the customer's activity, right? It's really important, of course, to get them to that milestone, but it's by no means the destination that they are really seeking out. What they want to be able to do is to continue to innovate and drive new business, better customer experience and a better overall user experience as well through the applications. And so we've called out a few examples here where the customers are really getting truly fantastic value from what they've been doing. Beneva is a customer of ours who did a migration of all of InsuranceSuite on-prem. What they were able to do is really have a strong emphasis on the kinds of experiences they wanted to drive. And they've been through update processes. And you heard some of that referenced a little bit earlier in the keynote today, hopefully, but they've really been able to find the ease of that process, and I'll speak to that also in just another quick moment. Westfield Specialty, working as a startup, taking PolicyCenter and really initially going live actually in about 5 months, actually going through and then taking 42 different specialty products live overall in about 8.5 months is truly remarkable. And creating both a quote and bind and policy issue experience that is so expedient that is creating a true differentiator for them in the business they pursue. With Hollard in Australia and New Zealand, we've been working with them for the first time around both ClaimCenter Cloud as well as digital. They've been able to improve the first notice process and claims capture really significantly and then use a digital portal in order to create the kind of support and exchange for their claimants and to really drive a different type of customer experience. And then Grinnell has been a customer of ours for a good deal on cloud, but on classic. And so earlier this year, we were able to migrate them from classic and actually move them onto GWCP. That upgrade really allows them now to do a lot of planning and work to take some of our most innovative features. And so with that move, it leaves us now with 4 remaining customers on our classic architecture, and we're in active planning with all 4 of those to get them to move to GWCP as quickly as possible. I mentioned about the update process because the update process is really how our customers continue to get as much value out of all of the capabilities, features that we're delivering with each release. And so it's been very important for us to make that as seamless as possible because all of them remember and have -- well, especially for our previously on-prem customers, a very practical experience of how difficult it was to do upgrade -- major upgrades, absolutely; minor upgrades, still pretty complex. And you can see here, again, an example from Beneva talking about the ease of what they were able to do. I think there most notably, it was actually about not even shifting the energy and attention away from the business priorities in order to do upgrades. And so now what they're able to do is to continue to keep that business focus and do so much more on the platform. Definity talks about the fact that the updates are the true -- that shows them the true value of cloud. That's great to see that kind of experience. I think you'll hear even more of that tomorrow also. So I apologize. I know it's just internal tomorrow. But the keynotes that are shared, Definity is one of our customers who's speaking tomorrow truly about that business value that they continue to unlock in the road map. And then finally, with Texas Mutual, who through even their transition program, got to see what a few of those updates look like. And it was incredibly important for them now to -- with their most recent update, to see truly how easy and seamless that process is for them. And what that's causing is our customers to shift their mindset from thinking about how am I going to update to stay technically current, and rather that update is so easy, what am I going to think about spending that energy on in terms of adopting new features and capabilities that are coming out in that release. And that shift of mindset is something that we're extremely excited to partner with them and put a lot of our emphasis around our customer success programs. I also wanted to talk a little bit about the fact that clearly, we would never be able to do this entirely on our own. Mike made mention to the fact that we now have over 23,000 trained resources from our SI partners. That has consistently been growing in the double-digit percentages year-over-year. And so we continue to see just tremendous interest and support in that community. We have 38 partners across the different tiers. At any point in time, we're incubating somewhere between basically about 15 to 20 partners as well who have shown tremendous interest to move into this community. But we put quite a bit of rigor around what it takes to be in each of the different categories so that our customers can have true trust in the partners that they select. I also wanted to talk about the fact John made mention earlier around accelerating the migration portfolio, which is crucial for us. We will continue to build assets, tools, capabilities to make that happen, but it's something that we can't do entirely on our own. For our customers to make that migration to GWCP, in many cases, it's heavily reliant on helping them to change a number of things that sit well outside of the Guidewire solutions. And so through the experience that all of our SI partners have been able to gather, they're able to actually create more repeatability and predictability around the things that sit in that customer's application ecosystem as well. And so partnering with them in more of this migration factory mode will help to drive down the cost, will take some of the emphasis away from that -- from the migration costs and continue to shift more of the focus on the value that's gained in moving to GWCP. And then what I also wanted to talk about, of course, are our solution partners. Our solution partners create a tremendous amount of value for our customers. Our customers, especially through some of the things that we've been able to do with Integration Gateway and some of the different means of ease of integration, are able to take these solutions and so rapidly integrate them into InsuranceSuite. All of our partners bring solutions that are 100% P&C focused, really tailored for the specific use cases that our customers are seeking out. We have 220 apps -- over 220 apps on marketplace that are available for them. That reflects across the more than 190 technology partners that we have. And we've continued to incubate this group of Insurtech vanguards, which are incredibly important because while all of the partner apps and solutions that are validated on marketplace are trusted solutions, what that leaves out is really the kind of discovery and the process where our customers are going out to investigate possible solutions that they would like to work with. And so through the Vanguard program, we've been able to not only take part in that exploration with them, but that's also helped us to prioritize those partners that will be best suited then basically to make the move into our formal program. And thus far, we've actually moved 6 of the vanguards into our formal partner program. So all in all, we see this really as a holistic group that comes together to deliver our customer success. We really think of it truly as this virtuous circle, the way that all the groups work together. Our customers' success feeds into them speaking to one another. That really reflects the power of community that we've been celebrating here. That encourages more ecosystem partners who want to be able to participate, which then drives more innovation and accelerated benefit for our customers as well. So it's something that we're really happy to look at that in a very holistic manner and be thinking about all of the different ways that we can accelerate value for our customers. So thank you so much. Right now -- sorry, maybe I will go actually back to this one and invite Diego to come back up with me. We'll spend a little time on Q&A now before going into the next section.

