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Excrept from filing document 2025-07-31

The aggregate market value of common stock held by non affiliates of the registrant computed by reference to the closing price at which the common stock was sold on January 31 2025 the last business day of the registrant s most recently completed second fiscal quarter as reported on the New York Stock Exchange was approximately 13 4 billion Shares of common stock held by each executive officer director and holder of 5 or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates This determination of affiliate status does not reflect a determination that such persons are affiliates of the registrant for any other purpose
Portions of the registrant s definitive Proxy Statement relating to its 2025 Annual Meeting of Stockholders are incorporated by reference into Part III of this report where indicated Such Proxy Statement will be filed with the U S Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates
The sections titled Business and Management s Discussion and Analysis of Financial Condition and Results of Operations as well as other parts of this Annual Report on Form 10 K and certain information incorporated herein by reference contain forward looking statements within the meaning of the Securities Act of 1933 as amended the Securities Act and the Securities Exchange Act of 1934 as amended the Exchange Act which are subject to risks and uncertainties The forward looking statements may include statements concerning among other things our business strategy including anticipated trends and developments in and management plans for our business and the markets in which we operate financial results results of operations revenue gross margins operating expenses services products projected costs and capital expenditures research and development programs cloud operations cybersecurity effectiveness sales and marketing initiatives and competition In some cases you can identify these statements by forward looking words such as will may might should could estimate expect suggest believe anticipate intend plan and continue the negative or plural of these words and other comparable terminology Actual events or results may differ materially from those expressed or implied by these statements due to various factors including but not limited to the matters discussed below in the section titled Risk Factors and elsewhere in this Annual Report on Form 10 K Many of the forward looking statements are located in Management s Discussion and Analysis of Financial Condition and Results of Operations
Forward looking statements are not guarantees of future performance and involve risks and uncertainties The forward looking statements contained in this Annual Report on Form 10 K are based on information available to us as of the filing date of this Annual Report on Form 10 K and our current expectations about future events which are inherently subject to change and involve risks and uncertainties You should not place undue reliance on these forward looking statements
We do not undertake any obligation to update any forward looking statements in this Annual Report on Form 10 K or in any of our other communications except as required by law All such forward looking statements should be read as of the time the statements were made and with the recognition that these forward looking statements may not be complete or accurate at a later date
Unless the context requires otherwise we are referring to Guidewire Software Inc together with its subsidiaries when we use the terms Guidewire the Company we our or us When using the term products we are generally referring to both our subscription services and term license software
Guidewire is the platform that property and casualty P C insurers rely on to engage with customers innovate and operate more efficiently Founded in 2001 we serve insurers of all sizes ranging from global carriers to regional and local providers helping them navigate a rapidly changing insurance market
Our platform combines core systems of record with digital analytics and artificial intelligence AI capabilities Our foundational core products InsuranceSuite and InsuranceNow are delivered primarily as a cloud based subscription service leveraging our proprietary cloud platform which we refer to as Guidewire Cloud Platform GWCP Historically InsuranceSuite has also been available for self managed installations These products serve as transactional systems of record fully supporting insurance operations including product definition policy administration claims management and billing
To support our core products we provide digital engagement offerings that enable seamless sales omnichannel service and enhanced claims experiences for policyholders agents vendors and field personnel and analytics products that allow insurers to manage and use data more effectively gain business insights improve operational efficiency and underwrite emerging risks To support insurers worldwide we localize our products to address diverse regulatory language and currency requirements Additionally we provide Guidewire Marketplace to empower customers pursuing innovation initiatives by offering a vetted collection of insurtech applications and to help them differentiate their businesses by allowing them to leverage capabilities from the Guidewire ecosystem
We reach customers directly through our global sales team and in partnership with third party global system integrators SIs Because our platform is central to insurers operations customer evaluation cycles are often extensive particularly when multiple products are involved or when insurers are moving to GWCP for the first time Sales processes typically include detailed due diligence and customer reference checks
In addition to migration and expansion activity on GWCP our growth depends on continuously enhancing existing products introducing new capabilities ensuring efficient cloud operations and expanding local content We sell our products primarily through subscription services for our platform and cloud delivered products We generally price our subscription services for core products based on the amount of Direct Written Premium DWP managed on our platform with certain cloud delivered products priced based on usage or other metrics Initial subscription agreements are generally five years in duration with annual renewals thereafter In some instances we have customers that sign contracts with an initial term of seven years or longer Subscription revenue is recognized ratably over the contract term We also offer term licenses primarily for existing on premise customers as well as support and professional services Support is typically priced as a percentage of license fees and recognized ratably while most professional services are billed monthly on a time and materials basis
The P C insurance industry is large fragmented highly regulated and complex It is also highly competitive with insurers competing primarily on product differentiation pricing options customer service marketing and advertising affiliate programs and channel strategies In some instances P C insurers rely on legacy systems that may impact their ability to respond to business and market requirements
To better respond to market demands P C insurers modernize their transactional core systems to manage key functional areas of P C insurance including product definition underwriting and policy administration claims management and billing Product definition specifies the insurance coverage pricing and financial and legal terms of insurance policies Underwriting and policy administration includes collecting information from potential policyholders determining appropriate coverages and terms pricing policies issuing policies and updating and maintaining policies over their lifetimes Claims management includes loss intake investigation and evaluation of incidents settlement negotiation vendor management litigation management and payment processing Billing includes policyholder invoicing payment collection and agent commission calculation We believe insurers that adopt modern cloud based core systems can enhance customer experience operate more efficiently and introduce innovative products more rapidly
We believe the P C insurance industry is rapidly evolving in how insurers engage with sell to and manage relationships with consumers and businesses Today P C insurers are striving to respond to significant changes in their competitive marketplace and the characteristics of the risks they underwrite The most significant changes include
In response to these trends changes challenges and opportunities we believe that P C insurers need a modern core platform that can increase agility and enhance digital engagement and analytics offerings
Insurers face rising competitive and market pressures including social inflation that is contributing to higher claims severity across lines of business that demand faster product definition risk selection and pricing and market entry or exit These pressures are heightened by climate driven risk events such as wildfires and floods growing competition from digital first insurers and broader macroeconomic challenges including inflation supply chain volatility and changes in trade policies
Policyholders and agents increasingly expect seamless digital first experiences Insurers are investing in modern engagement tools to reduce customer dissatisfaction and improve retention while transitioning from transactional interactions to more advisory and personalized relationships Examples include embedded insurance offerings omnichannel claims service and personalized product recommendations These investments can drive higher lead conversion and lower churn
Adoption of cloud platforms is accelerating as insurers recognize the cost efficiencies scalability and security benefits of public cloud infrastructure We believe cloud deployment also enables faster innovation cycles improved resilience during catastrophe events and easier compliance with evolving regulatory requirements By shifting infrastructure management to third parties insurers can focus more resources on differentiating products and services
Insurers are increasingly leveraging proprietary and third party data sources ranging from telematics and internet connected devices to catastrophe and climate models to inform decisions across underwriting claims and pricing Predictive analytics and AI technologies can help underwriters and claims professionals improve accuracy and efficiency while automation enables straight through processing where possible At the same time insurers must balance these gains with transparency and compliance requirements around the use of analytics and AI technologies Insurers also face costs from fraud in underwriting and claims and are using analytics and AI technologies to improve detection and reduce related expenses
Insurers are under pressure to innovate across their product lifecycle in order to grow their business and improve service quality Examples of focus areas include creating services and products to target under insured risks such as cyber supply chain disruption and reputational risk and partnering with insurtech providers to streamline operations and improve service to policyholders and agents
A significant portion of the market continues to rely on legacy systems We believe modern policy administration claims management and billing systems will continue to be adopted as insurers that rely on legacy systems seek to gain operating efficiencies expand into new markets and lines of business and introduce new digital and data offerings
The Guidewire ecosystem is designed so that insurers can increase revenue reduce operational costs and losses improve pricing and engage with a customer base that increasingly demands convenience and automated forms of self service and communication We are investing in research and development to accelerate improvements in our platform and suite of products to better serve our customers
Guidewire InsuranceSuite is a highly configurable and scalable product delivered as a service and primarily comprised of three core applications PolicyCenter ClaimCenter and BillingCenter that can be subscribed to separately or together These applications are built on and optimized for our GWCP architecture and leverage our in house cloud operations team GWCP is a Guidewire developed infrastructure layer enabled by and hosted on Amazon Web Services AWS GWCP s architecture consists of three primary layers The specialized cloud infrastructure service and tool layer centered around optimizing service and resource availability performance scalability and cost efficiency maintaining data security privacy and regulatory compliance and offering a high degree of service observability to provide customers with better insight and control consistent with their operational needs The data platform layer providing access to core and predictive analytics data to allow creation of curated datasets that can be used to drive delivery of actionable insights across the insurance lifecycle The app platform layer containing modular cloud native services decoupled from the InsuranceSuite core that can be used individually or interconnected to enhance existing applications and empower creation of new business applications GWCP was developed to meet the specialized needs of the P C insurance industry providing a scalable cloud architecture that combines multi tenant cloud services and tools with the ability to isolate each customer s system of record and database instances This approach provides our customers with the benefits of cloud native infrastructure and services and the flexibility to provide differentiated services to their customers
InsuranceSuite is designed to support multiple releases each year to accelerate delivery of new capabilities and ensure that cloud customers remain on the latest version and gain fast access to our innovation efforts Additionally InsuranceSuite embeds digital and analytics capabilities natively into our platform Most new sales and implementations are for InsuranceSuite
Guidewire PolicyCenter is our flexible underwriting and policy administration application that serves as a comprehensive system of record supporting the entire policy lifecycle including product definition underwriting quoting binding issuance endorsements audits cancellations and renewals Guidewire ClaimCenter is a complete end to end claims management solution that offers core claims functionality Guidewire BillingCenter automates the billing lifecycle enables the design of a wide variety of billing and payment plans manages agent commissions and integrates with external payment systems These primary applications also include predictive analytics that drive smart decisions digital engagement and an ecosystem of partners and insurtechs
Guidewire InsuranceNow is a complete cloud based application that offers policy administration claims management and billing functionality plus pre integrated document production analytics and other capabilities that increases agility without adding complexity Like InsuranceSuite InsuranceNow is hosted on GWCP and managed by our internal cloud operations team InsuranceNow is currently only available in the United States and is generally suited to mid market carriers and managing general agents whose needs are often not as complex as a typical InsuranceSuite customer
We offer several complementary capabilities and applications some of which are included in the core operational services and products and all of which are designed to work seamlessly with our core operational services and products including
Guidewire Advanced Product Designer is a cloud native application for insurance product design and management across the complete insurance lifecycle It enables insurers to launch and update products quickly by providing visual product development tools prebuilt product model templates product management capability and auto generated product code
Guidewire Product Content Management provides software tools and standards based line of business templates to enable insurers to more rapidly introduce and modify services and products by reducing product configuration and maintenance efforts Any such product introduction or modification must connect to and incorporate regulatory or industry standard data and content such as Insurance Services Office ISO or National Council on Compensation Insurance content
Our Digital Engagement Applications enable insurers to provide digital experiences to customers agents vendors and field personnel through their device of choice As consumers increasingly use self service functions on the internet and on mobile devices we believe that many of them prefer to interact with their insurance providers digitally and that they expect to have a consistent and efficient transactional experience through multiple channels whether online in person or by phone Our Digital Engagement Applications also benefit agents and brokers who are seeking to automate business processes with insurers to improve customer service and productivity Digital engagement applications are enabled by the Jutro Digital Platform Jutro allowing insurers to strengthen customer relationships and brand loyalty while reducing operational cost through easy to use self service interactions The focus of Jutro is on empowering digital native users or those who understand and expect to interact with their insurers through digital experiences that are seamless intuitive user friendly mobile ready and omnichannel In order to provide a holistic experience Digital Applications are unified with InsuranceSuite
Guidewire Predict is a P C specific machine learning platform that empowers insurers to make intelligent data driven decisions throughout the insurance lifecycle By building or importing predictive models built from multiple data sets designing comprehensive solutions and operationalizing the predictive insights Predict allows insurers to rapidly turn any model into business value by delivering guidance to frontline decision makers Predict for Claims helps customers to better manage claim indemnity and loss adjustment expenses Predict for Profitability improves pricing accuracy and customer satisfaction
Guidewire HazardHub allows insurers to understand assess price and manage property risk quickly and intelligently HazardHub provides a single source of geospatial risk data and provides access to more than 950 risk variables including perils from air water earth and fire HazardHub is a cloud native solution delivered through an Application Programming Interface that provides access to this information for any personal or commercial property located in 19 countries including among others Australia France Germany New Zealand South Africa the United Kingdom U K and the United States and has the ability to evaluate an entire portfolio for property risk
Guidewire Canvas is a cloud native application included with ClaimCenter It features an interactive map that enables claims management and catastrophe response teams to geo visualize claims to help improve customer satisfaction and reduce indemnity by proactively responding to storm events
Guidewire Compare is a cloud native application included with ClaimCenter that monitors key claims measures and gives feedback on how those compare against peer insurers in the Guidewire community or within a single insurer across regions or over time Compare allows claims organizations to increase their processing efficiency by monitoring key claims measures such as indemnity expenses cycle times reserves salvage subrogation percentage closed catastrophe and litigated
Guidewire Industry Intel comprises a set of pre built AI based models leveraging our comprehensive datasets Intel provides carriers with line of business specific actionable predictions to enhance operational efficiency directly embedded into core workflows within PolicyCenter and ClaimsCenter
Guidewire Data Studio is a cloud native application leveraging the Guidewire Data Platform It is designed to provide streamlined access to the data from InsuranceSuite products It provides a curated content data repository that enables insurers to build organize and publish InsuranceSuite datasets for downstream applications The Guidewire Insurance Data Model contains sets of pre curated P C insurance specific metrics and attributes data dictionaries and supporting user diagrams and documentation It facilitates the generation of financial and business insights ultimately improving policy and claims outcomes for insurers
Guidewire Explore is a cloud native business intelligence application with ready to use datasets reports and dashboards that provides insurers with financial and operational insights to better understand the health of their business make informed decisions identify areas of improvement stay competitive and support internal and external stakeholders
Guidewire Cyence is a cyber risk economic modeling product that helps P C insurers accurately measure the financial impact of cyber risk on their customers It does this by capturing data about cyber threats from more than 400 sources including public open source proprietary and third party data Cyence then curates and analyzes the data through AI and machine learning statistical models to extract meaningful signals Based on these models Cyence produces insights delivered through reports that will predict the likelihood and economic impact of cyber attacks on a target company or individual This can be used for underwriting pricing and developing cyber insurance products
Guidewire InfoCenter is a business intelligence warehouse for P C insurers that provides information in easy to use formats for business intelligence analysis and enhanced decision making With Guidewire InfoCenter insurers gain flexible operational insights as well as the ability to optimize their business
The Guidewire Marketplace is where insurers find vetted applications and content that complement the Guidewire platform from our PartnerConnect partners as well as Guidewire product and services teams These applications and content help insurers to rapidly innovate and differentiate their businesses by allowing them to leverage capabilities from the Guidewire ecosystem to meet their business goals The Guidewire Marketplace also empowers customers pursuing innovation initiatives by offering a vetted collection of insurtech applications Additionally we promote innovation through our Insurtech Vanguards which is a community of select startups and technology providers bringing transformative solutions to the P C industry and making innovation more accessible Sixteen Insurtech Vanguards have been promoted to our PartnerConnect program As of July 31 2025 the Guidewire Marketplace had over 315 partner developed integrations that have been awarded
We have increased the scope of our platform products and business through internal development and acquisitions This growing scope has required greater investment in the development of application interfaces and shared services necessary to unify the operations and user experience across our applications The prioritization of cloud delivered solutions has also required significant focus in improving our ability to manage secure and operate our applications since our cloud based deployments unlike our self managed implementations shift many operational responsibilities to us
Our cloud infrastructure is designed to enhance the security stability scalability and efficiency of our applications Our cloud infrastructure leverages AWS regions worldwide and is tailored to provide both the benefit of cloud subscription services delivered in a cloud native multi tenant model while still providing insurers with the ability to configure and extend their applications via single tenant environments which are easily managed via Guidewire Cloud Console All of our cloud services and products comply with relevant standards set by ISO American Institute of Certified Public Accountants and Payment Card Industry Security Standards Council
Finally we continue to improve the scalability of our service which performs millions of complex business critical transactions daily The accuracy and availability of our services must be maintained not only during normal business operations but also during extraordinary events such as catastrophes which may result in extremely high transaction volume in a short period of time
We provide implementation cloud migration and integration services to help our customers realize the benefits of our products Our delivery services teams assist customers in building implementation or migration plans integrating our software with their existing systems and defining business rules and specific requirements unique to each customer We also partner with leading SI consulting firms certified on our software to achieve scalable cost effective implementations for our customers
We provide support for our subscription customers as part of our subscription services and to our license customers for an annual fee based on a percentage of the license fees Subscription services also include regular updates to Guidewire software to ensure that Guidewire Cloud customers can easily access our latest innovations New capabilities are often toggled off so that customers can activate them at the right time for their businesses This enables our customers to deliver improvements at a steady pace optimized for their employees and customers
Our subscriptions include Guidewire Cloud Assurance Services which provides for review of all configurations and integrations to ensure they follow published standards best practices and required security methodologies Furthermore our internal cloud operations team monitors application performance and our customer success team works directly with customers to optimize adoption user experience and business requirements
Our business requires attracting developing and retaining a motivated team of individuals who thrive in a culture based on integrity rationality and collegiality Understanding and proactively anticipating the priorities and needs of our current and future employees is important to realizing our mission to be the platform P C insurers rely on to engage innovate and grow efficiently
As of July 31 2025 we had 3 772 employees including 1 879 in global product development and operations comprised of research and development cloud operations and technical support 873 in professional services 533 in sales and marketing and 487 in general and administrative roles As of July 31 2025 we had 1 714 employees in the United States and 2 058 employees internationally
Our recruiting development and retention objectives focus on providing an optimal employee experience and culture across the employee life cycle from recruitment to retirement and involve attracting skilled and engaged employees who contribute the talent and range of perspectives critical to our innovative forward looking and inclusive workforce Our recruiting process is designed to reduce bias and support our ability to hire candidates with professional qualifications personal potential and differing perspectives For certain roles and when required to meet our business needs flexible work policies expand our ability to hire for certain roles and retain talent in geographies where we do not have physical offices Fostering career progression by encouraging regular professional education empowers our employees to pursue their professional goals which is critical to developing and retaining our employees We invest in broad based development by providing diverse growth opportunities including skills training on demand AI learning
platforms mentorship and leadership programs We gauge progress and efficacy identify opportunities for change and pursue solutions through tracking and analyzing data from various sources such as annual talent reviews employee feedback and our progress toward hiring and promotion goals
We believe that understanding and respecting another s perspective experience background and beliefs provides opportunities to expand horizons increase innovation challenge complacency and foster empathy A broad range of perspectives and experiences drives our innovative collaborative and engaged workplace We aim for the highest standards of fairness and equal opportunity in recruitment hiring promotions job assignments and compensation Initiatives to foster a collaborative and welcoming workplace include recruiting and outreach programs and various employee resource groups open to all employees
Guidewire Gives Back GGB is our program focused on investing in local communities where we operate by encouraging employee volunteerism philanthropy and social impact investment The GGB program is centered around employee engagement and community impact through volunteer hours from the Guidewire community and financial donations both of which are geared toward making a measurable difference The GGB strategy programs and collaborative partnerships reflect employees passions and embody Guidewire s corporate mission as well as our customers purpose