Ken Wong from Oppenheimer. I had a question for Diego. You've been talking about how the platform is mature enough now where you guys are driving significant gross margin profitability, specifically on net new customers coming on board. But also today on stage, we were talking about how as customers start to engage with Jutro more, there's a possibility, well, one, you guys are monitoring their spend, but obviously, there's a large cost associated with developing apps onto the platform. How do you balance those 2? Should we expect some sort of dip in gross margins as customers start to engage more with Jutro?

So no, the comment that I made on the -- the comment that I made on stage, it was specifically a comment for the engineering team. So we have like -- let's put it like that. There is like the engineering team is a cost center. It's not exactly a profit center. So it does not fulfill -- it does not go into the area of gross product margin. It goes more into the cost of R&D, and then the cost of R&D, I need to be kind of careful to not give to our developers more tools to sort of -- I can, for example, give them a little bit of if I don't pay too much attention, they will run Gen AI model and they're going to create like some kind of interesting cost spending and so on. So the comment was on that perspective. Now if you now shift and saying, how did we develop Jutro and what kind of cost Jutro application we'll generate and so on, we are very, very comfortable in what we've been doing from a point of view of building web app on top of an infrastructure company like Salesforce have been -- made a killing out of that. So actually in contracts, the more they will be built -- they will be building applications that are modern, modernly built on the above infrastructure that is what we're having now with GWCP, the more we are comfortable on the cost and so on. So -- and the other comment about the sort of density and so on. 100 customer is a good number of customers to start to kind of start to see the value of the density and how Kubernetes enable us. But then you also become aware that, that density is not equal in every single of the 10 region into we're running the GWCP. There are some regions to which we are investing ahead of the density because we're investing ahead of the number of customers that are going to come. So if you pick a region in North America West, we have much more efficiency that we have in Asia [ APAC ] today. And so once then, we blend all those things in. Then you end up into the sort of operating cost margin that we have right now. But now when I pick the cohort, and in my example, that cohort is a core to sort of do we have confidence that at the right level of number of customers, we now run a business at the right level of efficiency. And that's what I was trying to convey.

Kevin Kumar, Goldman Sachs. I wanted to ask about the 4 remaining Classic customers. I guess from a process perspective, what needs to happen for that transition to GWCP. And maybe you can touch on just the resource cost implications when you transition.

Yes. So let me answer the product aspect, and then I'll let Christina to answer the sort of customer engagement aspect and so on. So those are 4, 2 of them are easier, 2 of them are more complex. The more complex is because they're bigger. And the complexity is specifically -- so when you think about a large carrier -- there was also a question before. When you think about -- the larger the carrier, the more the decision for them is about Guidewire is not only a decision about Guidewire. There are other things. There are other things that are dependent on, right? So when those customers, when they moved on plastic, we kind of did something very unique for them. So we are, in some extent, closer to what they do on their own than to GWCP in some extent, right? Because when they ask, can you do this, can you do this, can you do this, can you do this? We said, yes, we can do all this. And so now for them, if they're a large customer that have a lot of dependence into their ecosystem, when we're going to tell them move to GWCP, there is a lot of things on GWCP that they want. But they are also understanding that to adopt GWCP, there are a few things that they need to do in the ecosystem. And then now you're starting to kind of deal with their time line on things that we don't control. And so that is a little bit sort of -- 2 years ago, the conversation was do we have this feature, this feature, this feature. Now the conversation is not about do we have this feature, this feature, this feature. The conversation is we want to be there. But we have that project and that dependency that is on the project transformation that is going to take X amount of time, and so we cannot move before. So out of these 4, the 2 that are the smaller footprint, they're the ones that are going to move the sooner because of that dependency, and the 2 that are a little bit more kind of engraved into their own infrastructure are the 2 that are little bit more complex.

Yes. You characterized it quite well. There are so many dependencies that we have on them to make the changes. And so that falls then into their own budgeting and planning cycles and other business priorities that they may feel that they have. And so in some ways, it almost has a certain degree of parallels and perhaps some of our customers who are migrating from on-prem to cloud that they need to look at really the balance between the features that they want and the value that they know that they can get on GWCP versus some of the work that they're going to have to do, changing some of the dependencies and things that they have to get there. And it's definitely, obviously, for the bigger carriers, becomes more complex for them to do that. I think without question, just echoing what Diego said, they see the value of getting there, and they want to get there as rapidly as they can. It's just a matter of really being able to plan that in the most rapid fashion possible. And I think you were also speaking about sort of the cost in order to be able to do that. Our customers, for the dependencies that they have, manage that as they need. We have been planning for a significant period of time to be able to do the move as we need to. And I think we very much look at the fact that, obviously, continuing to get them to move -- to be moved off of Classic as rapidly as possible means that we're able to get them into the margin profiles that we're really targeting on GWCP, which is mutually beneficial because they get all of the features and values as well.

Yes. And just the kind of forgot a little bit to kind of articulate on cost. The results -- there are 2 elements here. First element is that the more we have customer on GWCP -- you look at absolute cost and a relevant cost, right? So if you look at -- if you take just that customer, how costly it is, is costly. But now the more we move and the more we have more customer on GWCP, the relative cost of that customer to manage it is kind of manageable into the overall scheme, right? 1% when you make $10 million, ARR is very different than 1% when you make $1 billion, right? So that part of the complexity is also there. So the more we move forward, the less impactful that those are into the sort of overall gross margin. The more we move forward, the more going back to Kubernetes or to things that we're thinking right now, the move which we move 3% or 4% on our AWS cost and optimization, that is a lever that is a gigantic level. So every year, we are having this conversation with our growth. Every year, the sort of the drag on the Classic becomes, even if they don't move, relatively smaller because of that. Said that I love to move them because there's a pain in the neck. That's kind of -- we have a team that they need to know specific, what they have and so on. So I wish to move them as fast as possible.

All right. Thank you all for coming. I really appreciate you all coming out to Nashville. It's great to see so many familiar faces. Hopefully, I have a lot of content here that you guys will enjoy and hopefully enough data to keep you all satisfied, probably unlikely, but I think we have some good slides to go through. I'm Jeff Cooper, I'm the CFO of Guidewire. I joined the company about 6 years ago, moved into the CFO role a little over 3 years ago. And so this would be my fourth Analyst Day in the seat as CFO. And it's been exciting, compelling and a lot of really interesting hard work, but we're really thrilled with where we are today on the transition. Great. So go through a couple of quick key financial highlights. I think most of you are familiar with most of these. But first and foremost, we have an outstanding, durable ARR growth engine, and that is supported by cloud leadership and leadership in our marketplace. And that leadership position is accelerating. What John went through, what Diego went through, I think, is a testament to that accelerating leadership position. We have some of the most durable customer relationships in software. The vertical that we serve, the use case that we serve is incredibly complex. But it creates very, very durable, lasting relationships with very strong ARR retention and some of the lowest churn in the industry. And that's just a testament to what we've built. We are at a point in time where -- I know it's been a little bit longer and taken a while, but we're at a point in time where the margin expansion is becoming very visible, right? We are seeing the margins inflect, and that's a testament to a lot of the investments we've made to put ourselves in a position to capitalize on a very long growth horizon and a meaningful opportunity to expand our margins. That, combined with focused operating discipline, I think we've really been driving more focus on kind of how we operate the business, is creating a compelling and exciting profitability inflection point that we're at right now. So we're thrilled to be in this position. So I've talked about this a bunch. We talked about 3 critical milestones as this transition. So those of you who I've talked to have probably heard me say this, but we have this mindset that can we build it and can we sell it and can we scale it. So can we build a scalable cloud architecture? This was a huge part of the focus over the last 4 or 5 years. And where we are today, we're thrilled with the progress. Diego said at 100 customers, we have a platform. We are no longer in transition. We are a cloud company, and we are the best in the industry, and we've worked really hard to be in that position. Can we drive sales and adoption of our cloud product? We saw really healthy momentum in selling over this last year. But in general, over the last 3 or 4 years, we've been really pleased with how we've been able to move the industry, starting with some of our best customers who chose to migrate, build that referenceability. And now we're seeing a pretty exciting acceleration of net new customer wins that was very exciting for us to watch over the last year, and then finally, kind of demonstrating the efficiency and margin improvement that we promised to all of you as we set out on this journey. So this leads to a very exciting point in kind of where we are in the business. I think nothing tells the story quite as elegantly as this visual of our operating margin and how this layers into how we thought about this transition. Obviously, we went through a period of establishing that cloud architecture, building that out. That was a significant investment cycle, including building out cloud operations. Then we will continue to drive sales adoption of our cloud product and are starting to see the benefits of the demonstration of efficiency and margin improvement. And this is looking at non-GAAP, but we are also very focused on driving a metric that you'll hear us talk more about, which is non-GAAP operating margin, including or considering stock-based compensation in addition to operating cash flow. So we are focused on these things, and you will hear us talk about this a little bit more and more in the future. Okay. So this yields to where we are today, where as we look at the FY '25 targets that we've talked about for some time, we are comfortable with maintaining the $1 billion target that I know we talked about on the last earnings call and also increasing our margin targets. We talked about this on the last call. We expected to cluster around the higher end of the ranges that we had previously disclosed. And if you look at these ranges, most of these ranges are kind of at the high end or well above the high end. So meaningful movement on subscription and support gross margin, total gross margin, non-GAAP operating margin and operating cash flow. And we've added one on here, which is non-GAAP operating margin ex SBC. And we expect that to be positive in FY '25. So really great progress that we've made this last year to where we felt comfortable moving these back up. And if you remember back at my first Analyst Day, where we set some of these targets, these targets are very much aligned to that first Analyst Day where we defined a lot of these targets. Okay. Taking a step back, obviously, our ability to drive our margin targets is driven by our ability to continue to grow ARR. And our ARR is primarily being driven. That growth is being driven by cloud ARR, and I think it's well understood in this room that cloud ARR, that growth is being driven by InsuranceSuite Cloud ARR. So just a tremendous amount of progress in the last 5 years in terms of how we've grown the InsuranceSuite Cloud ARR. So a lot of those investments we've made are really starting to pay off in a meaningful way. This is a slide that looks at our ARR build. This is an important element. Think about how you model Guidewire. We focus our discussion on ARR for a variety of reasons. I'll talk about that in the slide -- on the next slide. But when we think about the ARR build, there are really 3 primary components that are the most important to understand, right? So there is new ARR that comes from new deals that were sold in the period. And that is defined by kind of the new ARR bucket on this chart. Then there's new ARR that comes from deals that were sold in prior periods, prior years. That's an artifact of ramping agreements, and I'll talk a bit about that in a bit more detail. And then there's ARR churn or ARR attrition. And those are the 3 primary elements that is really important to understand. In the Q4 earnings call, we spent a bit of time talking about the ARR coming off of the backlog in FY '24 is a little bit of a headwind to growth for FY '24. And so you see the midpoint of our ARR guide for FY '24 is 12%. Then as we think about our $1 billion target in FY '25, that means to accelerate quite meaningfully to 16% to 17% in order to get to that target. And so the confidence that we have in terms of achieving that objective and that goal is embedded in these numbers, right? And what's really driving it -- what is one of the primary elements driving it is the acceleration of ARR off of the backlog in FY '25. Okay. So this slide is new. I think you guys will like this slide. It's cohort analysis. Diego likes to think this slide is very complicated, but I assured him, you all would eat this up and understand it. But let me walk through what this is. So this is looking at net new ARR from our InsuranceSuite Cloud cohorts, okay? So these are InsuranceSuite Cloud deals that were sold in each fiscal year and how much net new ARR they contributed to Guidewire. So think about this as if they were an on-prem customer. The existing on-prem ARR is not included in this analysis. It's just a net new step-up. And what you see is pretty somewhat -- if you look at FY '18, that was very, very early. If you look at the FY '19, FY '20 and FY '21 cohort, you see a relatively consistent pattern. Actually, you would note that FY '19 was quite a strong cohort. FY '20 was a COVID year, so a little bit of a weaker cohort. And then you see a step-up in FY '22. And then you see the FY '23 cohort. And what is interesting about the FY '23 cohort is it starts very similar to how you would have expected FY '23 growing on top of FY '22, but it follows a little bit of a different pattern, right? In year 3, you see a very material acceleration of the ramp. And so this is a view of the ramps, right? These are the fee ramps that are embedded in that contract. And that data point is what is informing how we think about FY '25. And this is why we have confidence into our ability to see an accelerating growth rate in FY '25 off of where we are -- what we expect to see in FY '24.