Our employees are critical to our success and our global strategy includes cultivating an inclusive and engaged workforce that fosters collaboration and supports our shared values Our values of integrity rationality and collegiality are the foundation of how we work with one another We incorporate a wide variety of communication and training activities to encourage collaboration across our global workforce We measure the effectiveness of our employee programs through quarterly surveys and use the results to identify opportunities for improvement
We believe a healthy engaged and high performing workforce is part of our competitive advantage We want all of our employees to thrive and we regularly re evaluate how to best support our employees wellness health and safety through management systems policies and programs that encompass our global operations Our current benefit and wellness programs drive engagement that positively impacts our culture job satisfaction recruiting and retention programs We demonstrate our commitment to well being through our physical mental and family health programs and professional development opportunities We also prioritize personal empowerment wellness initiatives safe and flexible workspaces and comprehensive benefits ensuring our team stays healthy supported and connected
Our employees in the United States are not represented by a labor union however in certain foreign locations there are workers councils that represent our employees We have not experienced any work stoppages and we consider our relations with our employees to be good We recognize the critical role that our supervisors and managers play in fostering a productive inclusive and respectful work environment and we encourage employees to work directly with their supervisors where possible to efficiently and effectively resolve workplace concerns We also respect our employees rights to voluntarily establish and join unions and similar associations without unlawful interference We strive to work collaboratively with the councils and associations that represent our workers
We market and sell our products to a wide variety of global P C insurers ranging from some of the largest global insurers to national regional and state companies We believe strong customer relationships are a key driver of our success given the long term nature of our customer engagements and importance of customer references for new sales We focus on developing and maintaining our customer relationships through customer service and account management Customers are defined as entities that have placed orders for our services or products In some instances a parent corporation can have multiple entities or insurance brands that place orders for our services or products and in other instances customers are in industries adjacent to the insurance industry and do not have an insurance brand As of July 31 2025 we had approximately 500 customers representing approximately 570 insurance brands in 43 countries Our customer definition excludes customers that pay us less than 10 000 per year which primarily represents customers of our HazardHub product
We have extensive relationships with SI consulting technology and industry partners Our network of partners has expanded as interest in and adoption of our platform has grown We encourage our partners to co market pursue joint sales initiatives obtain certifications related to our products and drive broader adoption of our technology helping us grow our business more efficiently and enabling us to focus our resources on continued innovation and further enhancement of our solutions
We work closely with our network of SI partners to facilitate new sales and implementations of our products Our partnerships with leading SI partners allow us to increase efficiency and scale while reducing customer implementation and migration costs We continue to invest time and resources to increase the number of qualified consultants employed by our SI partners develop relationships with new partners in existing and new markets and ensure that all SI partners are qualified to implement our products We believe this model will continue to serve us well and we intend to continue to expand our network of partners and the number of certified consultants with whom we work so we can leverage our SI partners more effectively especially for future subscription migrations and implementations
As part of our PartnerConnect alliance program we have a community of solution partners developing integrations that enable software and insurance business solutions to interoperate with our products many of which are in the Guidewire Marketplace These integrations help customers reduce implementation risk and effort and lower the total cost of implementation and operation
Consistent with our industry focus and the mission critical needs our products address our sales and marketing efforts are tailored to communicate effectively to senior executives within the P C insurance industry Our sales marketing customer success and executive teams work together to cultivate long term relationships with current and prospective customers in each of the geographies in which we are active
Our direct sales team serves as both our exclusive sales channel and our account management function and is organized by geographic region across the Americas EMEA and APAC We augment our sales professionals with a pre sales team possessing insurance domain and technical expertise who engage customers to understand their specific business needs and then represent our products through demonstrations tailored to address those needs
Our marketing team supports sales with competitive analysis and sales tools while investing to strengthen our brand name and reputation We participate at industry conferences are published frequently in the industry press and have active relationships with all of the major industry analysts We also host Connections our annual customer conference where customers both participate in and deliver presentations on a wide range of Guidewire and insurance technology topics We invite potential customers and partners to our customer conference as we believe customer references are a key component of driving new sales
Our strong relationships with leading SI partners enhance our direct sales through co marketing efforts and by providing additional market validation of the distinctiveness and quality of our offerings
Our research and development efforts focus on enhancing our platform services and products to meet the complex requirements of P C insurers with particular emphasis on capabilities operational efficiency data analytics security and privacy in the cloud These efforts are intended to help our customers improve their operations drive greater digital engagement with their customers agents and brokers and gather store and analyze data to improve business decisions We also invest significantly in developing our products and necessary integrations to meet the market requirements including regulations language currency and local terminology of each country or state in which our customers operate This market segment specific functionality must be updated regularly in order to stay current with regulatory changes in each market We rely on a multi national engineering team which has grown organically and through acquisitions
The software market that caters to the P C insurance industry is highly competitive and fragmented Increased spending by insurers on software solutions and the emergence of new platforms that have broadened from core system modernization to new digital engagement and data and analytics solutions have generated significant interest among investors and entrepreneurs Increased capital allows market participants or potential market participants such as insurtech companies to adopt more aggressive go to market strategies improve existing products introduce new products develop innovative solutions that disrupt the market and consolidate with other vendors This market is also subject to changing technology preferences shifting customer needs and the adoption of cloud deployed solutions These factors create an environment of shifting and increasing competition Our current and
future competitors vary in size and in the breadth and scope of the products they offer As we expand our product portfolio we may begin to compete with software and service providers we have not traditionally competed against Our current competitors include but are not limited to customers internally developed proprietary solutions P C insurance software vendors such as Duck Creek EIS Group Insurity Majesco Origami Risk and Sapiens and horizontal software vendors such as SAP SE Salesforce and ServiceNow
Competitive factors in our industry depend on the product being offered and the size geographic market and line of business of potential customers The principal competitive factors include product functionality performance customer references total cost of ownership solution completeness implementation track record security and in depth knowledge of the P C insurance industry We typically compete favorably on the basis of these factors in most geographies
Our success and ability to compete depend in part upon our ability to protect our proprietary technology to establish and adequately protect our intellectual property rights and to protect against third party claims and litigation related to intellectual property To accomplish these objectives we rely on a combination of patent trademark copyright and trade secret laws in the United States and other jurisdictions as well as license agreements and other contractual protections We own or have pending patents and patent applications which generally apply to our software Our owned patents have expiration dates starting in 2025 We also rely on several registered and unregistered trademarks as well as pending applications for such registrations in order to protect our brand both in the United States and internationally
Information about geographic revenue is set forth in Note 2 Revenue and information about segment reporting is set forth in Note 13 Segment Information to our consolidated financial statements included in this Annual Report on Form 10 K
We have experienced seasonal variations in our license revenue and to a lesser extent in our subscription revenue as a result of increased customer orders in our fourth fiscal quarter due to efforts by our sales team to achieve annual incentives Because we recognize revenue upfront for term licenses compared to over time for subscription services changes in the mix between term license and subscription services may impact our quarterly results Additionally any significant multi year term license renewal or non renewal could impact quarterly results Subscription sales now represent the significant majority of total sales and as a result when compared to term license sales the revenue we recognize in the initial fiscal year of an order is lower deferred revenue is higher and our total reported revenue growth may be adversely affected in the near term due to the ratable nature of these arrangements Over time this ratable revenue dynamic has and will dampen the impact of seasonality on our revenue
Our services revenue is also subject to seasonal fluctuations though to a lesser degree than our license revenue and subscription revenue Our services revenue is impacted by the number of billable days in a given fiscal quarter The fiscal quarter ending January 31 usually has fewer billable days due to the impact of calendar year end holidays in the United States Our fourth fiscal quarter usually has fewer billable days due to the impact of vacations taken by our services professionals Because we pay our services professionals the same amount throughout the year our gross margins on our services revenue are usually lower in these quarters This seasonal pattern however may be absent in any given year
The following filings are available to view and download free of charge on our investor relations website as soon as reasonably practicable after we file them with the SEC Annual Report on Form 10 K Quarterly Reports on Form 10 Q Current Reports on Form 8 K and our Proxy Statement for our annual meeting of stockholders Our website is located at
We provide access to a recording of our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website Additionally we also provide notifications on our investor relations website of news or announcements regarding our financial performance including SEC filings investor events press releases and earnings releases Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts and RSS feeds Corporate governance information including our governance guidelines and code of business conduct and ethics is also available on our investor relations website under the heading Corporate Governance Corporate sustainability information is available on our website and is located at www guidewire com corporate sustainability The contents of our websites including any information contained in reports or other resources found on such websites are not intended to be incorporated by reference into this Annual Report on Form 10 K or in any other report or document we file with the SEC Any references to our websites are intended to be inactive textual references only
A description of the risks and uncertainties associated with our business is set forth below You should carefully consider such risks and uncertainties together with the other information contained in this Annual Report on Form 10 K and in our other public filings If any of such risks and uncertainties actually occurs our business financial condition or results of operations could differ materially from the plans projections and other forward looking statements included in the section titled Management s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Annual Report on Form 10 K and in our other public filings In addition if any of the following risks and uncertainties or if any other risks and uncertainties actually occurs our business financial condition or results of operations could be harmed substantially which could cause the market price of our stock to decline perhaps significantly
our quarterly and annual results may fluctuate significantly due to a number of factors including economic conditions customer behavior contract provisions and changes operational costs and reliability seasonality and other uncertainties which could impact our stock price
our reliance on orders from a relatively small number of customers in the P C insurance industry for a substantial portion of our revenue and Annual Recurring Revenue ARR and the related substantial negotiating leverage of these customers as well as our dependence on customer renewals and expansions of their contracts for our products which may not occur
lengthy and variable sales and implementation cycles with factors beyond our control including competitive pressures potentially causing expenditure of significant time and resources prior to revenue generation
competitive attributes of our applications including the need to continuously develop and enhance our products to satisfy customer demands maintain market acceptance respond to competitive pressures and meet local requirements of international markets
our ability to expand adoption of our cloud based products migrate existing term license customers to cloud based offerings on a subscription basis and manage long term pricing commitments in our customer contracts that are based on available information and estimates about future costs that may change
exposure to risks in relation to data security incidents or breaches of our cloud based products unauthorized access to our customers or employees data and the related impact on our ability to effectively operate our cloud environment for our customers
issues in the development and use of AI as well as the use of AI by our workforce combined with an uncertain regulatory environment may result in reputational harm liability or other adverse consequences to our business operations
errors or failures in our products or services as well as failures security vulnerabilities or service interruptions of third party technologies and service providers we utilize could impair the availability of our products harm our reputation lead to customer loss increase liability claims or harm our future financial results
dependence on the quality and effectiveness of our professional services technical support and SI partners and successful development of our global direct sales force and the expansion of our relationships with SI partners
pursuing acquisitions or partnerships may lead to management distractions integration challenges increased costs and stockholder dilution with risks including unforeseen difficulties capital investment needs and competitive pressures
exposure to market risks including geographical and global events supply chain disruptions inflation political and regional conflicts interest rates foreign currency exchange rates tariffs and financial markets volatility and their impact on our stock price and its volatility and our customers partners vendors or our business operations and
required compliance with current and evolving local data privacy and cybersecurity laws and regulations in all jurisdictions where we have customers and our ability to maintain the security of our customers data and our cloud based products appropriately limit the use of information and manage related costs and liabilities incurred
Our quarterly and annual results of operations may fluctuate significantly due to a variety of factors many of which are outside of our control This variability may lead to volatility in our stock price as investors and research analysts respond to quarterly fluctuations In addition comparing our results of operations on a period to period basis particularly on a sequential quarterly basis may not be meaningful You should not rely on our past results as an indication of our future performance
the impact of economic downturns and related market volatility caused by economic volatility inflation bank failures and associated financial instability and crises political uncertainties or other national and worldwide events on our business and the businesses of our customers partners and vendors
erosion in services margins or significant fluctuations in services revenue caused by changing customer demand negotiated professional services billing rates investments in customer implementation and migration projects utilization rates or fixed fee contracts
our ability to enter into contracts on favorable terms including terms related to price payment timing service levels acceptance and product delivery especially with customers and prospects that possess substantial negotiating leverage and procurement expertise
the incurrence of penalties or having to renegotiate contract terms for failing to meet certain contractual obligations including service levels product development cycles and functionality and implementation times and objectives
the impact of a recession or any other adverse global economic condition on our business including public health crises such as epidemics and pandemics changes in political climate geographic and political conflicts and uncertainties with respect to trade tariffs trade agreements and other trade issues that may cause a delay in entering into a failure to enter into or cancellation of significant customer agreements or the fulfillment of professional service arrangements
the effects of inflation or deflation in the economies in which we operate and their impact on interest rates collection timeframes and our revenue given the multi year term of most customer agreements
The foregoing factors are difficult to forecast and these as well as other factors could materially adversely affect our quarterly and annual results of operations Further due to multi year term licenses and multi year term license renewals increased cloud based subscription services timing of and billing rates for professional services engagements and other ongoing aspects of our business it is challenging to forecast our quarterly and annual results
We believe our ability to adjust spending quickly enough to compensate for a potential revenue shortfall is limited and our inability to do so could magnify the adverse impact of a potential revenue shortfall on our results of operations If we fail to achieve our quarterly forecasts if our forecasts fall below the expectations of investors or research analysts or if our actual results fail to meet the expectations of investors or research analysts our stock price may decline
Our reliance on a relatively small number of P C insurance customers for a significant portion of our revenue and ARR and the substantial negotiating leverage of these customers could adversely affect our business results of operations and financial condition
Our revenue and ARR are dependent on orders from customers in the P C insurance industry which may be adversely affected by worldwide economic environmental public health and political conditions A relatively small number of customers have historically accounted for a significant portion of our revenue The composition of our individual top customers has varied and will continue to vary from year to year Our ten largest customers accounted for 20 and 22 of our revenue in fiscal years 2025 and 2024 respectively Additionally our ten largest customers based on ARR accounted for 20 of total ARR at July 31 2025 Customers for these metrics are calculated at the parent corporation level while our total customer count is based on entities that have placed orders for our services or products While we expect this reliance to decrease over time as our revenue customer base and subscription services as a percentage of revenue grow we expect that we will continue to depend upon a relatively small number of customers for a significant portion of our revenue and ARR for the foreseeable future As a result if we fail to successfully sell our products to one or more of these anticipated customers in any particular period or fail to identify additional potential customers or if such customers purchase fewer of our products or professional services defer or cancel orders fail to renew their license or subscription agreements or otherwise terminate or reduce their relationship with us our business results of operations and financial condition would be harmed Additionally if one or more of these anticipated customers enters into or transitions to a subscription agreement in any particular period or if we fail to achieve the required performance or acceptance criteria for one or more of this relatively small number of customers our quarterly and annual results of operations may fluctuate significantly
Furthermore some of our customers include the world s largest P C insurers These customers have significant bargaining power when negotiating new licenses or subscriptions or renewals of existing agreements and have the ability to buy similar products from other vendors or develop such systems internally These customers have and may continue to seek advantageous pricing and other commercial and performance terms that may require us to develop additional features in the products we sell to them or add complexity to our customer agreements We have been required to and may again be required to reduce the average selling price and ARR of our products along with agreeing to ramps that delay reaching fully ramped ARR in response to these pressures If we are unable to avoid reducing our average selling prices or ARR our results of operations could be harmed In addition consolidation among P C insurers may further concentrate our customer base and increase the negotiating leverage of our large customers which could heighten pricing and margin pressures
The typical sales cycle for our products is lengthy and unpredictable requires pre purchase evaluation by a significant number of employees in our customers organizations often involves a significant operational decision by our customers and could be affected by factors outside of our control Our sales efforts involve educating our customers about the use and benefits of our products including the technical capabilities of our products the potential cost savings achievable by organizations deploying our products and the benefits and risks associated with cloud based services Customers typically undertake a significant evaluation process which frequently involves not only our products but also those of our competitors We spend substantial time effort and money in our sales efforts without any assurance that our efforts will produce sales and our customers have significant negotiating power during the sales process which may result in a lengthy sales cycle and significant contractual complexity Additionally we may be unable to predict the size and terms of the initial contract until very late in the sales cycle which affects our ability to accurately forecast revenue and ARR In addition if we commit to include specific features in our base product offering at the request of a customer or group of customers we may be unable to recognize revenue until the specific features have been delivered with our products or be subject to penalties or costs Providing this additional functionality may be time consuming and may involve factors that are outside of our control Customers may also insist that we commit to certain time frames in which systems built around our products will be operational or that once implemented our products will be able to meet certain operational requirements Our ability to meet such timeframes and requirements may involve factors that are outside of our control and failure to meet such timeframes and requirements could result in us incurring penalties and costs and or making additional resource commitments which would adversely affect our business and results of operations
The implementation and testing of our products by our customers typically lasts six to 24 months or longer and unexpected implementation delays and difficulties can occur Implementing our products typically involves integration with our customers and third parties systems and creating or updating the digital experience as well as adding customer and third party data to our platform This process can be complex time consuming and expensive for our customers and can result in delays in the implementation and deployment of our products Failing to meet the expectations of our customers during the implementation of our products could result in a loss of customers and negative publicity about us and our products Such failure could result from deficiencies in our product capabilities performance issues or inadequate service engagements by us our SI partners or our customers employees the latter two of which are beyond our direct control The consequences of such failure could include and have included monetary credits for current or future service engagements reduced fees for additional products or upon renewal of existing products potential reversals of previously recognized revenue renegotiating existing customers contractual terms and a customer s refusal to pay their contractually obligated license subscription support or service fees In addition time consuming and delayed implementations may also increase the amount of services personnel we must allocate to the implementation for it to be successful thereby increasing our costs and adversely affecting our business results of operations and financial condition
The market for our products is intensely competitive The competitors we face in any sale opportunity may change depending on among other things the line of business purchasing the software the application or service being sold the geography in which the customer is operating and the size of the insurance carrier to which we are selling For example we are more likely to face competition from small independent firms when addressing the needs of small insurers These competitors may compete on the basis of price the time and cost required for implementation custom development or unique product features or functions Outside of the United States we are more likely to compete against vendors that may differentiate themselves based on local advantages in language market knowledge and pre built content applicable to that jurisdiction We also compete with vendors of horizontal software products that may be customized to address needs of the P C insurance industry
Additionally many of our prospective customers operate firmly entrenched legacy systems some of which have been in operation for decades Our implementation cycles may be lengthy variable and require the investment of significant time and expense by our customers These expenses and associated operating risks attendant on any significant process re engineering and new technology implementation may cause customers to prefer maintaining legacy systems Also maintaining these legacy systems may be so time consuming and costly for our potential customers that they do not have adequate resources to devote to the purchase and implementation of our products We also compete against technology consulting firms that either helped create such legacy systems or may own in full or in part subsidiaries that develop software and systems for the P C insurance industry Further as machine learning AI technologies including generative AI technologies and automated decision making technologies collectively AI technologies continue to evolve our existing and potential customers may leverage evolving AI technologies to develop their own solutions that could reduce or eliminate the need for our solutions