Any questions? I can take a question because I'm last. So if you want to -- if there's questions on this slide, I can take your question. We have to keep a little bit behind the curtain. So we didn't put a scale on here, but I mean I know you guys who have modeled our business have some understanding of kind of how ARR is added. But that is the other key takeaway from this slide, is if you -- this is without an access drawn to scale. And if you look at how meaningful the FY '23 outcomes are on a fully ramped basis, it was just a really exciting year for us. Ken, yes.

Sorry, Ken Wong from Oppenheimer. How much of that year 2, year 3 ramp is, I guess, kind of like-for-like customers just growing their DWP on the platform versus maybe there's these adjacent products that you guys are pushing out there that's driving the additional...

That's a great question. Let me be really clear. This is committed fee schedule on the cloud arrangement attached to the DWP of the program that they're building towards, right? So these are long complicated projects. Customer will put a baseline DWP into that contract. And then the ramping schedule is somewhat -- can be somewhat tied to how they think about the rollout. But oftentimes, it's tied to sales negotiation and the business case outcome. I care the most about preserving the fully ramped value that sets up the basis for ongoing renewals. But this is not -- this is committed fee schedule in a cloud contract. This is not tied to future sales or any add-on products above and beyond what was sold at the time.

Is the increased ramp activity in that cohort driven by the fact that you've had more net new customer wins in that cohort? Or are those not related?

Not really. I mean I think in general, we do see a little bit different ramping patterns for net new and migration customers. But to see this material of an acceleration was more independent of that particular dynamic and more a result of just the deals that we were able to close in the quarter, how the sales team executed to a fully ramped value rather than it being net new versus migrations. Okay. Great. Yes.

Sorry, one more, Jeff, Joe Vruwink from Baird. If you -- obviously, in the slide before, you had a new ARR assumption for how you meet guide in 2024 or 2025. What would the line look like on that chart if you can plot the FY '24 cohort? Like are you assuming that kind of the incremental value year 1...

It's a really good question. And we gave -- we probably -- we gave a little bit of detail into -- you can see that we didn't assume a material acceleration of net new, but there is a bit of an acceleration of kind of the new ARR coming from new deals in FY '24, if you look at this data set. Some of that is driven by we're expecting a bit more inflation and DWP true-ups to flow through the number. And that converts kind of at full value in year 1. There's no ramps associated with that. But there are a variety of dynamics that could impact that number, but we're not assuming a material acceleration of ABC, what we call our bookings to ARR conversion ratios. But we are assuming a little bit better than last year because if you look at last year, kind of that year 1 value to the full year value was lower than what we typically see.