As we expand our product portfolio we may begin to compete with software and service providers we have not competed against previously Such potential competitors offer data and analytics tools that may in time become more competitive with our offerings
If our competitors products services or technologies become more accepted than our solutions if they are successful in bringing their products or services to market earlier than we are if their products or services are more technologically capable than ours including without limitation as a result of new or better use of evolving AI technologies such as generative AI or if our customers or potential customers replace our solutions with custom built software then our revenue could be adversely affected
We expect the intensity of competition to remain high in the future as the amount of capital invested in current and potential competitors including insurtech companies has increased significantly in recent years As a result our competitors or potential competitors may develop improved product or sales capabilities or even a technology breakthrough that disrupts our market Continuing intense competition could result in increased pricing pressure increased sales and marketing expenses and greater investments in research and development each of which could negatively impact our profitability In addition the failure to increase or the loss of market share would harm our business results of operations financial condition and or future prospects Our larger current and potential competitors may be able to devote greater resources to the development promotion and sale of their services and products than we can devote to ours which could allow them to respond more quickly than we can to new technologies and changes in customer needs thus leading to their wider market acceptance We may not be able to compete effectively and competitive pressures may prevent us from acquiring and maintaining the customer base necessary for us to increase our revenue and profitability
In addition the insurance industry is evolving rapidly and we anticipate the market for cloud based solutions will become increasingly competitive If our current and potential customers move a greater proportion of their data and computational needs to the cloud new competitors may emerge that offer services either comparable or better suited than ours to address the demand for such cloud based solutions which could reduce demand for our offerings To compete effectively we will likely be required to increase our investment in research and development as well as the personnel and third party services required to improve reliability and security and lower the cost of delivery of our cloud based solutions New competitors are able to develop cloud based solutions without the cost of maintaining or migrating existing solutions and satisfying existing customer requirements which may allow them to introduce new services and products more quickly and on more efficient technologies than us This may increase our costs more than we anticipate and may adversely impact our results of operations
Our current and potential competitors may also establish cooperative relationships among themselves or with third parties to further enhance their resources and offerings Current or potential competitors may be acquired by other vendors or third parties with greater available resources As a result of such acquisitions our current or potential competitors might be more able than we are to adapt quickly to new technologies and customer needs to devote greater resources to the promotion or sale of their products to initiate or withstand substantial price competition or to take advantage of emerging opportunities by developing and expanding their product offerings more quickly than we can Additionally they may hold larger portfolios of patents and other intellectual property rights as a result of such relationships or acquisitions If we are unable to compete effectively with these evolving competitors for market share our business results of operations and financial condition could be materially and adversely affected
We have experienced consistent growth and expect to continue expanding our operations including increasing the number of employees and broadening the locations and scope of our international operations In particular we have been expanding and plan to continue to expand our operations in India Additionally we operate a hybrid work environment in which a large portion of our workforce works either in person on a part time basis or remotely on a permanent basis which brings challenges to managing our business and workforce This expansion combined with the complexity of managing a hybrid and geographically distributed workforce has placed and will continue to place a significant strain on our managerial administrative operational financial and other resources Further our ability to expand geographically depends in large part on our ability to attract retain and integrate managers with the appropriate skills to lead the local business and employees Similarly our profitability depends on our ability to effectively utilize personnel with the right mix of skills and experience to perform services for our customers including our ability to transition employees to new assignments on a timely basis If we are unable to effectively deploy our employees globally on a timely basis to fulfill the needs of our customers our reputation could suffer and our ability to attract new customers may be harmed
To manage our anticipated future operational expansion effectively we must continue to maintain and may need to enhance our information technology and cybersecurity infrastructure and financial and accounting systems and controls and manage expanded operations and employees in geographically distributed locations Our growth could require significant capital expenditures and may divert financial resources from other projects such as the development of new enhanced or more secure products or investments in cloud operations If we increase the size of our organization without experiencing an increase in sales of our products we will experience reductions in our gross and operating margins and net income If we are unable to effectively manage our expanding operations or hybrid work environment our expenses may increase more than expected our revenue could decline or grow more slowly than expected and we may be unable to implement our business strategy
We use AI technologies in our offerings and business and we are continuing to make investments in expanding our AI capabilities in our products professional services and tools including by enhancing existing or developing new product features and functionality that use or incorporate AI technologies AI technologies are complex and are rapidly evolving We expect that increased investment will be required to continuously improve our use of AI technologies As with many technological innovations there are significant risks involved in developing maintaining and deploying these technologies and there can be no assurance that the usage of or our investments in such technologies will always enhance our products or services or be beneficial to our business including our efficiency or profitability The use of AI technologies in new or existing offerings may result in new or enhanced governmental or regulatory scrutiny litigation confidentiality or cybersecurity risks privacy concerns ethical challenges or other complications that could adversely affect our business reputation or financial results
The complexity of our products that incorporate machine learning and AI technologies could result in unforeseen delays or expenses or undetected defects bugs or new or unknown cybersecurity risks vulnerabilities and challenges which may harm the market acceptance of new products damage our reputation with current or prospective customers cause significant remediation expenses and may harm our business results of operations and financial condition
The uncertainty around new and emerging AI technologies may require additional investment in the development and maintenance of proprietary datasets and machine learning models development of new approaches and processes to provide attribution or remuneration to creators of training data and development of appropriate protections and safeguards for handling the use of customer data with such technologies which may be costly and could impact our expenses
AI technologies may create content that appears facially correct but is factually inaccurate or flawed Our customers employees or others may rely on or use such factually incorrect or flawed content to their detriment which may expose us to brand or reputational harm competitive harm and or legal liability In all events the development marketing and use of AI technologies presents emerging ethical and social issues and if we enable or offer solutions that draw scrutiny or controversy due to their perceived or actual impact on customers or on society as a whole we may experience brand or reputational harm competitive harm additional costs and or legal liability If our AI technologies development deployment or governance is ineffective or inadequate it may result in incidents that impair the public acceptance of AI solutions or cause harm to individuals customers or society or result in our offerings not working as intended or producing unexpected outcomes
Further the development of next generation solutions that utilize new and advanced features using or incorporating AI technologies involves making predictions regarding the willingness of the market to adopt such technologies over legacy solutions We may be required to commit significant resources to developing new products before knowing whether such investment will result in products that the market will accept
We may face challenges in selling our solutions to insurers that have internally developed their own proprietary software solutions and we face competition from emerging and established vendors As a result these companies may offer lower prices additional products or services or other incentives that may impact our ability to maintain our prices
The market for our products is constantly evolving and our pricing and packaging decisions are made based on the best information available at the time but may change significantly in the future from our expectations We are continually analyzing and refining our pricing and packaging models to adapt to this dynamic environment For example we may need to change our pricing in future periods in response to market demands the inflation tariffs and interest rate environment or increased costs Our contracts are often multi year in duration and our inability to foresee changing events could impact the profitability of certain contracts Further as competitors introduce new products that compete with ours or reduce their prices we may be unable to attract new customers or retain existing customers based on our historical pricing As we expand internationally we also must determine the appropriate price to enable us to compete effectively in each market In addition if our mix or bundle of products sold changes then we may need to or choose to revise our pricing As a result we may be required or choose to reduce our prices or change our pricing model which could harm our business results of operations and financial condition In addition we cannot predict whether our current or prospective customers or the market in general will accept these changes If these adjustments do not gain acceptance our business and operational results could be adversely affected Failure to identify an optimal pricing and packaging strategy may harm our business and operational outcomes Should customers reject our new or modified pricing plans we may face increasing challenges in attracting new customers and retaining existing ones particularly if we apply new pricing models to current customer subscriptions
To address demand trends in the P C insurance industry we offer customers the use of our software products primarily through a cloud based offering sold on a subscription basis Our subscription business model has required and will continue to require a considerable investment of technical operational financial legal and sales resources
Our software and cloud services involve the storage and transmission of customer data including in some cases personal data and security incidents or breaches could result in the loss of this information which in turn could result in litigation breach of contract claims indemnity obligations harm to our reputation and other liabilities for us Our cloud offerings will continue to be the focus of existing resources require us to hire additional resources and increase costs especially in cost of subscription and support revenue cost of services revenue and research and development in any given period We may not be able to efficiently scale such investments to meet customer demand and expectations which may impact our long term growth and results of operations Further the increase in some costs associated with our cloud services such as the cost of third party infrastructure in which we rely to host our subscription services may be difficult to predict over time Furthermore we may assume greater responsibilities for implementation of subscription services due to our operating and maintaining the cloud environment for our customers As a result we may face risks associated with new and complex implementations or migrations the cost of which may differ from original estimates Our subscription contracts also contain penalty clauses for matters such as failing to meet stipulated service levels or other contractual provisions Should these penalties be triggered our results of operations may be adversely affected These penalties and costs could take the form of monetary credits for current or future service engagements reduced fees for additional services or products or upon renewal of existing agreements and a customer s renegotiation or refusal to pay its contractually obligated subscription or service fees
Revenue under our cloud based subscription model is generally recognized ratably over the term of the contract Ratable revenue recognition results in lower revenue in the initial period of the customer agreement This effect on recognized revenue may be magnified due to the concentration of our orders in the fourth fiscal quarter Additionally the timing of our customers decision to transition from self managed licenses to cloud based subscription services could negatively affect our ability to forecast the timing and amount of our revenue in any period
While market acceptance of our cloud based solutions has increased our future growth depends on our ability to further expand adoption among existing and new customers Factors such as cost security reliability performance customer preference perceived value associated with such offerings public concerns regarding privacy and the enactment of restrictive laws or regulations could continue to affect the pace and extent of this expansion If adoption or renewal of our cloud based solutions does not grow as expected we could experience reduced customer purchases reduced renewal rates lower ARR and decreased revenue any of which will adversely affect our business results of operations or financial condition
We are continually updating our existing products and developing new products in an effort to offer customers greater choices on how they utilize our software As our business practices in this area develop and evolve over time we may be required to revise our current subscription agreements which may result in revised terms and conditions that impact how we recognize revenue and the costs and risks associated with these offerings Whether our product development efforts or business model will prove successful and accomplish our business objectives is subject to numerous uncertainties and risks including but not limited to customer demand our ability to further develop manage and scale infrastructure our ability to include functionality and usability in such offerings that address customer requirements our customers ability to successfully migrate to and implement our subscription services tax and accounting implications and our costs
In addition the metrics we and our investors use to evaluate our business model may evolve over the course of time as significant trends emerge It may be difficult therefore to accurately determine the impact on our business on a contemporaneous basis or to clearly communicate the appropriate metrics to our investors If we are unable to expand adoption of our cloud offerings in light of the foregoing risks and uncertainties our reputation could suffer and our results of operations could be harmed which may cause our stock price to decline
Our business depends on customers renewing and expanding their license support and subscription contracts for our products A decline in our customer renewals and expansions could harm our future results of operations
Our customers have no obligation to renew their term licenses or subscriptions after their contract period expires and these licenses and subscriptions if renewed may be done so on less favorable terms Moreover under certain circumstances our customers have the right to cancel their licenses or subscriptions before they expire We may not accurately predict future trends in customer renewals Our customers renewal rates may fluctuate or decline because of several factors including their satisfaction or dissatisfaction with our products the prices of our products the prices of products offered by our competitors reduction in our customers business including their DWP reductions in our customers spending levels due to the macroeconomic environment or other factors or the sale of their operations to a buyer that is not a current customer Additionally customers may delay making payments under existing agreements or at renewal in an attempt to obtain more favorable terms from us
Also in certain limited cases our customers have a right to exercise a perpetual buyout of their term licenses at the end of the initial contract term which if exercised would eliminate future term license revenue If our customers do not renew their term licenses or subscriptions for our solutions or renew on less favorable terms our revenue may decline or grow more slowly than expected and our profitability may be harmed
Seasonal sales patterns may cause significant fluctuations in our results of operations and cash flows and may prevent us from achieving our quarterly or annual forecasts which may cause our stock price to decline
We generally see increased new orders in our fourth fiscal quarter which is the quarter ending July 31 due to efforts by our sales team to achieve annual incentives As a result a significantly higher percentage of our annual license revenue and cash receipts have historically been recognized in our fourth fiscal quarter Since a substantial majority of our license revenue has annual renewals after the initial term of the contract we expect to continue to experience this seasonality effect in subsequent years Because of the upfront nature of revenue recognition for new multi year term licenses and multi year term license renewals any quarter in which a significant agreement of this nature is signed renewed cancelled or not renewed when scheduled to do so may be impacted
We currently anticipate that sales of and revenue from subscription services will continue to increase in the future Subscriptions are recognized ratably over the term of the agreement after provisioning of the service Over time this may reduce the impact of our historic revenue seasonality but in the near term the introduction of proportionally more subscription services into our revenue stream together with their delayed and ratable recognition will likely impact quarter over quarter and year over year revenue growth comparisons Cash flow expectations and comparisons will most likely remain concentrated in the fourth fiscal quarter and could also be impacted because of the ramped nature of the annual installments of these multi year subscription services arrangements Additionally ARR which reflects the annualized recurring value of active customer contracts at the end of a reporting period will be impacted by the seasonality of new sales orders and ramped nature of annual installments over the initial term even if the revenue is recognized ratably
Our quarterly growth in revenue or ARR also may not coincide with new orders or cash flows in a given quarter which could mask the impact of seasonal variations This mismatch is primarily due to the following reasons
as customers enter into a subscription agreement to migrate from an existing term license agreement or as we invest in certain cloud implementations to assist our customers with their migration to our cloud services the timing of revenue recognition may be impacted by the allocation of revenue between different performance obligations
we may enter into agreements with future product delivery requirements specified terms for product upgrades or functionality acceptance terms early termination rights or unconditional return rights which may require us to delay revenue recognition for a period of time and
revenue recognition may not occur in the period when the order is placed due to certain revenue recognition criteria not being met such as delivery of the software or providing access to the subscription services
Additionally seasonal patterns may be affected by the timing of particularly large transactions and the number of renewals in a given quarter Seasonal and other variations may cause significant fluctuations in our revenue ARR results of operations and cash flows may make it challenging for an investor to predict our performance on a quarterly basis and may prevent us from achieving our quarterly or annual forecasts or meeting or exceeding the expectations of research analysts or investors which in turn may cause our stock price to decline
Our success depends on our continued ability to develop introduce and market new and enhanced versions of our products to meet evolving customer requirements Because our products are complex and require rigorous testing new features new functionality and updates to our existing products can take significant time and resources to develop and bring to market
As we expand internationally our products must be modified and adapted to comply with regulations and other requirements of the countries in which our customers do business Additionally market conditions may dictate that we change the delivery method of our products or the technology platform underlying our existing products or that new products be developed on different technology platforms potentially adding material time and expense to our development cycles The nature of these development cycles may cause us to
If we fail to develop new products enhance our existing products or manage our products in the cloud our business could be adversely affected especially if our competitors are able to introduce products with enhanced functionality in the cloud It is critical to our success for us to anticipate changes in technology industry standards and regulations and customer requirements and to successfully introduce new enhanced and competitive products to meet our customers and prospective customers needs on a timely basis We have invested and intend to increase investments in research and development and cloud operations to meet these challenges
Revenue may not be sufficient to support the future product development that is required for us to remain competitive If we fail to develop products in a timely manner that are competitive in technology and price or develop products that fail to meet customer demands our market share will decline and our business and results of operations could be harmed
We and many of our third party providers operate a hybrid work environment in which a significant portion of our workforce works either in person on a part time basis or remotely on a permanent basis As a result we are subject to the challenges and risks of having a remote and hybrid workforce For example certain security systems in homes or other remote workplaces may be less secure than those used in our offices which may subject us to increased security risks including cybersecurity related events or incidents and expose us to risks of data or financial loss and associated disruptions to our business operations Members of our workforce who work remotely may not have access to technology that is as robust as that in our offices which could cause the networks information systems applications and other tools available to those remote workers to be more limited or less reliable than in our offices We may also be exposed to risks associated with the locations of remote workers including compliance with local laws and regulations or exposure to compromised internet infrastructure Allowing members of our workforce to work remotely may create intellectual property risk if employees create intellectual property on our behalf while residing in a jurisdiction with unenforced or uncertain intellectual property laws Further if employees fail to inform us of changes in their work location we may be exposed to additional risks without our knowledge Hybrid in person as well as remote working may also subject us to other operational challenges and risks For example hybrid working arrangements may adversely affect our ability to recruit and retain personnel who prefer a fully remote or fully in person work environment Operating our business with both remote and in person workers or workers who work in flexible locations and on flexible schedules could have a negative impact on our corporate culture decrease the ability of our workforce to collaborate and communicate effectively decrease innovation and productivity or negatively affect workforce morale and retention rates In addition we expect to incur costs related to a hybrid workforce including among other things facilitating permanent remote work for a portion of our workforce and updating our offices to offer more collaborative workspaces If we are unable to effectively operate a hybrid workforce manage the cybersecurity and other risks of remote work and maintain our corporate culture and workforce morale our business could be harmed or otherwise negatively impacted
Real or perceived errors or failures in our products and professional services including implementation and cloud support services may affect our reputation cause us to lose customers and reduce sales and renewal rates which may harm our business and results of operations and subject us to liability for breach of warranty claims
Because we offer complex products undetected errors or failures may exist or occur especially when products are first introduced or when new versions or updates are released Our products are often used in large scale computing environments with different operating systems system management software and equipment and networking configurations which may result in errors or failures or expose undetected errors failures or bugs in our products Despite extensive testing by us we may not identify all errors failures or bugs in new products or releases until after commencement of commercial sales or installation As is common with complex software errors failures or bugs may be discovered in our offerings after their introduction While we have implemented and continually improve a breadth of industry standard technology controls designed to ensure system stability and availability we may introduce errors design flaws software bugs and other issues into the environment and fail to remediate them in a timely manner which may cause serious or prolonged service interruptions to our customers
implementation of our products Failure to meet these upfront estimates and the expectations of our customers could result from our product capabilities or professional service engagements performed by us our SI partners or our customers employees the latter two of which are beyond our direct control The consequences could include and have included monetary credits for current or future service engagements reduced fees for additional products or upon renewal of existing products renegotiation or modification of existing contracts that could potentially result in reversals of previously recognized revenue or a customer s refusal to pay its contractually obligated fees In addition time consuming or difficult migrations and implementations may also increase the amount of
services personnel we must allocate to the project potentially without commensurate compensation thereby increasing our costs lowering our services margin and adversely affecting our business results of operations and financial condition
The license subscription and support of our products creates the risk of significant liability claims against us Our license and subscription agreements with our customers contain provisions designed to limit our exposure to potential liability claims It is possible however that the limitation of liability provisions contained in such agreements may not be enforced as a result of international federal state and local laws or ordinances or unfavorable judicial decisions Breach of warranty or damage liability or injunctive relief resulting from such claims could harm our results of operations and financial condition
Our ability to sell our products is highly dependent on the quality of our professional services and technical support services and the support of our SI partners and the failure of us or our SI partners to offer high quality professional services or technical support services could damage our reputation and adversely affect our ability to sell our products to new customers and renew agreements with our existing customers
If we or our SI partners do not effectively assist our customers in deploying our products successfully help our customers quickly resolve post deployment issues assist our customers in migrating from self managed licenses to subscription services and provide effective ongoing support our ability to renew existing agreements and sell additional products to existing customers would be adversely affected and our reputation with potential customers could be damaged Once our products are deployed and integrated with our customers existing information technology environment our customers may depend on our technical support services and or the support of SI partners or internal resources to resolve any issues relating to our products High quality support is critical for the continued successful marketing and sale of our products In addition as we continue to expand our operations internationally our support organization will face additional challenges including those associated with delivering support training and documentation in multiple languages Many enterprise customers require higher levels of support than smaller customers If we fail to meet the requirements of our larger customers it may be more difficult to sell additional products to these customers or to transition existing license customers to subscription services a key strategy for the growth of our revenue and profitability In addition as we further expand our cloud based products our professional services cloud operations and support organizations will face new challenges including hiring training and integrating a large number of new personnel with experience in delivering high quality services and support for cloud based offerings Further as we continue to rely on SI partners to provide deployment migration and on going services our ability to ensure a high level of quality in addressing customer issues and providing a maintainable and efficient cloud environment could be diminished as we may be unable to control the quality or timeliness of the implementation and support of our products by our SI partners Our failure to maintain high quality implementation and support services or to ensure that SIs provide the same could have a material adverse effect on our business results of operations financial condition and growth prospects
Our workforce is exposed to and is encouraged to use AI technologies for certain tasks related to our business We have guidelines and policies specifically directed at the use of AI tools in the workplace Nevertheless the use of these AI tools whether authorized or unauthorized by our workforce poses potential risks relating to the protection of data including cybersecurity risk exposure of our proprietary confidential information to unauthorized recipients and the misuse of our or third party intellectual property Use of AI technologies by our workforce even when used consistently with our guidelines may result in allegations or claims against us related to violation of third party intellectual property rights unauthorized access to or use of proprietary information or failure to comply with open source software requirements In addition our employees may use AI tools for various tasks such as writing code and building content and these AI technology tools may produce responses that appear facially correct but that are factually inaccurate or flawed which could lead to errors in our decision making solution development or other business activities and have a negative impact on our business operating results and financial condition Our ability to mitigate these risks will depend on our continued effective training monitoring and enforcement of appropriate policies guidelines and procedures governing the use of AI technology and compliance by our workforce
Further while use of AI tools to develop software code makes our development process more efficient AI technologies have sometimes generated content that is substantially similar to proprietary or open source code on which the AI tool was trained If the AI technologies we use generate code that is too similar to other proprietary code or to software processes that are protected by patent we could be subject to intellectual property infringement claims We may also not be able to anticipate and detect security vulnerabilities in such AI generated software code If our tools generate code that is too similar to open source code we risk losing protection of our own proprietary code that is commingled with such code Finally to the extent we use third party AI technologies to develop software code the terms of use of these tools may state that the third party provider retains rights in the generated code
Our subscription and support revenue was 61 and 56 of total revenue for fiscal years 2025 and 2024 respectively Our subscription and support revenue produces lower gross margins than our license revenue The gross margin of our subscription and support revenue was 68 and 63 for fiscal years 2025 and 2024 respectively while the gross margin for license revenue was 99 and 98 for fiscal years 2025 and 2024 respectively We expect that subscription revenue will continue to increase as a percentage of total revenue as we contract with new cloud customers and existing customers migrate from term licenses to subscription services Additionally we are incurring expenses to operate our cloud services and manage our cloud operations which may not result in an improvement of our subscription and support gross margin These trends along with other factors some of which may be beyond our control may adversely affect our overall gross and operating margins These other factors include the percentage of new customers that enter into subscription services agreements as compared to term license agreements the revenue impact of allocating total contract consideration between license revenue and subscription and support revenue when existing customers transition from term license to subscription services agreements investments in certain cloud implementations to assist our customers with their migration to our cloud services continued growth and efficiency of our cloud operations and technical support teams and the impact on the global economy as a result of economic volatility inflation tariffs or other global events and disasters
Further our services revenue was 18 and 18 of total revenue for fiscal years 2025 and 2024 respectively Our services revenue produces significantly lower gross margin than either our license revenue or our subscription and support revenue and has at times been negative If we experience an increase in the percentage of total revenue represented by services revenue due to acquisitions or other factors such increase could reduce our overall gross and operating margins Fluctuation in our services revenue can result from several factors some of which may be beyond our control including change in customer demand for our services team s involvement in the implementation of and migration to new products the rates we charge or discounts we offer for our services our ability to bill our customers for all time incurred to complete a project the extent and quality of implementations and migrations provided by our SI partners the extent to which we subcontract services to those SI partners and the impact on the global economy as a result of economic volatility inflation tariffs or other global events and disasters Additionally the failure to improve or the erosion of our services margin whether due to discounts related to encouraging customers to enter into cloud agreements or otherwise particularly in combination with any increase in services revenue could adversely affect our overall gross and operating margins Our services margin may erode if we hire and train additional services personnel to support cloud based services or markets prior to having customer engagements if we make investments in customer migrations from self managed term licenses to subscription services if we enter into fixed fee services arrangements if our services personnel are underutilized if we subcontract out services without an adequate markup or if we require additional personnel on unexpectedly difficult projects to ensure customer success perhaps without receiving commensurate compensation
We derive a significant majority of our revenue and cash flows from our established product offerings including Guidewire InsuranceSuite Guidewire InsuranceNow and our digital and data products We expect to continue to derive a substantial portion of our revenue from these sources As such continued market acceptance of these products is critical to our growth and success Demand for our products is affected by a number of factors some of which are beyond our control including the successful implementation of our products the timing of development and release of product upgrades enhancements and new products by us and our competitors the cost and effort to migrate from self managed products to subscription services the ease of integrating our software to third party software and services technological advances that reduce the appeal of our products changes in the regulations that our customers must comply with in the jurisdictions in which they operate and the growth or contraction in the worldwide market for technological solutions for the P C insurance industry If we are unable to continue to meet customer demands to achieve and maintain a technological advantage over competitors or to maintain market acceptance of our products our business results of operations financial condition and growth prospects may be adversely affected
If we are unable to continue the successful development of our global direct sales force and the expansion of our relationships with our strategic partners sales of our products will suffer and our growth could be slower than we project
We believe that our future growth will depend on the continued recruiting retention and training of our global direct sales force and their ability to obtain new customers both large and small P C insurers and to manage our existing customer base New hires require significant training and may in some cases take more than a year before becoming productive if at all If we are unable to hire and develop sufficient numbers of productive global direct sales personnel sales of our products will suffer and our growth will be impeded
Our SI partners help us reach additional customers We believe our future growth also will depend on the retention and expansion of successful relationships with SI partners including with SI partners that will focus on products we may acquire in the future Our growth in revenue particularly in international markets will be influenced by the development and maintenance of relationships with SI partners including regional and local SI partners Although we have established relationships with some of the leading SI partners our products may compete directly against products that such leading SI partners support or market Additionally we are unable to control the quantity or quality of resources that our SI partners commit to migrating or implementing our products the quality or timeliness of such migrations and implementations or the effects of global events on our SI partners If our partners do not commit sufficient or qualified resources to these activities our customers will be less satisfied be less supportive with references or may require the investment of our resources at discounted rates These and other failures by our partners to successfully implement our products would have an adverse effect on our business and our results of operations could fail to grow in line with our projections
We sell our products to customers located outside the United States and we are continuing to expand our international operations as part of our growth strategy In fiscal years 2025 and 2024 431 6 million and 347 9 million of our revenue respectively was from customers outside of the United States Our current international operations and our plans to expand our international operations subject us to a variety of risks including
the burdens and costs of complying with a wide variety of foreign laws and legal standards including without limitation any new or evolving laws and regulations relating to the use of data in AI generative AI machine learning technologies climate related disclosures operational resilience data protection and privacy particularly in the European Union EU and the United Kingdom U K
multiple and possibly overlapping tax regimes including certain Organization for Economic Cooperation and Development OECD proposals such as the implementation of the global minimum tax under the Pillar Two model rules
As we increase the number of products we offer increase the number of countries in which we operate and incorporate new technologies and capabilities into our products including without limitation the use of AI generative AI and machine learning technologies the complexity of adjusting our offerings to comply with legal and regulatory changes will increase
As we continue to expand our business globally our success will depend in large part on our ability to anticipate and effectively manage these and other risks associated with our international operations Any of these risks could harm our international operations and reduce our international sales adversely affecting our business results of operations financial condition and growth prospects
We may expand through acquisitions or partnerships with other companies which may divert our management s attention and result in unexpected operating and technology integration difficulties increased costs and dilution to our stockholders
Our business strategy includes the potential acquisition of shares or assets of companies with software cloud based services technologies as well as businesses that are complementary to ours Our strategy also includes alliances with such companies For example we have made several acquisitions in the past most recently our April 2025 acquisition of Quantee Sp z o o Quantee a Poland based insurtech company specializing in dynamic pricing software From time to time we also invest in private growth stage companies to support strategic initiatives and such investments involve the risk of partial or total loss of capital and may not generate a return Acquisitions alliances and strategic investments are inherently risky and may result in unforeseen operating difficulties and expenditures be dilutive to earnings negatively impact margins and fail to generate the anticipated benefits In particular we may fail to assimilate or integrate the businesses technologies services products personnel or operations of the acquired companies retain key personnel necessary to favorably execute the combined companies business plan retain existing customers or sell acquired products to new customers or adequately test and assimilate the internal control processes of the acquired business in accordance with the requirements of Section 404 of the Sarbanes Oxley Act of 2002 Sarbanes Oxley Act Our due diligence may fail to identify all of the problems liabilities or challenges and our mitigation strategies for identified issues may not be effective As a result we may overpay fail to achieve expected synergies or earnings accretion or incur unexpected costs any of which could harm our business prospects financial condition results of operations cash flows or stock price
Acquisitions and alliances may also disrupt our ongoing business divert our resources and require significant management attention that would otherwise be available for ongoing development of our current business In addition we may be required to make additional capital investments or undertake remediation efforts to ensure the success of our acquisitions which may reduce the benefits of such acquisitions We also may be required to use a substantial amount of our cash or issue debt or equity securities to complete an acquisition or realize the potential of an alliance which could deplete our cash reserves and or dilute our existing stockholders Following an acquisition or the establishment of an alliance offering new products the timing of revenue from the sale of products that we acquired or that result from the alliance or from the sale of a bundle of products that includes such new products may be different from the timing of revenue from existing products In addition our ability to maintain favorable pricing of new products may be challenging if we bundle such products with existing products A delay in the recognition of revenue from sales of acquired or alliance products or reduced pricing due to bundled sales may cause fluctuations in our quarterly financial results may adversely affect our operating margins and may reduce the benefits of such acquisitions or alliances
Additionally competition within the software industry for acquisitions of businesses technologies and assets has been and may continue to be intense Acquisitions may be subject to regulatory reviews which could increase legal and compliance costs or delay limit or prevent completion of the transaction As such even if we are able to identify an acquisition that we would like to pursue the target may be acquired by another strategic buyer or financial buyer such as a private equity firm or we may otherwise not be able to complete the acquisition on commercially reasonable terms if at all Moreover in addition to our failure to realize the anticipated benefits of any acquisition including our revenue or return on investment assumptions we may be exposed to unknown liabilities or impairment charges to acquired intangible assets and goodwill as a result of acquisitions we do complete
Incorrect or improper use of our products or our failure to properly train customers on how to utilize our products could result in customer dissatisfaction and negatively affect our business results of operations financial condition and growth prospects
Our products are complex and are deployed in a wide variety of environments The proper use of our products requires training of the customer If our products are not used correctly or as intended inadequate performance may result Our products may also be intentionally misused or abused by customers or their employees or third parties who are able to access or use our products Because our customers rely on our services products and support to manage a wide range of operations the incorrect or improper use of our products our failure to properly train customers on how to efficiently and effectively use our products or our failure to properly provide services to our customers may result in negative publicity or legal claims against us Also any failure by us to properly provide training or other services to existing customers will likely result in lost opportunities for follow on and increased sales of our products
In addition if there is substantial turnover of customer personnel responsible especially at the executive level for the use and support of our products or if customer personnel are not well trained in the use and support of our products customers may defer the deployment of our products may deploy them in a more limited manner than originally anticipated or may not deploy them at all Further if there is substantial turnover of the customer personnel responsible for use of our products our ability to renew existing licenses and make additional sales may be substantially limited
We may not be able to obtain capital when desired on favorable terms if at all and we may not be able to obtain capital or complete acquisitions through the use of equity without dilution to our stockholders
We may need additional financing to execute on our current or future business strategies including to develop new or enhance existing products acquire businesses and technologies service our existing debt or otherwise to respond to competitive pressures
If we raise additional funds through the issuance of equity or convertible debt securities the percentage ownership of our existing stockholders could be significantly diluted and newly issued securities may have rights preferences or privileges senior to those of existing stockholders If we accumulate additional funds through debt financing a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness thus limiting funds available for our business activities We cannot be assured that additional financing will be available on terms favorable to us or at all If adequate funds are not available or are not available on acceptable terms when we desire them our ability to fund our operations take advantage of unanticipated opportunities develop or enhance our products or otherwise respond to competitive pressures would be significantly limited Any of these factors could harm our results of operations
If our products experience cybersecurity incidents or breaches there is unauthorized access to our customers data or unauthorized use of our products or any of these events are perceived to happen we may lose current or future customers and our reputation and business may be harmed
Our products and business involve the collection storage and processing of customer data and in some cases information that relates to individuals and or constitutes personal data including from our employees business partners and others and in some cases from our customers and our products may provide business critical software and analytics necessary for our customers operations As such we may be an attractive target for data security attacks that threaten the confidentiality integrity and availability of our information technology systems and confidential information Security incidents or breaches could result in public disclosure of confidential information or personal information loss or modification of data affecting our customers operations fraud or theft ransom demands or other misuse of confidential information or personal information which in turn could result in
our cloud services being perceived as not being secure a reduction in customers using our products as well as litigation breach of contract claims indemnity obligations additional reporting requirements and or oversight restrictions on processing data and other liabilities for our Company all of which could lead to loss of revenue a diminished ability to retain or attract new customers due to reputational harm fines costs or other penalties or sanctions
While we have taken and are continually updating and enhancing steps to protect the confidential information customer data and personal data that we steward including confidential information we may obtain through our customer support services or customer usage of our cloud based services our security measures or the security measures of companies we rely on could be breached We rely on third party technology and systems for a variety of information technology systems and related products and services including without limitation cloud computing services encryption and authentication technology employee email content delivery to customers back office support and other functions Our ability to control or prevent breaches of any of these systems may be beyond our control Any failure by a third party to prevent or mitigate data security incidents breaches or improper access to or use acquisition disclosure alteration or destruction of customer data could have adverse consequences for us Because techniques used to obtain unauthorized access or infiltrate sabotage disable or degrade systems change frequently and generally are not identified until they are launched against a target we may be unable to anticipate these techniques or to implement adequate preventative measures despite our efforts in implementing and deploying security measures The use of constantly evolving technologies by diverse threat actors including state sponsored organizations opportunistic hackers and hacktivists such as the increased use of AI technologies are sophisticated and complex and may increase the velocity of such threats frequency of incident cases and otherwise magnifying the risks associated with these types of attacks These attack vectors may include social engineering phishing malware including ransomware malfeasance by insiders human or technological error and as a result of malicious code embedded in open source software or the exploitation of bugs misconfigurations or exploited vulnerabilities in software or hardware
that is integrated into our or our suppliers or service providers information technology systems products or services Although we have developed systems and processes designed to protect our and our customers data prevent loss or unauthorized modification of data ensure only authorized use of services and prevent other cybersecurity incidents or breaches including systems and processes designed to reduce the impact of a security incident or breach to a third party vendor such measures cannot provide absolute security and our systems may be vulnerable to malware or physical or electronic break ins that our security measures may not be able to detect investigate remediate or recover from or to avoid a material adverse impact to our information technology systems confidential information supply chain or business Moreover we have acquired and continue to acquire companies whose systems may contain cybersecurity vulnerabilities and or unsophisticated security measures which may expose us to significant cybersecurity operational and financial risks Because our products are integrated with our customers systems and processes any circumvention or failure of our cybersecurity defenses or measures could compromise the confidentiality integrity and availability of our customers own information technology systems and or confidential information as well
In addition we cannot ensure that our cybersecurity risk management program and processes including our policies controls or procedures will be fully implemented complied with or effective in all instances and even if fully implemented they may not fully protect our information technology systems or confidential information Furthermore given the nature of complex systems software and services like ours as well as the scanning tools we deploy across our networks and products even if we regularly identify and track security vulnerabilities we may be unable to comprehensively apply patches confirm that measures are in place to mitigate all such vulnerabilities or ensure that patches are applied before vulnerabilities are exploited by a threat actor Individuals including our employees and contractors who circumvent our security measures may misappropriate proprietary confidential or personal data held by or on behalf of us disrupt our operations damage our systems or otherwise damage our business While to date no incidents have had a material impact on our operations or financial results we cannot guarantee that material incidents will not occur in the future In addition we may need to expend significant resources to protect against cybersecurity incidents or breaches or mitigate the impact of any such incidents or breaches Any or all of these issues
that adversely impact the availability integrity or confidentiality of our information technology systems or confidential information could negatively impact our ability to attract new customers or to increase engagement with existing customers could cause existing customers to elect not to renew their term licenses or subscription agreements or could subject us to third party lawsuits including class actions regulatory investigations and enforcement actions fines and penalties other action or liability and or significant incident response system restoration or remediation and future compliance costs which could adversely affect our business results of operations financial condition or reputation We cannot guarantee that any costs and liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all
In addition data security incidents or breaches could expose us to liability under various laws and regulations across jurisdictions increase the risk of litigation and governmental or regulatory investigation and increase our costs for compliance For example we may need to notify governmental authorities and or affected individuals with respect to certain cybersecurity incidents or breaches in light of a growing number of laws including those in the European Economic Area EEA U K and the United States Complying with such numerous and complex regulations in the event of a cybersecurity incident or breach would be expensive and difficult and failure to comply with these regulations could subject us to regulatory scrutiny and additional liability We may also be contractually required to notify customers or other counterparties of a cybersecurity incident or breach