Okay. ARR continues to be the best measure of momentum. ARR is a measure -- it normalizes for all the different revenue recognition patterns that we have. So we continue to focus on ARR as our primary measure of momentum. I will say that it's been -- if you look at how ARR growth has compared to software revenue growth, it's been quite different, right? You've seen that the early part of the outset, ASC 606 had a big impact, caused revenue growth rates to accelerate above ARR. Then we went through a period where some of those multiyear ARR deals -- or some of those multiyear term license deals that were sold didn't renew because they -- we recognize multiple years upfront. And so that caused growth rates to drop below ARR. And now the model is starting to converge. Most of our -- we're not selling that much term license revenue. Most of our term license customers are on annual renewals. So as we look ahead, we expect the model to not have as much noise on the revenue side, but ASC 606 can always [ rear ] its ugly head. So we will continue to focus on ARR as the right measure to think about overall momentum in the business. This is a slide that looks at growth and efficiency and how we've measured that we've done this slide now a number of years. The early outset of the cloud transition, we invested a lot in headcount, primarily cloud operations headcount to support our customers. I know we've talked to a lot of you about this. We invested ahead of the demand curve. We had to build out a best-in-class cloud operations function to support large customers that were early adopters of cloud. At that point in time was more of a managed service offering. We've done a tremendous job on the back end of that, building out the platform, making the platform more scalable, and now we are leveraging those headcount investments. And so the overall investment we're making in headcount 2 years in a row is relatively small. And we're seeing -- and in some cases, we're actually seeing declining headcount in cloud operations, and people that were working on customer-specific stuff are now starting to work on platform stuff and dropping down into R&D. So we're seeing a lot more efficiency on the headcount line. And the other costs are primarily the cloud infrastructure costs. That will continue to grow. But we've done a lot of work to manage that, and we feel very confident about how that is growing vis-a-vis revenue growth to drive to our margin targets that we talked about previously. This is an analysis that I know a lot of you do. This is -- I got asked this question a lot in FY '21 and FY '22 about how we think about incremental subscription and support margins. And if you do the math on incremental subscription and support margins, does that -- how does that validate or make us feel internally feel comfortable about our ability to get to our long-term targets? Obviously, when we were investing, there was some complexity into that measure in addition to migration accounting, and I talked to some of you about how migration accounting can also impact this measures. But as we look ahead, we've made tremendous progress in FY '23. So if you look at the incremental subscription and support revenue and you apply that to the incremental subscription and support costs. It was an 87% incremental margin in FY '23. We don't expect to repeat that in FY '24. But if you do the math at the implied midpoint of our guidance range, that equates to about 74%, and we feel confident that we can grow off of that number. So as you do that type of analysis, you're driving that to -- over time into the 80% range, we feel is reasonable as we think about marching towards our long-term targets. Okay. And so this comes -- I didn't leave out the $1.5 billion target. The news on the $1.5 billion target is there really isn't much of a change. The targets are still the same. The only adjustment we made is we did see a little bit more activity on net new, which has been an exciting fact pattern for us. A little bit slower migration, and migrations have a big impact on the cloud ARR as a percent of total ARR. So we tempered some of those assumptions a little bit. But all of the margin assumptions and all of the primary targets are still the same as we think about getting to $1.5 billion of ARR. We think about $1.5 billion of ARR as a point in time. We think about growing this business in the mid-teens. And so you can do math on when we would cross that threshold. But that threshold is not tied to specific year. We will cross that threshold. Who knows whether it's quarter 1 or quarter 2? It's not an annual target, but that is how we think about what the business should look like once we cross that threshold. And it's important to say that, that is not our end point, right? We think that, that is a very appropriate target for us for the midterm, but we believe we can continue to grow margins and expand beyond those levels. And just a final comment on capital structure. We were more aggressive than we've ever been with respect to share repurchases this year. So we bought back $262 million worth of stock. We did that on an average price of just around $65. That yielded a pretty good return this year, so that was nice to see. But as we look ahead, where we sit in terms of the cloud transition, how we feel about the platform as a launching off point to add some new products and capabilities and as we think about the market for strategic uses for our cash, it's becoming more and more compelling. We continue to think about needing at least a minimum of $400 million to run the business cash, and maybe maintaining a little bit -- previously, I'd said kind of $400 million of run the business cash, $400 million of strategic cash and then looking at returning some of that excess cash to shareholders. Given the environment we're in today, we think that we might want to hold on to a little bit more of that excess cash, and we also have to consider our convert maturity, which would be in March of 2025. So that's also in the back of our mind. But that's how we think about our cash position. I think you will see us slowing down share repurchases and focusing on preserving some cash so that we can be more opportunistic around M&A and some other things. And I'll finish with the highlights. We're really excited about where we are in this transition. We think this is a very compelling time to be an investor of Guidewire. We appreciate all your support and appreciate you all making the trip out. With that, I think we can move. I'm going to tick through the GAAP to non-GAAP reconciliations, and we can move to Q&A. I think we can invite everybody up or I can take some -- we'll invite everybody up.

Jeff, one question we got from online was on the cohort slide. Should they deduce from that, that ramped ARR would grow even faster in 2026 relative to 2025?

That ramped ARR in 2026 would grow faster than 2025. We report out fully ramped ARR. So fully ramped ARR grew 17% last year, and that's a reflection of all the fully ramped outcomes. So it is our aspiration to continue to see a similar progression this year as we saw last year. But yes, that's not the way I measure it. And 17%, we think about our ability to grow this business over the long term in the mid-teens. And if we can get back into the upper teens, that would be very exciting. 17% was a good start, but I benchmark myself more to the mid-teens at this point.

Yes, I'm just curious, why does a business that has low churn, long-term contracts, predictable revenue at $1 billion need $400 million just to run it? I'm just -- seems high.

Yes. I mean, look, we service a very conservative industry. These are very long-term, committed relationships. And from our perspective, having a strong balance sheet has been helpful for Guidewire as we pursue these long-term relationships with very risk-averse customers. We could probably -- if we wanted to scale that down, I'm sure we could figure out a way to manage it with a little bit less cash. But given the end market that we sell, it's always been, in our perspective, a good asset to maintain a strong balance sheet.