We utilize services and technology and intellectual property provided or licensed by unaffiliated third parties to operate our products including AWS Okta and Datadog Any interruptions failure slowdown errors defects bugs design flaws or security vulnerabilities in our services or in third party technology on which we rely could cause outages or delays in our products negatively affect our platform damage our reputation with current and potential customers expose us to liability cause us to lose customers adversely affect our results of operations or otherwise harm our business Our operations depend on our ability and that of our service providers to protect our virtual cloud infrastructure preserve GWCP s configuration delivering capability and interconnections and maintain access to our products and to the information stored in virtual data centers and transmitted over internet service providers Although we have disaster recovery plans that use multiple virtual data center locations any incident affecting our service providers operations and infrastructure including software errors bugs design flaws power loss telecommunications failures unauthorized intrusion or malicious action malware and disabling devices natural catastrophes terrorism wars or other similar events beyond our control could negatively affect our products A prolonged third party service disruption affecting our supply chain or our platform for any of the foregoing reasons could be detrimental to our business We may also incur significant costs for taking other actions in preparation for or in reaction to events that disrupt the third party services we use
Our platform is accessed by a large number of customers often at the same time and we do not control the operation of our third party service providers As we continue to expand the number of our customers and products available to our customers we and or our third party service providers may not be able to scale our technology to accommodate the increased capacity requirements which may result in interruptions or delays in our products In addition the failure of third party virtual data centers third party internet service providers or other third party service providers whose services are integrated with our products to meet our capacity requirements could result in interruptions or delays in access to our products or impede our ability to scale our operations In the event that our third party service agreements are not renewed or are terminated or there is a lapse of service interruption of service provider connectivity or damage to such services we could experience interruptions in access to our products as well as material delays and material additional expense in securing alternative third party service providers particularly where such service providers perform critical functions and may not be readily replaceable all of which could harm our business
We use technology and intellectual property licensed from unaffiliated third parties in certain of our products and we may license additional third party technology and intellectual property in the future This may include certain AI technologies that are or may in the future be integrated into our products and licensed from third parties Our ability to provide these AI enabled capabilities may depend on access to specific third party software or infrastructure and any loss of access unfavorable changes in terms incompatibility or disruption in such technologies could reduce the functionality of our products make them less appealing to customers and harm our reputation and business Any errors defects or security issues in this third party technology and intellectual property or the integration of third party technology and intellectual property with our products could result in errors that could harm our brand and business Though we have not experienced any material impact to date industry incidents involving vulnerabilities in third party technology underscore the potential risks associated with the use of third party technology and intellectual property Moreover licensed technology and intellectual property may not continue to be available on commercially reasonable terms or at all or otherwise will be subject to restrictions that under applicable law could adversely affect our proprietary software The loss of the right to license and distribute this third party technology could limit the functionality of our products and might require us to redesign our products
Evolving policy and regulatory responses to AI technologies and their potential implications for the fields of information technology data privacy and security may result in increased compliance costs and associated concerns for us
At present various governments are taking an increased interest in developments in AI technologies and are responding to such developments in various ways including by issuing action plans for risk mitigation and introducing legislation to generally oversee the use of AI In the United States federal and state authorities have introduced and may continue to introduce requirements related to AI oversight disclosure and accountability and the scope and direction of such laws and policies remain uncertain In the EU the EU Artificial Intelligence Act EU AI Act establishes a comprehensive governance framework for AI and similar efforts are emerging in other jurisdictions New or evolving regulations relating to rapidly evolving AI technologies may impose additional rules and restrictions on the use of AI in our products
Compliance with such global laws and regulations may require valuable management and employee time resources and operating expenses and any actual or perceived failure to comply with these laws and regulations or other actual or asserted obligations relating to privacy data protection or cybersecurity could lead to inspections audits regulatory investigations and other proceedings significant fines severe penalties and other relief imposed by governmental agencies and regulatory bodies and claims demands and litigation by our customers or third parties which may reduce demand for our products and result in reputational harm substantial damages and other liabilities all of which could harm our business
Privacy concerns could result in regulatory changes and compliance with ever evolving privacy and data protection laws could impose additional costs and require significant resources and any actual or alleged failure by us or our vendors to comply could result in significant
As adoption of our cloud based products expands the amount of customer data and transaction level data that we manage continues to increase We anticipate that over time we will continue to expand the use and collection of personal data as greater amounts of such personal data may be transferred from our customers to us We recognize that privacy and data security has become a significant issue in the United States Europe the U K and many other jurisdictions where we operate and we and our vendors are subject to a variety of federal state and foreign data privacy laws rules regulations industry standards and other requirements Even though we believe we are generally in compliance with applicable laws rules and regulations relating to privacy and data security these laws are in some cases relatively new and the interpretation and application of these laws are uncertain In addition we depend on our vendors to comply with such requirements and any failure by them to do so may subject us to liability or other adverse consequences
Many federal state and foreign legislatures and government agencies have imposed are considering imposing or are considering changing restrictions and requirements about the collection use and disclosure of personal data New or changes to existing laws or regulations affecting privacy could impose additional costs and liabilities including fines on us require us to implement new processes and limit our use of such information to add value for customers including for example the California Consumer Privacy Act as amended by the California Privacy Rights Act collectively CCPA and other state privacy laws enacted in recent years The enactment of the CCPA has prompted a wave of similar legislative developments in other states in the United States which has created a patchwork of overlapping but different state laws which we may become subject to directly or by contract Additionally we may be considered a service provider to financial institutions under the Gramm Leach Bliley Act the GLBA The GLBA includes a Safeguards Rule which imposes obligations on financial institutions and indirectly their service providers to implement and maintain physical administrative and technological measures to protect the security of personal data New EU laws related to the use of data including the Digital Services Act the EU Data Act and the EU AI Act may impose additional rules and restrictions on the use of the data in our products Additionally evolving regulations aimed at enhancing financial sector resilience such as the Digital Operational Resilience Act may impact our operations by requiring adaptations for risk management and compliance potentially leading to increased costs and operational adjustments If we were required to change our business activities or revise or eliminate services or to implement burdensome compliance measures our business and results of operations could be harmed We may be subject to significant fines penalties and damages resulting from potential litigation including class action lawsuits proceedings or actions by individuals consumer rights groups government agencies or others if we fail or are perceived to fail to comply with applicable privacy and or data security laws regulations standards and other requirements and could incur significant costs in investigating and defending such claims The costs of compliance with and other burdens imposed by evolving privacy related laws regulations and standards may limit the use and adoption of our products and reduce overall demand
Furthermore concerns regarding data privacy and or security may cause our customers customers to resist providing the data and information necessary to allow our customers to use our products effectively Even the perception that the privacy and or security of personal data is not satisfactorily managed or does not meet applicable legal regulatory and other requirements could inhibit sales of our products and could limit adoption of our solutions resulting in a negative impact on our sales reputation and results of operations If any of these events were to occur our business results of operations and financial condition could be adversely affected
Privacy concerns in the EU and the U K are evolving and we may face fines and other penalties as well as reputational harm if we fail to comply with these current and evolving laws and compliance with these laws may increase our expenses and adversely affect our business and results of operations
The European General Data Protection Regulation the GDPR applies in part to companies outside the EEA that carry out processing of personal data of individuals in the EEA that is related to the offering of goods or services to them or the monitoring of their behavior The GDPR has enhanced data protection obligations for processors and controllers of personal data and non compliance with the GDPR can trigger substantial fines We have in the past and may in the future need to allocate additional resources in response to new interpretations regulatory guidance and enforcement decisions or ongoing negotiation of data processing agreements with our customers and business partners which may increase our costs of compliance and impose limitations on our operations
In addition the GDPR restricts transfers of personal data outside the EEA to countries without adequate privacy protections such as the United States unless an appropriate safeguard specified by the GDPR such as the Standard Contractual Clauses is implemented We and many other companies have and may in the future be required to adopt additional measures to accomplish and maintain legitimate means for the transfer and receipt of personal data from the EU to the United States and other countries
As data protection authorities continue to issue guidance and orders on personal data export mechanisms or take enforcement action we could suffer additional costs complaints regulatory investigations or fines If we are unable to transfer personal data between and among countries and regions in which we operate it could affect the manner in which we provide our services the geographical location or segregation of our relevant systems and operations and could adversely affect our financial results
Further we may experience hesitancy reluctance or refusal by European or multi national customers to continue to use our products due to the potential risk exposure to such customers as a result of such developments and the data protection obligations imposed on them by various data protection authorities Such customers may also view any alternative approaches to the transfer of any personal data as being too costly too burdensome or otherwise objectionable and therefore may decide not to do business with us
Given the nature of our cloud based products and the current data protection landscape in the EU we may be subject to greater risk of potential inquiries and or enforcement actions from regulators We may find it necessary to establish alternative systems to maintain EEA personal data within the EEA which may involve substantial expense and may cause us to divert resources from other aspects of our business all of which may adversely affect our results from operations Further any inability to adequately address privacy concerns in connection with our cloud based services or comply with applicable privacy or data protection laws regulations and policies could result in additional cost and liability to us including fines and harm to our reputation and adversely affect our ability to offer cloud based services
In addition as we are subject to the supervision of relevant data protection authorities under both the GDPR and United Kingdom s General Data Protection Regulation U K GDPR we could be fined under each of those regimes independently in respect of the same breach There may be further developments under the U K GDPR independent of the GDPR that could cause our cost of and risks associated with compliance to increase Further evolution of EU and U K regulations on data privacy and security and any related changes to the regulatory framework in these or other countries may substantially increase our risk exposure to the penalties to which we could be subject in the event of any non compliance We may incur substantial expense in complying with the new obligations to be imposed by new regulations and interpretations of existing regulations and we may be required to make significant changes to our software applications and expanding business operations all of which may adversely affect our results of operations
Assertions by third parties of infringement or other violation by us of their intellectual property rights could result in significant costs and substantially harm our business and results of operations
The software industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patents and other intellectual property rights In particular leading companies in the software industry own large numbers of patents copyrights trademarks and trade secrets which they may use to assert claims against us From time to time third parties holding such intellectual property rights including leading companies competitors patent holding companies and or non practicing entities may assert patent copyright trademark or other intellectual property claims against us our customers and partners and those from whom we license technology and intellectual property
Although we believe that our products do not infringe upon the intellectual property rights of third parties we cannot assure that we are not infringing or otherwise violating any third party intellectual property rights or that third parties will not assert infringement or misappropriation claims against us with respect to current or future products or that any such assertions will not require us to enter into royalty arrangements result in costly litigation or result in us being unable to use certain intellectual property Infringement assertions from third parties may involve patent holding companies or other patent owners who have no relevant product revenue and therefore our own issued and pending patents may provide little or no deterrence to these patent owners in bringing intellectual property rights claims against us
Legal questions related to ownership of intellectual property rights in output generated by generative artificial intelligence models as well as the rights of developers of artificial intelligence or machine learning models to train such models on third party data have not been fully addressed by competent legal tribunals or applicable laws or regulations in all applicable jurisdictions Further the use or adoption of third party AI technologies including generative AI technologies into our products may result in exposure to claims of copyright infringement or other intellectual property related causes of action While some providers of AI technologies may offer to indemnify their end users for any copyright or other intellectual property infringement claims arising from the output of their AI technologies we may not be successful in adequately recovering our losses in connection with such claims
If we are forced to defend against any infringement or misappropriation claims whether they are with or without merit are settled out of court or are determined in our favor we may be required to expend significant time and financial resources on the defense of such claims Furthermore an adverse outcome of a dispute may require us to pay damages potentially including treble damages and attorneys fees if we are found to have willfully infringed a party s intellectual property cease making licensing or using our products that are alleged to infringe or misappropriate the intellectual property of others expend additional development resources to redesign our products enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies or works and to indemnify our partners customers and other third parties Any of these events could seriously harm our business results of operations and financial condition
Our success depends in part on our ability to enforce and defend our intellectual property rights We rely upon a combination of trademark trade secret copyright patent and unfair competition laws as well as license agreements and other contractual provisions to do so
We have filed and may in the future file patent applications related to certain of our innovations We do not know whether those patent applications will result in the issuance of a patent or whether the examination process will require us to narrow our claims In addition we may not receive competitive advantages from the rights granted under our patents and other intellectual property Our existing patents and any patents granted to us or that we otherwise acquire in the future may be contested circumvented or invalidated and we may not be able to prevent third parties from infringing these patents Therefore the extent of the protection afforded by these patents cannot be predicted with certainty In addition given the costs effort risks and downside of obtaining patent protection including the requirement to ultimately disclose the invention to the public we may choose not to seek patent protection for certain innovations however such patent protection could later prove to be important to our business
We also rely on several registered and unregistered trademarks to protect our brand Nevertheless competitors may adopt service names similar to ours or purchase our trademarks and confusingly similar terms as keywords in internet search engine advertising programs thereby impeding our ability to build brand identity and possibly leading to confusion in the marketplace In addition there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our trademarks Any claims or customer confusion related to our trademarks could damage our reputation and brand and substantially harm our business and results of operations
We attempt to protect our intellectual property technology and confidential information by generally requiring our employees and consultants to enter into confidentiality agreements and assignment of inventions agreements and third parties to enter into nondisclosure agreements all of which offer only limited protection These agreements may not effectively prevent unauthorized use or disclosure of our confidential information intellectual property or technology and may not provide an adequate remedy in the event of unauthorized use or disclosure of our confidential information intellectual property or technology Despite our efforts to protect our confidential information intellectual property and technology unauthorized third parties may gain access to our confidential proprietary information develop and market services or products similar to ours or use trademarks similar to ours any of which could materially harm our business and results of operations In addition others may independently discover our trade secrets and confidential information and in such cases we could not assert any trade secret rights against such parties Existing United States federal state and international intellectual property laws offer only limited protection The laws of some foreign countries do not protect our intellectual property rights to as great an extent as the laws of the United States and many foreign countries do not enforce these laws as diligently as governmental agencies and private parties in the United States Moreover policing our intellectual property rights is difficult costly and may not always be effective
From time to time legal action by us may be necessary to enforce our patents and other intellectual property rights to protect our trade secrets to determine the validity and scope of the intellectual property rights of others or to defend against claims of infringement or invalidity Such litigation could result in substantial costs and diversion of resources and could negatively affect our business reputation results of operations and financial condition If we are unable to protect our technology and to adequately maintain and protect our intellectual property rights we may find ourselves at a competitive disadvantage to others who need not incur the additional expense time and effort required to create the innovative products that have enabled us to be successful to date
Some of our products and technologies may use open source software which may restrict how we use or distribute our services or require that we release the source code of certain products subject to those licenses
Some of our products and technologies may incorporate software licensed under so called open source licenses In addition to risks related to license requirements usage of open source software can lead to greater risks than use of third party commercial software as open source licensors generally do not provide warranties or controls on origin of the software Additionally some open source licenses require that source code subject to the license be made available to the public and that any modifications or derivative works to open source software continue to be licensed under open source licenses These open source licenses typically mandate that proprietary software when combined in specific ways with open source software become subject to the open source license If we combine our proprietary software in such ways with open source software we could be required to release the source code of our proprietary software Further this third party technology and intellectual property has the potential for security related concerns given that we do not create or maintain such third party technology and intellectual property that may be exposed to unknown future security risks
We take steps to ensure that our proprietary software is not combined with and does not incorporate open source software in ways that would require our proprietary software to be subject to many of the restrictions in an open source license However few courts have interpreted open source licenses and the manner in which these licenses may be interpreted and enforced is therefore subject to some uncertainty Additionally we rely on hundreds of software programmers to design our proprietary technologies and although we take steps to prevent our programmers from including objectionable open source software in the technologies and software code that they design write and modify we do not exercise complete control over the development efforts of our programmers and we cannot be certain that our programmers have not incorporated such open source software into our proprietary products and technologies or that they will not do so in the future In the event that portions of our proprietary technology are determined to be subject to an open source license we could be required to publicly release the affected portions of our source code re engineer all or a portion of our technologies or otherwise be limited in the licensing of our technologies each of which could reduce or eliminate the value of our services and technologies and materially and adversely affect our business results of operations and prospects
Our software license agreements typically contain provisions permitting the customer to become a party to or a beneficiary of a source code escrow agreement under which we place the proprietary source code for our applicable products in escrow with a third party Under these escrow agreements the source code to the applicable product may be released to the customer typically for its use to maintain modify and enhance the product upon the occurrence of specified events such as our filing for bankruptcy discontinuance of our support services and breaching our representations warranties or covenants of our agreements with our customers Additionally in some cases customers have the right to request access to our source code upon demand Some of our customers have obtained the source code for certain of our products by exercising this right and others may do so in the future
Disclosing the content of our source code may limit the intellectual property protection we can obtain or maintain for that source code or the products containing that source code and may facilitate intellectual property infringement claims against us It also could permit a customer to which a product s source code is disclosed to support and maintain that software product without being required to purchase our support services Each of these could harm our business results of operations and financial condition
We prepare our consolidated financial statements to conform to United States Generally Accepted Accounting Principles GAAP These accounting principles are subject to interpretation by the SEC Financial Accounting Standards Board FASB and various bodies formed to interpret and create accounting rules and regulations Accounting standards or the guidance relating to interpretation and adoption of standards could have a significant effect on our financial results and could affect our business Additionally the FASB and the SEC are focused on the integrity of financial reporting and our accounting policies are subject to scrutiny by regulators and the public We cannot predict the impact of future changes to accounting principles or our related accounting policies on our financial statements going forward If we are unsuccessful in adapting to the requirements of any new standard or if changes to our business model create new risks then we may experience greater volatility in our quarterly and annual results which may cause our stock price to decline
In addition GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements Were we to change our accounting estimates including those related to the timing of revenue recognition and those used to allocate revenue between various performance obligations our reported revenue and results of operations could be significantly impacted We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances the results of which form the basis for making judgments about the carrying values of assets liabilities equity revenue and expenses that are not readily apparent from other sources
Further revenue recognition standards require significant judgment and estimates that impact our reported revenue and results of operations Additionally reported revenue has and will vary from ARR a non GAAP metric and cash flow associated with each customer agreement
For example for some arrangements with multiple performance obligations a portion of recurring license and support or subscription contract value is allocated to services revenue for revenue recognition purposes but does not get allocated for purposes of calculating ARR This revenue allocation only impacts the initial term of the contract This means that if we increase arrangements with multiple performance obligations that include services at discounted rates more of the total contract value would be recognized as services revenue but our reported ARR amount would not be impacted This potential difference and variability in the trends of reported amounts may cause volatility in our stock price
If we fail to maintain effective internal control over financial reporting or identify a material weakness in our internal control over financial reporting our ability to report our financial condition and results of operations in a timely and accurate manner could be adversely affected investor confidence in our Company could diminish and the value of our common stock may decline
Preparing our consolidated financial statements involves a number of complex manual and automated processes which are dependent upon individual data input or review and require significant management judgment One or more of these processes may result in errors that may not be detected and could result in a material misstatement of our consolidated financial statements The Sarbanes Oxley Act requires among other things that as a publicly traded company we disclose whether our internal control over financial reporting and disclosure controls and procedures are effective
A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis
While we continually undertake steps to improve our internal control over financial reporting as our business changes we may not be successful in making the improvements and changes necessary to be able to identify and remediate control deficiencies or material weaknesses on a timely basis If we are unable to successfully remediate any future material weaknesses in our internal control over financial reporting the accuracy and timing of our financial reporting may be adversely affected our liquidity access to capital markets and perceptions of our creditworthiness may be adversely affected we may be unable to maintain compliance with securities laws stock exchange listing requirements and debt instruments covenants regarding the timely filing of periodic reports we may be subject to regulatory investigations and penalties investors may lose confidence in our financial reporting we may suffer defaults under our debt instruments and our stock price may decline
We are subject to federal state and local income taxes in the United States and in foreign jurisdictions Our future effective tax rates and the value of our deferred tax assets could be adversely affected by changes in interpretations of and guidance regarding tax laws including impacts of the Tax Cuts and Jobs Act of 2017 the Coronavirus Aid Relief Economic Security Act of 2020 the Inflation Reduction Act of 2022 the One Big Beautiful Bill Act of 2025 and certain OECD proposals including the implementation of the global minimum tax under the Pillar Two model rules
In addition we are subject to the examination of our income tax returns by the IRS and other tax authorities We regularly assess the likelihood of adverse outcomes resulting from such examinations to determine the adequacy of our provision for income taxes Significant judgment is required in determining our worldwide provision for income taxes Although we believe we have made appropriate provisions for taxes in the jurisdictions in which we operate changes in the tax laws or challenges from tax authorities under existing tax laws could adversely affect our business results of operations or financial condition
The market price of our common stock could be subject to wide fluctuations in response to among other things the risk factors described in this report the timing and amount of any share repurchases by us and other factors beyond our control such as fluctuations in the valuation of companies perceived by investors to be comparable to us and research analyst coverage about our business
Furthermore the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies These fluctuations often have been unrelated or disproportionate to the operating performance of those companies These broad market and industry fluctuations as well as general economic political and market conditions such as recessions interest rate changes inflation or deflation armed conflict international currency fluctuations tariffs or other global events have and may continue to affect the market price of our common stock
that have experienced volatility in the market price of their stock have been subject to securities class action litigation and we may become the target of complaints of this type of litigation in the future Securities litigation against us could result in substantial costs and divert our management s attention from our business which could seriously harm our business results of operations and financial condition
We currently do not plan to declare dividends on shares of our common stock in the foreseeable future Consequently the only opportunity to achieve a return on investment in our Company will be if the market price of our common stock appreciates and shares are sold at a profit
Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent a merger acquisition or other change in control that stockholders may consider favorable including transactions in which stockholders might otherwise receive a premium for their shares These provisions may also prevent or delay attempts by stockholders to replace or remove our current management or members of our board of directors These provisions include
authorizing our board of directors to issue without stockholder approval preferred stock rights senior to those of common stock which could be used to significantly dilute the ownership of a hostile acquirer
limiting the persons who may call special meetings of stockholders which could delay the ability of our stockholders to force consideration of a proposal or to take action including the removal of directors and
requiring advance notification of stockholder nominations and proposals which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer s own slate of directors or otherwise attempting to obtain control of us
The affirmative vote of the holders of at least a majority of our shares of capital stock entitled to vote is generally necessary to amend or repeal the above provisions that are contained in our amended and restated certificate of incorporation Also absent approval of our board of directors our amended and restated bylaws may only be amended or repealed by the affirmative vote of the holders of at least 50 of our shares of capital stock entitled to vote
In addition we are subject to the provisions of Section 203 of the Delaware General Corporation Law These provisions may prohibit large stockholders in particular those owning 15 or more of our outstanding common stock from engaging in certain business combinations without approval of substantially all of our stockholders for a certain period of time
These and other provisions in our amended and restated certificate of incorporation our amended and restated bylaws and under Delaware law could discourage potential takeover attempts reduce the price that investors might be willing to pay for shares of our common stock in the future and result in the market price of our shares being lower than it would be without these provisions
Our amended and restated bylaws designate certain state or federal courts as the exclusive forum for certain litigation that may be initiated by our stockholders which could limit stockholders ability to obtain a favorable judicial forum for disputes with us
Our amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum to the fullest extent permitted by law the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any state law claim for
Further our amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum the United States District Court for the Northern District of California will be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act the Federal Forum Provision as we are based in the State of California In addition our amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision
The Delaware Forum Provision and the Federal Forum Provision in our amended and restated bylaws may impose additional litigation costs on stockholders in pursuing any such claims Additionally these forum selection clauses may limit our stockholders ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors officers or employees including without limitation any claims in respect of stockholder nominations of directors as permitted under our amended and restated bylaws which may discourage the filing of lawsuits against us and our directors officers and employees even though an action if successful might benefit our stockholders In addition while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are facially valid under Delaware law there is uncertainty as to whether other courts will enforce our Federal Forum Provision If the Federal Forum Provision is found to be unenforceable we may incur additional costs associated with resolving such matters The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid The Court of Chancery of the State of Delaware and the United States District Court for the Northern District of California may also reach different judgments or results than would other courts including courts where a stockholder considering an action may be located or would otherwise choose to bring the action and such judgments may be more or less favorable to us than our stockholders
In September 2022 our board of directors authorized and approved a share repurchase program of up to 400 0 million of our outstanding common stock As of July 31 2025 138 2 million of the share repurchase program remained available for future repurchases Share repurchases under the program may be made from time to time in the open market in privately negotiated transactions and otherwise at the discretion of management and in accordance with applicable federal securities laws including Rule 10b 18 of the Exchange Act and other applicable legal requirements Such repurchases may also be made in compliance with Rule 10b5 1 trading plans entered into by us The timing pricing and size of these repurchases will depend on a number of factors including the market price of our common stock and general market and economic conditions The share repurchase program does not obligate us to repurchase any dollar amount or number of shares and the program may be suspended or discontinued at any time which may result in a decrease in the price of our common stock The share repurchase program could affect the price of our common stock increase volatility and diminish our cash reserves
Our future success depends upon our ability to continue to attract train integrate and retain highly skilled employees particularly our executive officers sales and marketing personnel professional services personnel cloud operations personnel and software engineers especially personnel experienced in developing and delivering cloud based offerings Our inability to attract and retain qualified employees and key personnel or delays in hiring required personnel including attrition retention and delay issues due to macroeconomic and other factors beyond our control may seriously harm our business results of operations and financial condition
Any one of our executive officers and other key employees could terminate his or her relationship with us at any time The loss of one or more of our executive officers or key employees and any failure to have in place and execute an effective succession plan for key executive officers could significantly delay or prevent us from achieving our business and or development objectives and could disrupt or materially harm our business Although we strive to reduce the challenges of any transition failure to ensure effective transfer of knowledge and a smooth transition could disrupt or adversely affect our business results of operations financial condition and prospects
We face competition for qualified individuals from numerous software and other technology companies Competition for qualified personnel is particularly intense in the San Francisco Bay Area where our headquarters are located though we also face significant competition in all of our domestic and foreign development centers Further significant amounts of time and resources are required to train technical sales services operations and other personnel We may incur significant costs to attract train and retain such personnel and we may lose new employees to our competitors or other technology companies before we realize the benefit of our investment after recruiting and training them
Also to the extent that we hire personnel from competitors we may be subject to allegations that such personnel have been improperly solicited or have divulged proprietary or other confidential information In addition we have a limited number of sales people and the loss of several sales people within a short period of time could have a negative impact on our sales efforts We may be unable to attract and retain suitably qualified individuals who are capable of meeting our growing technical operational and managerial requirements including managing employees and contractors remotely or in a hybrid environment or we may be required to pay increased compensation in order to do so
Because of the technical nature of our products and the dynamic market in which we compete any failure to attract integrate and retain qualified direct sales professional services cloud operations and product development personnel as well as our contract workers could harm our ability to generate sales deliver consulting services manage our customers cloud environments or successfully develop new products and enhancements of existing products
Servicing our indebtedness requires a significant amount of cash We may not have sufficient cash flow from our business to pay our substantial indebtedness and we may not have the ability to raise the funds necessary to settle for cash conversions of the 2029 Convertible Senior Notes or to repurchase the 2029 Convertible Senior Notes upon a fundamental change which could adversely affect our business and results of operations
As of July 31 2025 we had outstanding an aggregate principal amount of 690 0 million of our Convertible Senior Notes due November 2029 In addition we have available a 300 0 million senior revolving credit facility arranged by a syndicate of financial institutions Our indebtedness may increase our vulnerability to any generally adverse economic and industry conditions and we and our subsidiaries may subject to the limitations in the terms of our existing and future indebtedness incur additional debt secure existing or future debt or recapitalize our debt If we incur additional indebtedness the risks related to our business would increase and our ability to service or repay our indebtedness may be adversely impacted
Before November 1 2029 holders of the 2029 Convertible Senior Notes will have the right to convert their notes only upon the occurrence of certain events and on or after August 1 2029 the 2029 Convertible Senior Notes become convertible at any time at the election of the holders until the close of business on the second scheduled trading day immediately preceding the maturity date of November 1 2029 Upon conversion of the 2029 Convertible Senior Notes we will be obligated to make cash payments In addition holders of our 2029 Convertible Senior Notes will have the right to require us to repurchase their 2029 Convertible Senior Notes upon the occurrence of a fundamental change as defined in the 2029 Indenture at a repurchase price equal to 100 of the principal amount of the 2029 Convertible Senior Notes to be repurchased plus accrued and unpaid interest if any to but not including the fundamental change purchase date Although we have the option to settle the 2029 Convertible Senior Notes in either cash or a combination of cash and shares we may not have sufficient available cash or be able to obtain financing at the time we are required to settle the 2029 Convertible Senior Notes Additionally our ability to make payments may be limited by law by regulatory authority or by agreements governing our future indebtedness Our failure to repurchase the 2029 Convertible Senior Notes at a time when the repurchase is required by the 2029 Indenture or to pay any cash payable on future conversions of the 2029 Convertible Senior Notes as required by such Indenture would constitute a default under such Indenture A default under the 2029 Indenture or the fundamental change itself could also lead to a default under agreements governing our existing or future indebtedness If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods we may not have sufficient funds to repay the indebtedness and settle the 2029 Convertible Senior Notes or make cash payments upon conversions thereof
Our ability to make scheduled payments of the principal and interest on our indebtedness when due or to make payments upon conversion or repurchase demands with respect to our 2029 Convertible Senior Notes or to refinance our indebtedness as we may need or desire depends on our future performance which is subject to economic financial competitive and other factors beyond our control Our business may not continue to generate cash flow from operations in the future sufficient to satisfy our obligations under our existing indebtedness and any future indebtedness we may incur and to make necessary capital expenditures If we are unable to generate such cash flow we may be required to adopt one or more alternatives such as reducing or delaying investments or capital expenditures selling assets refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive Our ability to refinance existing or future indebtedness will depend on the capital markets and our financial condition at such time We may not be able to engage in any of these activities or engage in these activities on desirable terms which could result in a default on our existing or future indebtedness and have a material adverse effect on our business results of operations and financial condition
Our revolving credit facility contains restrictive and financial covenants that may limit our operational flexibility If we fail to meet our obligations under the credit facility our operations may be interrupted and our business results of operations and financial condition could be adversely affected
In December 2024 we entered into a five year 300 0 million senior revolving credit facility by and among us certain of our subsidiaries and certain lenders to fund working capital and general corporate purpose expenditures The revolving credit facility contains customary conditions to borrowing events of default covenants and consent requirements and other provisions that may limit our flexibility to take certain actions Covenants include but are not limited to restrictions on our and certain of our subsidiaries ability to incur indebtedness grant liens dispose of assets make certain restricted payments such as distributions to holders of our capital stock or the capital stock of our subsidiaries share repurchases make investments or engage in transactions with our affiliates and require us to maintain a minimum consolidated net cash interest coverage ratio and a maximum total net leverage ratio Our obligations are guaranteed by our material domestic subsidiaries and secured by substantially all of our assets including intellectual property assets
Various risks uncertainties and events beyond our control could affect our ability to comply with these covenants in the future Failure to comply with any of the covenants could result in a default under the credit facility Such a default could permit lenders to accelerate the maturity of outstanding amounts under our credit facility if any which in turn could result in adverse consequences that negatively impact our business the market price for our common stock and our ability to obtain other financing in the future
Increased scrutiny regarding climate change human capital and other sustainability matters as well as our response to the same may result in increased costs including but not limited to increased costs related to compliance stakeholder engagement and contracting impact our reputation or otherwise negatively affect our business performance We engage in certain actions including disclosures to manage sustainability related matters or respond to stakeholder expectations however such actions may be costly or be subject to numerous conditions that are outside our control and we cannot guarantee that such actions will have the desired effect or outcome For example many sustainability initiatives leverage data methodologies technologies and or standards that are complex subject to varying interpretations and continuing to evolve As with other companies our approach is expected to continue to evolve as well and we cannot guarantee that our approach will align with the expectations or interpretations of any particular stakeholder Stakeholders including policymakers have varying and at times conflicting expectations We may face reputational damage including impacts to any related ratings or additional costs in the event our sustainability procedures or standards do not meet the standards set by various constituencies and any failure to successfully navigate competing stakeholder interests may also result in adverse impacts to our business
In addition we expect there will likely continue to be increasing levels of regulation as policymakers in jurisdictions such as Europe California and Australia are adopting or considering adopting various requirements regarding sustainability disclosures or actions Such regulations are not uniform which may increase the cost and complexity of compliance as well as associated risks Moreover both advocates and opponents of sustainability matters are increasingly resorting to a range of activism forms including litigation to advance their perspectives Addressing stakeholder expectations and regulatory requirements may be costly and any failure to successfully navigate such expectations as well as evolving interpretations of any existing or new governmental laws or requirements may result in reputational harm loss of customers or contracts regulatory or investor engagement or other adverse impacts to our business Our customers and other stakeholders are also subject to many of these expectations and regulatory considerations which may augment or result in additional risks that also could adversely impact our business results of operations or financial condition
Global events have adversely affected and may continue to adversely affect workforces organizations economies and financial markets globally leading to economic downturns inflation and increased market volatility Ongoing conflicts such as the war between Russia and Ukraine continued geopolitical instability in the Middle East escalating tensions in the South China Sea high interest rates tariffs financial instability and crises pandemics and supply chain issues have added to global economic and market volatility Our past business and financial results including our ARR growth rates services revenue and margins have been adversely impacted due to the disruptions resulting from such events and may be again in the future Such global events have disrupted and may again disrupt the normal operations of our customers businesses and our SI partners businesses The related impacts of global events on the global economy could decrease or delay technology spending and adversely affect demand for our products Further our sales and implementation cycles could increase which could result in contract terms more favorable to customers and a potentially longer delay between incurring operating expenses and the generation of corresponding revenue if any or difficulty in accurately forecasting our financial results Additionally our customers may be unable to pay outstanding invoices or may request amended payment terms due to the economic impacts from such global events and related implementation delays As a result of such developments and the related economic impact to our business we may be required to record impairment related to our operating lease assets investments long lived assets or goodwill Due to the continuing and evolving nature of such global events it is not possible for us to accurately predict the duration or magnitude of the adverse impacts and effects on our business results of operations or financial condition Further to the extent global events adversely affect our business results of operations or financial condition it may also have the effect of heightening many of the other risks described in this Risk Factors section
General worldwide economic conditions remain unstable and prolonged economic uncertainties or downturns could harm our business results of operations or financial condition In particular global inflation concerns ongoing conflicts such as the war between Russia and Ukraine continued geopolitical instability in the Middle East escalating tensions in the South China Sea tariffs and the occurrence of regional epidemics or a global pandemic and related public health measures have created and may continue to create global economic uncertainty in regions in which we have significant operations These conditions may make it difficult for our customers and us to forecast and plan future business activities accurately and could cause our customers to reevaluate their decision to purchase our products which could delay and lengthen our sales cycles delay or increase pricing pressures on services engagements or result in cancellations of planned purchases Moreover during challenging economic times our customers may face issues in gaining timely access to sufficient credit which could result in an impairment of their ability to make timely payments to us If that were to occur we may not receive amounts owed to us and may be required to record an accounts receivable allowance which would adversely affect our financial results A substantial downturn in the P C insurance industry may cause firms to react to worsening conditions by reducing their capital expenditures reducing their spending on information technology delaying or canceling information technology projects or seeking to lower their costs by renegotiating vendor contracts Negative or worsening conditions in the general economy both in the United States and abroad including conditions resulting from financial and credit market fluctuations tariffs and inflation could cause a decrease in corporate spending on enterprise software in general and in the insurance industry specifically and negatively affect the rate of growth of our business
Furthermore the increased pace of consolidation in the P C insurance industry may result in reduced overall spending on our products and professional services Acquisitions of customers or potential customers can delay or cancel sales cycles or result in existing arrangements not being renewed and because we cannot predict the timing or duration of such acquisitions our results of operations could be materially impacted
Factors outside of our control including but not limited to natural catastrophes the geopolitical landscape and terrorism may adversely impact the P C insurance industry or third parties we rely on preventing us from expanding or maintaining our existing customer base and harming our business Our business is subject to the risks of earthquakes fire floods and other natural catastrophic events
Our customers are P C insurers that have experienced and will likely experience in the future losses from catastrophes or terrorism that may adversely impact their businesses Catastrophes that impact our business our customers or third parties we rely on can be caused by various events including without limitation hurricanes tsunamis floods typhoons windstorms earthquakes hail tornadoes explosions volcanic eruptions severe weather excessive heat epidemics pandemics and fires Climate change and other environmental factors are contributing to an increase in erratic weather patterns globally and intensifying the impact of certain types of catastrophes Moreover acts of terrorism armed conflict or uncertainty in the geopolitical landscape including the ongoing war between Russia and Ukraine and continued geopolitical instability in the Middle East as well as the escalation of tensions in the South China Sea could cause disruptions to our business or our customers businesses or the economy as a whole The risks associated with natural catastrophes the geopolitical landscape and terrorism are inherently unpredictable and it is difficult to forecast the timing of such events or estimate the amount of losses they will generate Events such as hurricanes wildfires heatwaves earthquakes and flooding in various regions illustrate the potential severity of such occurrences and their significant impact on P C insurers Such events may adversely impact our current or potential customers which may prevent us from maintaining or expanding our customer base and increasing our revenue as such events may cause customers to postpone purchases and professional service engagements or to discontinue existing projects