It definitely comes up with customers, validating that Guidewire is here for the long haul and something that they can absolutely rely on. It does actually come up in deals.

Showing the life wrapped up. No, I didn't have a question. I just want to monopolize this thing. So you're saying that we're not at the destination with the long-term target. As we look ahead, is this more a byproduct of the incremental leverage? Is it just that you guys can streamline OpEx in a more meaningful way? Is it some of what Diego was talking about where kind of the unit economics of future apps will be superior to what you guys are seeing today? I would love to get a sense from any of you guys kind of what drives leverage beyond that future state.

I mean, there's certainly an opportunity to leverage once we aggregate a meaningful part of this industry on a common cloud platform and sell through high-margin capabilities. That is certainly part of how we think about the long term. But I would say that's not what's -- you don't have to believe that to believe that we can expand margins beyond that $1.5 billion target. Just executing on where we are with the cloud, how confident we are to getting to -- for a point in time for this use case, we had some questions about could we get into the mid-70s, could we get into the high 70s. I think our confidence is building that getting into the high 70s and even getting into 80% is not unrealistic over the longer term. It's still going to take a while for us to get there. And then on the operating expenses side, there's still room there as well as we continue to grow.

Yes. I guess my question was on OpEx. But I guess kind of the areas for leverage. I know, Jeff, you've talked about, I think, having the right capacity and team to kind of get to $1 billion. Is that still kind of how you're thinking about it? Just curious on just broadly how you're thinking about kind of R&D teams so the marketing and leverage.

Yes. Last year, we talked about this, we said, hey, we've built the business to support $1 billion of ARR. Very little hiring outside of the core team that exists today is required to unlock $1 billion of ARR. That is still true. We still believe that. We have modeled headcount growth beyond $1 billion, and there's a headcount growth this year. But in general, as we think about the opportunity, there's very little needed in order to get to $1 billion. And outside of $1 billion, depending on if there are new ambitions that could accelerate the revenue growth that might come with incremental investment. But in terms of unlocking the core opportunity that's embedded into our financial model, there's some growth, but it's going to be a lot slower than the revenue growth.

Dylan Becker, William Blair. Maybe Mike or John, as you're thinking about kind of the catalysts for change from a carrier perspective, right, we're seeing frequency and severity tick up. That's probably a big driver. How much of it is well -- or to what extent you called out reinsurance in your keynote today but that kind of driving more operational and underwriting excellence from a carrier perspective as well to the saying, I have to modernize just to adapt.

Yes, for sure. It's a great question. I'll let John expand if he wants. The necessity to adjust rate quickly, which was caused, I think, at the beginning stages of this change by inflation. But then also the reinsurance being related to the weather-related risk is also a driver. Just the pace around which these companies can change is a driver for systems like Guidewire. Just expanding on the sort of reinsurance connection. We're, I think, creating a system that enables the collection of information at a sort of deeper level than we've seen before in the industry, and it creates opportunities for us to work with reinsurers to sort of share information where it's appropriate and also share analytics models where it's appropriate. And these kinds of things can foster that push maybe to cloud and show them that there's a different way to work with their reinsurance partners that would facilitate their ability to compete and grow efficiently.

The only thing I'd add to it is portfolio management, to your point, capital -- the economic environment has put a strain on the capital availability. And if you roll the clock back 6, 7, 8 years, reinsurers had a huge appetite to take on more than what might have been the organic necessity for reinsurance. And it's putting now a ton of pressure on the primary carrier to get really good at portfolio management. So the data being available is absolutely critical. The interoperability between primary cedent and reinsurer is really important, and the visibility of that is important. So press release announced today on our partnership with Swiss Re. We're really excited about what that means to collaborating not only for our primary customers but also helping reinsurers get their advice and collaborative portfolio management to a market that we think we're influencing more and more every day as the standard destination.

Matt VanVliet from BTIG again. As you think about the partner community, walker on the floor, everyone sounds capacity constrained. They're trying to hire people as quickly as they can. It's very, I guess, low supply of talented people there. So I guess from that front, what's the process of maybe bringing on new partners? And what's the focus there to bring on new partners and sort of elevate them to that level. And then sort of second to that, you're talking about driving more penetration at the top level of customers. I think the TAM slide had a pretty big multiple of where you're at today. How much are partners critical to that versus things Diego is talking about of expanding the actual product to cover more?

Sounds good. So I'll start at least with the piece about the number of resources. As I mentioned, we've seen some pretty considerable growth just within our existing partners, right? So over 23,000, I think probably about the 10 last year, we were rather [ 21.5 ], somewhere in that range. So that growth is happening quite considerably. And what they're doing is really to grow and find new talent that can either be at the more junior levels and people who have more general Java skills, and they're really training them up. And so that's where a lot of our existing partners are working. As much as we would love to continue to expand the number of partners, we have a really high level of rigor associated with the kind of quality and experience they need to have in order to be considered part of a trusted member of our partner program. So it's something that we constantly look at. Always looking for different ways to be able to channel more capability through. One of the great things I would say now that is true that wouldn't have been true 5, 10 years ago, is that all of our partners actually have GWCP environments themselves. And so they're using those as sandboxes to learn and play and really gain so much more experience than they would have had, not being able to always have each version, all of the features that are associated with it. So we do see a much more expeditious path to getting the right level of trained, even certified resources. But it is something that we are always constantly trying to keep up with demand.