Our corporate headquarters and a substantial portion of our operations are located in the San Francisco Bay Area a region known for seismic activity rising ocean levels and proximity to areas prone to severe wildfires A significant natural disaster such as earthquake tsunami wildfire flood or significant power outage affecting the Bay Area could have a material adverse impact on our business results of operations and financial condition
Adverse developments affecting certain financial institutions as well as the banking system as a whole could negatively affect our current and projected business operations and our financial condition and results of operations
Adverse developments that may affect certain financial institutions and the banking system as a whole such as events involving liquidity that are either rumored or actual have in the past and may in the future lead to bank failures and market wide liquidity concerns For example in March 2023 Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation which appointed the Federal Deposit Insurance Corporation as receiver Similarly other institutions have been and may continue to be swept into receivership Up until March of 2023 our primary banking partner in the United States was Silicon Valley Bank Since such time we have further diversified our banking relationships In connection with such developments we have not experienced any material adverse impact to our cash flow or to our current and projected business operations financial condition or results of operations Although we are continuing to evaluate and diversify our banking relationships uncertainty may remain over liquidity concerns in the broader financial services industry As a consequence our business our business partners or industry as a whole may be adversely impacted in ways that we cannot predict at this time Further a significant portion of our assets are held in cash cash equivalent and marketable securities If any financial uncertainty were to impact a broad segment of the financial services industry our enterprise value and our future prospects could be harmed or otherwise negatively impacted
Our revenue results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates particularly changes in the Australian Dollar British Pound Canadian Dollar Euro Indian Rupee Japanese Yen New Zealand Dollar Polish Zloty and Swiss Franc
The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy Although we believe our operating activities act as a natural hedge for a majority of our foreign currency exposure at the cash flow or operating income level because we typically collect revenue and incur costs in the currency of the location in which we provide our products and services our relationships with our customers are long term in nature so it is difficult to predict if our operating activities will provide a natural hedge in the future In addition because our contracts are characterized by large annual payments significant fluctuations in foreign currency exchange rates that coincide with annual payments may affect our cash flows revenue or financial results in such quarters Our results of operations may also be impacted by transaction gains or losses related to revaluing certain current asset and liability balances that are denominated in currencies other than the functional currency of the entity in which they are recorded Moreover significant and unforeseen changes in foreign currency exchange rates may cause us to fail to achieve our stated projections for revenue ARR and operating income which could have an adverse effect on our stock price We expect global exchange rates for various currencies may be more volatile than normal as a result of ongoing conflicts including the war between Russia and Ukraine continued geopolitical instability in the Middle East the escalation of tensions in the South China Sea and related events We will continue to experience fluctuations in foreign currency exchange rates which if material may harm our revenue ARR or results of operations
In the event the conditional conversion feature of the 2029 Convertible Senior Notes is triggered the holders thereof will be entitled under the terms of the 2029 Indenture to convert their 2029 Convertible Senior Notes at their option As of July 31 2025 the conditional conversion feature of our 2029 Convertible Senior Notes was not triggered If the conditional conversion feature of the 2029 Convertible Senior Notes is triggered and one or more holders elect to convert their 2029 Convertible Senior Notes we would be required to settle a portion or all of our conversion obligation through the payment of cash which could adversely affect our liquidity In addition in certain circumstances such as conversions by holders or redemption we could be required under applicable accounting rules to reclassify all or certain of the outstanding principal of such series of notes as a current rather than long term liability which would result in a material reduction of our net working capital
The conversion of some or all of the 2029 Convertible Senior Notes may dilute the ownership interests of existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our common stock upon any conversion of such Convertible Senior Notes Our 2029 Convertible Senior Notes may become in the future convertible at the option of their holders under certain circumstances If holders of our 2029 Convertible Senior Notes elect to convert their notes in certain circumstances we will be required to settle our conversion obligation by delivering shares of our common stock which would cause dilution to our existing stockholders
In connection with the issuance of the 2029 Convertible Senior Notes we entered into capped call transactions with certain financial institutions collectively the option counterparties The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the notes and or offset any cash payments we are required to make in excess of the principal amount of converted notes as the case may be with such reduction and or offset subject to a cap
From time to time the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivative transactions with respect to our common stock and or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2029 Convertible Senior Notes Such activities could cause a decrease in the market price of our common stock
The option counterparties are financial institutions and we will be subject to the risk that any or all of them might default under the capped call transactions Our exposure to the credit risk of the option counterparties will not be secured by any collateral Past and recent global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions If an option counterparty becomes subject to insolvency proceedings we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the capped call transactions with such option counterparty Our exposure will depend on many factors but generally an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock In addition upon a default by an option counterparty we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock We can provide no assurances as to the financial stability or viability of the option counterparties
Our products involve the collection storage and processing of customer data including in some cases personal data and may provide business critical software and analytics necessary for our customers operations Guidewire develops implements and maintains cybersecurity measures designed to safeguard our products and protect the confidentiality integrity and availability of our customer data and our confidential information
We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality integrity and availability of our critical systems information and products Our cybersecurity risk management program includes a cybersecurity incident response plan
cybersecurity and cloud computing including without limitation ISO 27001 certification SOC 2 U S NIST Cybersecurity Framework CSF and the CIS Critical Security Controls This does not imply that we have met any particular technical standards specifications or requirements only that we use these frameworks industry best practices and standards as a guide to help us identify assess and manage cybersecurity risks relevant to our business
Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies reporting channels and governance processes that apply across the enterprise risk management program to other legal compliance strategic operational and financial risk areas
an enterprise wide security team principally responsible for managing our cybersecurity risk assessment processes implementing and maintaining our security controls and responding to cybersecurity incidents
a third party risk management process for service providers suppliers and vendors including among others vetting periodic monitoring and the implementation of contractual safeguards to ensure adherence to our cybersecurity standards
We have not identified risks from known cybersecurity threats to date including as a result of any prior cybersecurity incidents that have materially affected or are reasonably likely to materially affect us including our operations business strategy results of operations or financial condition
However we face ongoing cybersecurity risks including threats that might become more sophisticated and effective over time and we cannot anticipate when or the extent to which cybersecurity incidents or breaches will materially affect the Company Additional information on the cybersecurity risks we face is discussed in Part I Item 1A Risk Factors
Our Board by way of our Risk Committee oversees management of cybersecurity and other information technology risks The Risk Committee receives periodic reports from management on our cybersecurity risks and control structure In addition management updates the Risk Committee as necessary regarding cybersecurity incidents
The Risk Committee reports to the full Board regarding its activities including those related to cybersecurity The full Board also receives briefings from management on our cybersecurity risk management program Board members receive reports on cybersecurity risks from our Chief Information Security Officer CISO internal security staff and or external experts as part of the Board s continuing education on topics that impact public companies
Our management team including our CISO is responsible for assessing and managing our material risks from cybersecurity threats The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants Our CISO has over 20 years of experience in the technology sector including 18 years dedicated to information security He has held multiple executive security roles in a large Fortune 500 company overseeing product security mergers and acquisitions security marketplace security and enterprise security He holds a Bachelor of Science in Information Systems Management and a Masters of Business Administration
Our management team will periodically receive information on our cybersecurity program designed to prevent detect mitigate and remediate cybersecurity risks and incidents through various means which may include periodic briefings from internal security personnel threat intelligence and other information obtained from governmental public or private sources including external consultants engaged by us and alerts and reports produced by security tools deployed in our information technology environment
Our corporate headquarters in San Mateo California consists of approximately 79 000 square feet of space leased through June 2027 Our European headquarters in Dublin Ireland consists of approximately 85 000 square feet of space leased through March 2032 As of July 31 2025 we also lease facilities for our sales services development operations and administrative activities in various locations in the United States and around the world including in the Americas Europe and Asia Pacific
We believe that our facilities are suitable to meet our current needs In the future we may expand our facilities or add new facilities as we add employees and enter new geographic markets and we believe that suitable additional or alternative space will be available as needed to accommodate any such growth We expect to incur additional expenses in connection with any such new or expanded facilities
From time to time we are involved in legal proceedings that arise in the ordinary course of our business Any such proceedings whether meritorious or not could be time consuming costly and result in the diversion of significant operational resources and or management time
Although the outcomes of legal proceedings are inherently difficult to predict we are not currently involved in any legal proceeding in which the outcome in our judgment based on information currently available is likely to have a material adverse effect on our business or financial position
As described in Note 9 Commitments and Contingencies to our consolidated financial statements included elsewhere in this Annual Report on Form 10 K which is incorporated by reference herein we are not party to any material pending legal proceedings
On July 31 2025 the last reported sale price of our common stock on the New York Stock Exchange for fiscal year 2025 was 226 22 per share As of July 31 2025 we had 31 holders of record of our common stock The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees This number of holders of record also does not include stockholders whose shares may be held in trust by other entities
We have never declared or paid and do not anticipate declaring or paying any cash dividends on our common stock Any future determination as to the declaration and payment of dividends if any will be at the discretion of our board of directors and will depend on then existing conditions including our financial condition operating results contractual restrictions capital requirements business prospects and other factors our board of directors may deem relevant
This performance graph shall not be deemed soliciting material or to be filed with the Securities and Exchange Commission for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933 or the Exchange Act
The following graph shows a comparison of the cumulative total return for our common stock the NASDAQ Composite Total Return Index and S P Software Services Select Industry Index for the period from July 31 2020 through July 31 2025 Such returns are based on historical results and are not intended to suggest future performance Data for the NASDAQ Composite Total Return Index and S P Software Services Select Industry Index assume reinvestment of dividends
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included in Item 8 and the Risk Factors included in Item 1A of Part I of this Annual Report on Form 10 K All information presented herein is based on our fiscal calendar Unless otherwise stated references in this Annual Report on Form 10 K to particular years or quarters refer to our fiscal years ended in July and the associated quarters of those fiscal years We assume no obligation to revise or update any forward looking statements for any reason except as required by law
We have elected to omit discussion on the earliest of the three years covered by the consolidated financial statements presented Refer to Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations located in our Form 10 K for the fiscal year ended July 31 2024 filed on September 16 2024 for reference to discussion of the fiscal year ended July 31 2023 the earliest of the three fiscal years presented
Guidewire is the platform that property and casualty P C insurers rely on to engage with customers innovate and operate more efficiently Our platform combines core systems of record with digital analytics and artificial intelligence AI capabilities We serve insurers of all sizes ranging from global carriers to regional and local providers helping them navigate a rapidly changing insurance landscape
Our foundational core products InsuranceSuite and InsuranceNow are delivered primarily as cloud based subscription services Historically InsuranceSuite has also been available for self managed installations These products serve as transactional systems of record fully supporting insurance operations including product definition policy administration claims management and billing
In addition we provide digital engagement products that enable seamless sales omnichannel service and enhanced claims experiences for policyholders agents vendors and field personnel Our analytics products allow insurers to manage and use data more effectively gain business insights improve operational efficiency and underwrite emerging risks To support insurers worldwide we localize our products to address diverse regulatory language and currency requirements
InsuranceSuite is a highly configurable and scalable product delivered as a service and primarily comprised of three core applications PolicyCenter ClaimCenter and BillingCenter that can be subscribed to separately or together These applications are built on and optimized for our Guidewire Cloud Platform GWCP architecture and leverage our in house cloud operations team InsuranceSuite is designed to support multiple releases each year to accelerate delivery of new capabilities and ensure that cloud customers remain on the latest version and gain fast access to our innovation efforts Additionally InsuranceSuite embeds digital and analytics capabilities natively into our platform Most new sales and implementations are for InsuranceSuite
InsuranceNow is a complete cloud based application that offers policy administration claims management and billing functionality plus pre integrated document production analytics and other capabilities that increases agility without adding complexity Like InsuranceSuite InsuranceNow is hosted on GWCP and managed by our internal cloud operations team InsuranceNow is currently only available in the United States and is generally suited to mid market carriers and managing general agents whose needs are often not as complex as a typical InsuranceSuite customer
We reach customers directly through our global sales team and in partnership with third party global system integrators SI s Because our platform is central to insurers operations customer evaluation cycles are often extensive particularly when multiple products are involved or when insurers are moving to GWCP for the first time Sales processes typically include detailed due diligence and customer reference checks Our growth depends on continuously enhancing existing products introducing new capabilities ensuring efficient cloud operations expanding local content and providing access to innovation through the Guidewire Marketplace
We sell our products primarily through subscription services for our platform and cloud delivered products We generally price our subscription services for the core products based on the amount of Direct Written Premium DWP managed on our platform with certain cloud delivered products priced based on usage or other metrics Initial subscription agreements are generally five years in duration with annual renewals thereafter In some instances we have customers that sign contracts with an initial term of seven years or longer Subscription revenue is recognized ratably over the contract term We also offer term licenses primarily for existing on premise customers as well as support and professional services Support is typically priced as a percentage of license fees and recognized ratably while most professional services are billed monthly on a time and materials basis
Over the past few years we have primarily been entering into cloud based subscription arrangements with our new and existing customers and we anticipate that subscription arrangements will continue to be a significant majority of annual new sales going forward We may decide to change certain contract terms in new arrangements to remain competitive or otherwise meet market demands which may impact the way we recognize revenue and or ARR
To extend our technology leadership in the global market and to drive operating efficiency we continue to invest in product development and cloud operations to enhance and improve our current products introduce new products and advance our ability to securely and cost effectively deliver our services in the cloud Continued investment is critical as we seek to assist our customers in achieving their technology goals maintain our competitive advantage grow our revenue expand internationally and meet evolving customer demands In certain cases we may also acquire skills and technologies to manage our cloud infrastructure and accelerate our time to market for new products solutions and upgrades
Our track record of success with customers and their implementations is central to maintaining our strong competitive position We rely on our global services team and SI partners to ensure that teams with the right combination of product business and language skills are used in the most efficient way to meet our customers implementation and migration needs We have extensive relationships with SI consulting technology and other industry partners Our network of partners has expanded as interest in and adoption of our platform has grown We encourage our partners to co market pursue joint sales initiatives and drive broader adoption of our technology helping us grow our business more efficiently and enabling us to focus our resources on continued innovation and further enhancement of our solutions
We work closely with our network of SI partners to facilitate new sales and implementations of our products Our partnership with leading SI partners allows us to increase efficiency and scale while reducing customer implementation and migration costs We continue to invest time and resources to increase the number of qualified consultants employed by our SI partners develop relationships with new partners in existing and new markets and ensure that all SI partners are qualified to assist with implementing our products We believe this model will continue to serve us well and we intend to continue to expand our network of partners and the number of certified consultants with whom we work so we can leverage our SI partners more effectively especially for future subscription migrations and implementations
We face a number of risks in the execution of our strategy including but not limited to risks related to fluctuations in our results due to factors largely outside of our control reliance on sales to a relatively small number of large customers and the related substantial negotiating leverage of these customers lengthy and variable sales and implementation cycles competing effectively in the global market growing our business and managing our expanding operations development and use of AI in an evolving regulatory environment making long term pricing commitments based on cost estimates that may change expanding market adoption of our cloud based offerings maintaining customer satisfaction and renewals and cost effectively and securely managing the infrastructure of our cloud based customers In response to these and other risks we might face we continue to invest in many areas of our business including product development cloud operations cybersecurity introduction of new products and or new features implementation and migration services and sales and marketing
We have experienced seasonal variations in our license revenue and to a lesser extent in our subscription revenue as a result of increased customer orders in our fourth fiscal quarter which is the quarter ending July 31 We generally see significantly increased orders in our fourth fiscal quarter due to efforts by our sales team to achieve annual incentives Because we recognize revenue upfront for term licenses compared to over time for subscription services changes in the mix between term license and subscription services may impact our quarterly results Additionally any significant multi year term license or term license non renewal could impact quarterly results Subscription sales now represent the significant majority of total sales and as a result when compared to term license sales the revenue we recognize in the initial fiscal year of an order is lower deferred revenue is higher and our total reported revenue growth may be adversely affected in the near term due to the ratable nature of these arrangements Over time this ratable revenue dynamic will dampen the impact of seasonality on our revenue
Our services revenue is also subject to seasonal fluctuations though to a lesser degree than our license revenue and subscription revenue Our services revenue is impacted by the number of billable days in a given fiscal quarter Our second fiscal quarter which is the quarter ending January 31 usually has fewer billable days due to the impact of calendar year end holidays in Europe and the United States Our fourth fiscal quarter usually has fewer billable days due to the impact of vacations taken by our services professionals Because we pay our services professionals the same amount throughout the year our gross margins on our services revenue are usually lower in these quarters This seasonal pattern however may be absent in any given year
Global events have adversely affected and may continue to adversely affect workforces organizations economies and financial markets globally leading to economic downturns inflationary pressures and increased market volatility For instance ongoing conflicts such as the war between Russia and Ukraine continued geopolitical instability in the Middle East escalating tensions in the South China Sea inflationary pressures currency exchange fluctuations changes in interest rates changes in trade policies and practices including the imposition of tariffs previous bank failures in the United States and Switzerland and supply chain issues have contributed to global economic and market volatility in recent years We are unable to accurately predict the full impact that these global events will have on our results of operations financial condition liquidity and cash flows due to numerous uncertainties
Our business and financial results have been and may in the future be impacted due to these disruptions which may affect our ARR and revenue growth rates sales cycles services revenue and margins operating cash flow and expenses employee attrition hiring and onboarding necessary personnel allowance for collectibility of accounts receivable and unbilled receivables and the change in fair value of strategic investments Additionally inflation levels and political uncertainty are impacting the global economy and have magnified the impact of these disruptions
Our customers may be unable to pay or may request amended payment terms for their outstanding invoices due to the economic impacts from these disruptions and we may need to increase our accounts receivable allowances A decrease in orders in a given period could negatively affect our revenue and ARR in future periods particularly if experienced on a sustained basis because a substantial proportion of our new software subscription services orders is recognized as revenue over time Also the global economic impact of these disruptions could affect our customers DWP which could ultimately impact our revenue as we generally price our products based on the amount of DWP that will be managed by our products As a result of these developments and the related economic impact to our business we may be required to record impairment related to our operating lease assets investments long lived assets intangible assets or goodwill
We use certain key metrics and financial measures not prepared in accordance with United States Generally Accepted Accounting Principles GAAP to evaluate and manage our business including ARR and free cash flow For a further discussion of how we use key metrics and certain non GAAP financial measures see Non GAAP Financial Measures in this Annual Report on Form 10 K
We use ARR to quantify the annualized recurring value outlined in active customer contracts at the end of a reporting period ARR includes the annualized recurring value of term licenses subscription agreements support contracts and hosting agreements based on customer contractual terms and invoicing activities for the current reporting period which may not be the same as the timing and amount of revenue recognized ARR reflects all fee changes due to contract renewals non renewals expansion cancellations attrition or renegotiations at a higher or lower fee arrangement that are effective as of the ARR reporting date All components of the licensing and other arrangements that are not expected to recur primarily perpetual licenses and professional services are excluded from our ARR calculations In some arrangements with multiple performance obligations a portion of recurring license and support or subscription contract value is allocated to services revenue for revenue recognition purposes but does not get allocated for purposes of calculating ARR This revenue allocation generally only impacts the initial term of the contract This means that if we increase arrangements with multiple performance obligations that include services at discounted rates more of the total contract value would be recognized as services revenue but our reported ARR amount would not be impacted In fiscal year 2025 the recurring license and support or subscription contract value recognized as services revenue was 9 5 million