Yes, today, I forgot actually to mention on the keynote that we have launched last week. These super cool things on our web form. The partner can ask for a sandbox, and we can deploy that within a couple of hours. And so that is an important -- we had that vision already a year ago, but it took us a little bit longer to make that real. And to kind of a little bit on your question about talent, we are doing an event in India in April this year for partners. We've been seeing more and more -- we had more knowledge in India than we ever thought because some of our partner had knowledge in India that we didn't really kind of foster somehow. So last year, we did a small test and learn event. And this year, we're going to run a bigger event in March in April. So that is going to be also an interesting things.

On the strategic accounts part of your question, certainly, when we talk about that account planning and market planning road map, there's a new -- there's a new efficiency in the conversation that we're unlocking. If I again spin the clock backwards a couple of years, as we embarked on the journey, there was some friction in the equation. There is some friction in the equation for systems integrators who are running large application outsourcing in the on-prem world. There's cannibalization of that. And so us investing to get them ready to move and see the value of moving customers to that has kind of -- has a very natural timing to it. We're past that point of that friction. Certainly, now we're looking at for those customers where they have the highest degree of influence and strategic influence, we're partnering with the SIs much more closely and other partners, other strategic advisers much more closely to think about destination outcomes. All of this is simply focused on removing friction from the equation. And more and more of the SIs are -- I hope you hear from when you talk to them, is more and more they're looking at working with us to do joint planning rather than trying to hammer through deals. I think it's an important part of it.

And I think that capacity planning is really crucial because a lot of the capacity planning that they've historically down to thinking about what does this next implementation going to take, what does that look like. And while there's always been a meaningful component of managed services that are associated with that and really more of the long-term revenue that they can -- our SI partners can get from it, one of the things I don't think that we've really been able to fully unlock yet, but now with as many customers as we have live, is getting really into that pace where customers are finding new features in the road map. They're putting together the governance that they need for rapid business case approval and then deploying those quite quickly. So making some of that adoption more of a business as usual function is a really fantastic new managed service offering that the SIs are able to put out there. So going back to John's point about doing the joint planning, they need to be able to have enough visibility so that they are not just capacity planning for the migrations, the transitions, the new programs, but really thinking about the longer-term potential as well.

Jeff, there's obviously been a lot of focus on the inflection in gross margin. But today, it seemed like there was a lot of conversation from Diego and John about investments in potential accelerated growth, right, whether it's the value of the updates, international sales force expansion, shifting investment to new business applications. So I know you're not guiding up long-term growth rates, but do you feel like you're laying the groundwork here for a potential inflection in growth rates? .

Look, what we experienced last year was an acceleration in our growth, right? It's -- getting to 17% full ramped ARR growth was very exciting for us. This industry is one that takes a while to unlock, and we want to be considered about that. And one quarter does not make a new trend, but Q4 was tremendous. And how that drove some acceleration of fully ramped ARR growth gives us reason to be cautiously excited about a potential to get back into the upper teams. We have not built our model that way, but kind of getting back to those levels is certainly possible given the momentum we're seeing, the leadership position we've built, the opportunity to expand into new geographies. That potential is certainly there. .

So 17, you cited 17 out of 22, the Tier 1s had cloud agreements in place. I would love to know what that number was kind of a year ago. And then when you attribute that change in mindset to -- well starting to accelerate at least there move.

Yes, I don't know if I know off the top of my head the number a year ago. But certainly the change in mindset has to do with our maturity, our position in the market, where we've taken the platform and the degree of confidence that we can create with these companies. Like I said, I like the phrase that I said before is like can we do this as well or better than they are doing it themselves. And when that starts to be clear, it makes it possible for us to win these deals. And that -- we saw that last year in a very clear way with a couple of great Tier 1 wins. So I don't want to make the number up because I like to try to do the math in my head. But last year was a pretty significant increase in that statistic for us.

On InsuranceNow, you touched on it briefly. I just wonder, do you all have a sense of what the sort of return on that investment going forward will be for you? And how much of the cost structure is it? And as these Tier 1s move, the relative revenue is going to just be smaller. So just sort of understanding -- I get why you're doing it, but is this to preserve optionality in case several of those go from 4 to 2 and you're going to make sure you don't miss some market share, and that's worth the cost? Or what's the rationale behind it, I guess?

Number one, I think the acquisition made sense for Guidewire and that we had to learn a lot about cloud that they had moved to the cloud a little bit earlier on Guidewire and there's a whole bunch of people that came with that acquisition that had that experience. That was very, very beneficial. It's a good strategy for the company. Number two, I like having a product that's down market that protects our flank somewhat. That's not why we do it. I want to have a great product. I want to make those customers wildly successful and happy. But it's nice for us to be able to participate in that segment of the market and win deals in that segment of the market so that we know what's going on and we're monitoring who we're potentially competing with in the future upmarket. And number three, the InsuranceNow customers love the product. They love the platform. They want to just -- they want us to keep investing in it. They're super happy with it. I'm going to like go on and on. I love InsuranceNow. Number four, we're moving those customers to our Guidewire Cloud platform. Like so Diego has done a tremendous amount of work to help us take what we're doing for InsuranceSuite and apply it to the InsuranceNow application suite. And so over time, we move them over and that makes the business more efficient. And I think you will also see more application layer synergy between the 2 suites as well, right, where we're able to do something with work -- I'm projecting here, right? But like we'll be able to do things with the application suite and the services we offer that will benefit InsuranceNow. And so I don't see it as a drag. I see it's like very much a good strategy and a thing that's really helping us in making customers satisfied. So I'm pretty happy with it right now.

Yes. Now around 20% of them run on GWCP. And we have this trajectory to have them across the next couple of years to move them all of them to GWCP. This is going to give us a better efficiency and cost profile. And so that is part of that. And the last thing that, Mike, we do not have is that some customers are customers of both solutions. And so that is also an important aspect that they're kind of running both of them. So the more that we're really going to run them on cores that are kind of, how to say, speak the same language, the more we can build those economy of scale even more, right? It's going to be like the opportunity is going to be, okay, if I underwriting, I'm underwriting across 2 systems that they both store data in our data platform. So all those things are just going to be, again, accelerator of the overall strategy.

Ken Wong, Oppenheimer again. Sorry, you can cut me off. So this one is for you, John. In the last couple of quarters, I think Mike has mentioned more customer flips from competitors. I'm just wondering from what you're seeing -- I mean you put up that win rate chart up there, another kind of nice statistics. But is that more kind of customer inbound, more Guidewire outbound in terms of the focus there? And then secondarily, like was there anything specific to this year that might have caused that, whether it's a competitor getting the wings clipped or the macro or whatnot? And kind of what gives you comfort that maybe that is something that's sustainable going forward?

So I wouldn't say it's -- I wouldn't focus on any individual competitor in that space or the wings clipped version of that perspective, that back pattern. What I think it has to do with is durability, predictability, and also we have a large number of customer -- a large number of partners, customers where leaders have switched positions inside the industry. And they go to other carriers. And there's a tremendous amount of trust built in this 3,000-person ecosystem that carries with that, I think, a lot of -- just a lot of really effective relationship building, relationship mapping. And then it becomes about not so much about a point in time. It's about are we really thinking about how to maintain those people as part of the ecosystem. Are we really well positioned through Christina's, seeing to make sure that every customer or prospect that we have on our radar screen, we're actually knowing what opportunities that they're facing or challenges that might be facing so that when those -- it's so much less about what might be the magic moment in time when that happens but laying the foundation so that when those opportunities exist, we're ahead of that curve rather than reacting to that curve. That's really the pattern of how we're trying to turn that into a repeatable fact pattern. But 101 customers live successful, that message is getting out more and more and more. So I'd say the initiation is inbound, but our knowledge of where they are is very much more about how we act as a corporation respond -- as a company in response to that.

Kevin Kumar, Goldman Sachs. Another one for John. You talked about accelerating international growth. So curious kind of maybe as you assess what were the challenges in the past, maybe in growing segments like EMEA and APAC. And I know you talked about investing in more content, but anything else you can add to kind of how you're pivoting if at all in those regions.

So the first one -- I'll go first, and then Diego, you talk about what we're building on top of the platform. I think the first thing was I experienced this when I was on the system integrator side, which is a tremendous acquisition of deal context, right? So deals in regions where Guidewire was in a very unique place to solve that, but then bringing it through the supply lines and treating it as an account and a market and building content on top of it is absolutely critical, critical before in the on-prem world but ever more critical as we're seeking to be the standard destination rather than an event-based transaction. So building the content -- a couple of examples. Number one, London market is a content component that we've partnered with the industry on really well. They're going through -- the syndicates are going through what they call Blueprint 2.0, which is the future of the London market. And us getting ahead of that and engaging with them in a conversation about what that future looks like so that we can be the destination for that Blueprint 2.0 is absolutely critical, and that was really a forward thinking and thoughtful investment that was made before I showed up, so I won't take credit for it. The other one is -- the other one is the content for Australia Motor, absolutely critical because we have a tremendous customer base in Australia, and there are very unique challenges there in a very dense concentrated market. So that's another investment that is critical. Japan, the same and Germany. Germany is probably one of the more interesting patterns for us. As we think about the success that Guidewire has had in Germany, we are every day focusing more and more on showing up in that market, as relevant in that culture and relevant in that content. And so these are the things we're building. The best proof point I would say right now, if you're looking for patterns, is really that London marketplace where we're having great success. You want to talk, Diego, about how we go after that?

I simply want to -- of course, I want to swing it back to platform and product because that's my bias. But in general, if you look at Guidewire, the platform they had, I made a comment before like the customer cost [indiscernible] like to implement and when it was live, it was live. U.S. is such a large market into which the company grew and build up all that content for the U.S. market. When you go to other markets, those markets are in everything smaller. And now you needed to build that content specifically for country 1, country 2, country 3. And in the absence of what we discussed today about externalized service, everything was built uniquely from one market. So now when you try to kind of build a unique from one market is that market is not big enough. It's not large enough, and you don't have all the customer day one, then the cost to invest upfront is kind of prohibitive or kind of very difficult to stomach. So what we've been doing, we have been decoupling the platform in a way that now you don't need to build that uniquely for Germany. There are aspects of the platform that are going to be shared between Germany, France, Italy and so on and so forth. So that capability of building things with the highest level of usability is a critical element on that. And then, of course, the fact that we are becoming more investment country by country is out. So the combination of those 2 things is really kind of a game changer.

Okay. Maybe we have time for a drink. We're good. Great. Okay. Well, thanks very much. Appreciate your time.