If a customer contract contains invoicing amounts that increase over the contract term then ARR reflects the annualized invoicing amount outlined in the contract for the current reporting period For example given a contract with annual invoicing of 1 0 million at the beginning of year one 2 0 million at the beginning of year two and 3 0 million at the beginning of year three and the reporting period is subsequent to year two invoicing and prior to year three invoicing the reported ARR for that contract would be 2 0 million
As of July 31 2025 ARR was 1 041 million or 1 032 million based on currency exchange rates as of July 31 2024 We measure ARR results on a constant currency basis during the fiscal year and revalue ARR at year end to current currency rates ARR grew in fiscal year 2025 by 20 or 19 on a constant currency basis
We monitor our free cash flow as a key measure of our overall business performance which enables us to analyze our financial performance without the effects of certain non cash items such as depreciation amortization and stock based compensation expenses Additionally free cash flow takes into account the impact of changes in deferred revenue which reflects the receipt of cash payments for products before they are recognized as revenue and unbilled accounts receivable which reflects revenue that has been recognized that has yet to be invoiced to our customers Our net cash provided by used in operating activities is significantly impacted by the timing of invoicing and collections of accounts receivable the timing and amount of annual bonus payments as well as payroll commissions payroll taxes and other tax payments Our capital expenditures consist of purchases of property and equipment primarily computer hardware software and leasehold improvements and capitalized software development costs For a further discussion of our operating cash flows see Liquidity and Capital Resources Cash Flows
Our consolidated financial statements are prepared in accordance with GAAP Accounting policies methods and estimates are an integral part of the preparation of our consolidated financial statements in accordance with GAAP and in part are based upon management s current judgments Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events Certain accounting policies methods and estimates are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that future events affecting them may differ markedly from management s current judgments While there are a number of significant accounting policies methods and estimates affecting our consolidated financial statements which are described in Note 1 The Company and Summary of Significant Accounting Policies and Estimates to our consolidated financial statements included in this Annual Report on Form 10 K our revenue recognition policies are critical to the periods presented
Revenue recognition requires judgment and the use of estimates especially in identifying and evaluating the various non standard terms and conditions in our contracts with customers as to their effect on reported revenue
Our revenue is derived from contracts with customers The majority of our revenue is derived from subscriptions to our cloud services licensing arrangements for our software and implementation and other professional services arrangements We account for revenue in accordance with Accounting Standards Codification 606 Revenue from Contracts with Customers ASC 606 The core principle of ASC 606 is to recognize revenue upon the transfer of services or products to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those services or products We apply a five step framework to recognize revenue as described in our Revenue Recognition policy included in Note 1 of our consolidated financial statements included in this Annual Report on Form 10 K
Our customers have significant negotiating power during the sales process which can and does result in terms and conditions that are different from our standard terms and conditions When terms and conditions of our customer contracts are not standard certain negotiated terms may require significant judgment in order to determine the appropriate revenue recognition in accordance with ASC 606
If the contract contains a single performance obligation the entire transaction price is allocated to the single performance obligation Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance
obligation based on its standalone selling price SSP in relation to the total fair value of all performance obligations in the arrangement Some of our performance obligations such as support implementation services and training services have observable inputs that are used to determine the SSP of those distinct performance obligations Where SSP is not directly observable we determine the SSP using information that may include market conditions and other observable inputs In the circumstances when available information to determine SSP is highly variable or uncertain such as for our term licenses we will use the residual method
The majority of our contracts contain multiple performance obligations such as when licenses are sold with support implementation services or training services As customers enter into a subscription agreement to migrate from an existing term license agreement customers may be under contract for self managed licenses and support in addition to subscription services for a period of time which may require an allocation of the transaction price to each performance obligation New and migration subscription agreements also typically include implementation configuration and training services which may require an allocation of the transaction price to each performance obligation
Additionally contract modifications for products that are distinct but are not priced commensurate with their SSP or are not distinct from the existing contract may affect the initial transaction price or the allocation of the transaction price to the performance obligations in the contract In such cases revenue recognized may be adjusted
See Note 1 The Company and Summary of Significant Accounting Policies and Estimates to our consolidated financial statements included in this Annual Report on Form 10 K for a full description of recent accounting pronouncements adopted including the dates of adoption and recent accounting pronouncements not yet adopted
The following table sets forth our results of operations for the years presented The data has been derived from the consolidated financial statements contained in this Annual Report on Form 10 K The results of operations for any period should not be considered indicative of results for any future period
The majority of our revenue consists of fees for our subscription services which are generally priced based on the amount of DWP that is managed by our subscription services Subscription revenue is recognized ratably over the term of the arrangement beginning at the point in time our provisioning process has been completed and access has been made available to the customer The initial term of such arrangements is generally five years though in some instances customers have entered into contracts with an initial term of seven years or longer Subscription agreements contain optional annual renewals commencing upon the expiration of the initial contract term A majority of our subscription customers are billed annually in advance In some arrangements with multiple
performance obligations a portion of recurring subscription contract value may be allocated to license revenue or services revenue for revenue recognition purposes For example in arrangements with multiple performance obligations that include services at discounted rates a portion of the total contract value related to subscription services will be allocated and recognized as services revenue Additionally agreements to migrate an existing term license customer to subscription services contain multiple performance obligations including a provision to continue using the term license during the subscription service implementation period Under these migration agreements a portion of the total contract value related to subscription services could be allocated and recognized as term license and support revenue in the period renewed or delivered
Our support revenue is generally recognized ratably over the committed support term of the licensed software Our support fees are typically priced as a fixed percentage of the associated term license fees We generally invoice support annually in advance Support related to subscription arrangements is included in subscription revenue as support is not quoted or priced separately from the subscription services
The majority of our license revenue consists of term license fees Our term license revenue is primarily generated through license fees that are billed annually in advance during the term of the contract including any renewals Our term license fees are generally priced based on the amount of DWP that will be managed by our licensed software Our term licenses are sold under an initial term with optional annual renewals after the initial term Term license revenue for the committed term of the customer agreement is generally fully recognized upon delivery of the software or at the beginning of the renewal term We do enter into license arrangements that have an initial term of two or more years and renewal terms of more than one year which results in significantly higher revenue in the initial year of the committed term than arrangements for our subscription services
Our services revenue is primarily derived from implementation and migration services performed for our customers reimbursable travel expenses and training fees A majority of our services engagements are billed and revenue is recognized on a time and materials basis upon providing our services
We anticipate subscriptions will continue to represent a significant majority of new arrangements including customers migrating from existing term license arrangements to subscription services in future periods Due to the ratable recognition of subscription revenue growth in subscription revenue will lag behind the growth of subscription orders and will impact the comparative growth of our reported revenue on a year over year basis If we complete a higher percentage of subscription arrangements towards the end of a given period our short term growth rates will be negatively impacted Due to the seasonal nature of our business the impact of new subscription orders in our fourth fiscal quarter our historically largest quarter for new orders is not fully reflected in revenue until the following fiscal year
Subscription revenue increased by 190 0 million compared to the prior year primarily due to the impact of new subscription agreements and cloud transition agreements entered into and provisioned since July 31 2024 of 154 0 million and the renewal or extension of subscription services at the fully ramped annual fees after the initial committed term of 28 2 million
Support revenue decreased by 7 8 million compared to the prior year primarily due to customers migrating from on premise term licenses to subscription services Support related to subscription arrangements is included in subscription revenue as support is not quoted or priced separately from the subscription services As customers enter into a subscription agreement to migrate from an existing term license agreement the timing and amount of revenue recognized will be impacted by allocations of the total contract value between the license subscription and support performance obligations As a result we expect the increase in subscription orders as a percentage of total new sales and customers migrating from term licenses to subscription services will result in lower support revenue in the future
Revenue related to new term licenses and multi year term license renewals is generally recognized upfront and as a result no additional license revenue is recognized until after the committed term expires As a customer enters into a subscription agreement to migrate from an existing term license agreement the timing and amount of revenue recognition will be impacted by allocations of total contract value between license subscription and support performance obligations License revenue growth has and will be negatively impacted as subscription sales increase as a percentage of total new sales and as customers migrate from term licenses to subscription services instead of renewing their term licenses
Term license revenue increased by 3 0 million compared to the prior year primarily due to higher renewals and expansion orders within our existing customer base partially offset by the impact of customers that migrated from a term license to a subscription service Ongoing revenue related to migration agreements is recorded as subscription revenue The impact on term license revenue from contracts with an initial term of greater than two years or a renewal term of greater than one year was 0 5 million during fiscal year 2025 as compared to 2 7 million in the prior year
Services revenue increased by 38 0 million compared to the prior year primarily due to improved operational focus that resulted in higher utilization of services employees and more new subscription implementation and migration projects than projects that were completed over the past year
As we successfully leverage our SI partners to lead more implementations and migrations we expect our services revenue could fluctuate between periods Additionally services revenue overall may continue to be impacted by contracts with lower average services billing rates and investments in customer implementations including fixed fee or capped arrangements to accelerate customer transition to the cloud In these arrangements when a project extends longer than originally anticipated the average billing rate we recognize may decrease which can result in revenue adjustments and lower gross profit As we continue to expand into new markets and develop new products we have and may continue to enter into contracts with lower average billing rates make investments in customer implementation and migration engagements and enter into fixed price contracts
Our cost of subscription and support revenue primarily consists of personnel costs for our cloud operations and technical support teams cloud infrastructure costs development of online training curriculum amortization of intangible assets and royalty fees paid to third parties Our cost of license revenue primarily consists of development of online training curriculum royalty fees paid to third parties and amortization of intangible assets Our cost of services revenue primarily consists of personnel costs for our professional service employees third party subcontractors or consultants and travel costs In instances where we have primary responsibility for the delivery of services subcontractor fees are expensed as cost of services revenue In each case personnel costs include salaries bonuses benefits and stock based compensation
We allocate overhead such as information technology infrastructure and software expenses information security infrastructure and software expenses and facilities expenses to all functional departments based on headcount As such these general overhead expenses are reflected in cost of revenue and each functional operating expense
The 30 3 million increase in cost of subscription and support revenue was primarily due to increases in cloud infrastructure costs of 26 6 million from increased transaction volume on our cloud services personnel costs of 4 5 million as a result of higher compensation related to bonus and other benefits internal use software amortization of 1 2 million royalties of 0 6 million due to higher usage and amortization of intangibles of 0 3 million due to newly acquired intangible assets being amortized These increases were partially offset by a decrease in professional services expense of 2 9 million
Cloud infrastructure expense continues to benefit from the efficiencies that we are achieving from our development efforts associated with our GWCP platform and the five year agreement we entered into with a cloud infrastructure services provider As a result of efficiencies that we are seeing from our previous investments in cloud operations and development efforts we continue to critically evaluate headcount additions professional services contracts and third party software costs along with other investment opportunities However we expect cost of subscription and support revenue to increase in absolute dollars due to the increased number of customers utilizing our cloud services the volume of transactions by our cloud customers and the impact of inflation and other macroeconomic events
The 0 9 million decrease in our cost of license revenue was primarily due to a 0 6 million decrease in personnel costs associated with the development of online training curriculum included with the latest releases of InsuranceSuite and lower royalties of 0 3 million
The 23 9 million increase in cost of services revenue was primarily due to increases in personnel expense of 13 5 million subcontractor expense of 9 3 million due to implementations involving our SI partners professional services expense of 0 6 million and software subscriptions and travel expenses of 0 5 million
We had 606 cloud operations and technical support employees and 873 professional service employees as of July 31 2025 compared to 613 cloud operations and technical support employees and 750 professional services employees as of July 31 2024
Our gross profit increased by 168 7 million compared to the prior year Gross profit was impacted by an increase in subscription and support gross profit due to the increase in subscription revenue and cloud operations efficiencies License gross profit slightly increased primarily as a result of customer renewals and lower costs associated with development of online training curriculum Services gross margin increased due to increased revenue from new implementation and migration projects higher utilization rates and the completion of certain implementation projects that required significant investment by us
Our gross margin increased to 63 in fiscal year 2025 as compared to 59 in fiscal year 2024 Gross margin was primarily impacted by the increase in subscription and support revenue at a higher margin due to cloud operations efficiencies and higher services margin after the completion of certain implementation projects that required significant investment by us and higher utilization rates
We expect subscription and support gross margin to continue to improve though at a slower rate than in recent years as we gain additional efficiencies and increase the number of cloud customers We expect services gross margin will continue to improve as we enter into fewer fixed fee arrangements but could fluctuate between periods based on the use of subcontractors to supplement our internal services team We expect license gross profit to decline due to customers migrating from licenses to subscription services Overall we expect gross margins to continue to improve over time as improvements in subscription and support gross margin and services gross margin will more than offset the negative impact of revenue shifts away from high margin license revenue
Our operating expenses consist of research and development sales and marketing and general and administrative expenses The largest components of our operating expenses are personnel costs for our employees and to a lesser extent professional services In each case personnel costs include salaries bonuses commissions benefits and stock based compensation
We allocate overhead such as information technology infrastructure and software expenses information security infrastructure and software expenses and facilities expenses to all functional departments based on headcount As such these general overhead expenses are reflected in cost of revenue and each functional operating expense
The 26 8 million increase in research and development expenses was primarily due to increases in personnel costs of 23 3 million due to higher headcount professional services of 1 0 million web hosting costs of 1 0 million software subscription costs of 0 9 million and travel costs of 0 6 million
We expect our research and development expenses to increase in absolute dollars due to inflation and investments to enhance and develop our products and services but decrease as a percentage of revenue after our recent period of significant investment in cloud platform capabilities as overall hiring slows and we focus on hiring in lower cost regions We continue to dedicate internal resources to develop improve and expand the functionality efficiency and security of our solutions in the cloud Research and development expenses may also increase if we pursue additional acquisitions
Our sales and marketing expenses primarily consist of personnel costs for our sales and marketing employees Included in our personnel costs are commissions which are considered contract acquisition costs and are capitalized when earned and expensed over the anticipated period of time that goods and services are expected to be provided to a customer which we estimate to be approximately five years Sales and marketing expenses also include travel expenses professional services for marketing activities and amortization of certain acquired intangibles
The 31 3 million increase in sales and marketing expenses was primarily due to increases in personnel costs including higher contract acquisition costs and stock based compensation of 24 1 million travel costs of 3 2 million web hosting expenses of 2 6
million marketing and advertising expenses of 0 6 million software subscriptions of 0 6 million and professional services costs of 0 5 million These increases were partially offset by a decrease in amortization of intangibles of 0 3 million
We expect our sales and marketing expenses to continue to increase in absolute dollars due to inflation and investments to support ongoing growth but decrease as a percentage of revenue as overall hiring slows after our recent period of investment to build out our customer success team and add analytics and cloud sales capabilities
Our general and administrative expenses include executive finance human resources information technology information security legal and corporate development and strategy functions and primarily consist of personnel costs and to a lesser extent professional services software costs and cloud hosting costs
The 17 0 million increase in our general and administrative expenses was primarily due to increases in professional services expenses of 6 2 million net of capitalized implementation costs due to ongoing projects to upgrade our technology infrastructure personnel costs of 5 6 million travel costs of 3 4 million bad debt expense of 1 0 million software subscription costs of 0 5 million and web hosting costs of 0 3 million
Our general and administrative headcount was 487 as of July 31 2025 as compared to 460 as of July 31 2024 General and administrative headcount includes facilities personnel whose expenses are allocated across all functional departments
We expect that our general and administrative expenses will increase in absolute dollars due to inflation and investments required to support our strategic initiatives grow our business and meet our product and information security compliance and reporting obligations but decrease as a percentage of revenue as overall hiring and investments slow
Interest expense includes both stated interest and the amortization of debt issuance costs associated with the outstanding amount due on the aggregate principal amount of our 1 25 Convertible Senior Notes due 2025 2025 Convertible Senior Notes and the aggregate principal amount of our 1 25 Convertible Senior Notes due 2029 the 2029 Convertible Senior Notes together with the 2025 Convertible Senior Notes the Convertible Senior Notes The amortization of debt issuance cost is recognized on an effective interest basis Our 2025 Convertible Senior Notes were partially retired in October and December 2024 and were fully settled on their maturity date of March 15 2025 Beginning in fiscal year 2025 interest expense also includes the commitment fees on our undrawn 2025 Credit Facility and the amortization of the associated issuance costs
Interest expense for the fiscal year ended July 31 2025 consists of stated interest of 9 0 million non cash interest expense of 3 8 million and 0 4 million of commitment fees and amortization of the associated issuance costs on our undrawn 2025 Credit Facility Interest expense for the fiscal year ended July 31 2024 consists of stated interest of 5 0 million and non cash interest expense of 1 7 million
Other income expense net includes foreign exchange gains and losses resulting from fluctuations in foreign exchange rates on monetary asset and monetary liability balances that are denominated in currencies other than the functional currency of the entity in which they are recorded Our monetary assets and liabilities denominated in currencies other than the functional currency of the entity in which they are recorded consist primarily of trade accounts receivable unbilled accounts receivable trade accounts payable and intercompany receivables and payables We have significant transactions in the following currencies Australian Dollar British Pound Canadian Dollar Euro Indian Rupee Japanese Yen New Zealand Dollar Polish Zloty and Swiss Franc Other income expense also includes changes in the fair value of our strategic investments and expenses related to the retirement of a portion of our 2025 Convertible Senior Notes
Other income expense net in fiscal year 2025 consists of a debt retirement loss associated with the 2025 Convertible Senior Notes of 53 6 million and a 2 1 million decrease in the fair value of our strategic investments partially offset by a 16 7 million gain primarily from foreign currency fluctuations and a 3 7 million gain on the sale of one of our strategic investments During the second quarter of fiscal year 2025 one of our strategic investments was acquired As a result we received 5 7 million in consideration for our equity interest in the investee composed of 3 4 million in cash and 2 3 million of an ownership interest in the acquirer and recognized a 3 7 million gain in excess of cost
Other income expense net in fiscal year 2024 consists of a 10 8 million loss primarily from foreign currency fluctuations and a 2 0 million decrease in the fair value of our strategic investments offset by 1 8 million of other income primarily from the gain on the sale of one of our strategic investments During the fiscal year ended July 31 2024 one of our investees was acquired by a privately held limited partnership As a result we received 12 1 million in consideration for our equity interest in the investee composed of 6 5 million cash and 5 6 million of an ownership interest in the privately held limited partnership and recognized a 1 8 million gain in excess of cost
We are subject to taxes in the United States as well as other tax jurisdictions and countries in which we conduct business Earnings from our non U S activities are subject to local country income tax and may also be subject to U S income tax
We recognized an income tax benefit of 20 4 million for fiscal year 2025 compared to 20 7 million for fiscal year 2024 Our fiscal year 2025 income tax benefit was similar to our fiscal year 2024 income tax benefit even though we generated more pre tax income due to an increase in deductions from stock based compensation the foreign derived intangible income deduction change in valuation allowance and an increase in research and development tax credits partially offset by non deductible debt retirement expense and non deductible executive compensation
The effective tax rate differs from the statutory U S Federal income tax rate of 21 primarily due to the debt retirement expense which is non deductible for tax purposes and other permanent differences related to stock based compensation including excess tax benefits research and development credits foreign earnings taxed in the U S the foreign derived intangible income deduction and certain non deductible expenses including but not limited to executive compensation limitation
In the United States on July 4 2025 H R 1 was signed into law Among other provisions the legislation reinstates immediate expensing for domestic research and experimental expenditures extends 100 bonus depreciation for qualified property placed in service beginning January 20 2025 and makes certain other provisions of the Tax Cuts and Jobs Act permanent We are evaluating the impact of the provisions of this legislation that are effective subsequent to fiscal year 2025 and will reflect its impact on our financial statements in the periods in which they are effective
The Organization for Economic Co operation and Development has implemented a framework for a global minimum corporate tax of 15 applied on a country by country basis for companies with global revenues and profits above certain thresholds referred to as Pillar 2 Pillar 2 provisions did not have a material impact on our financial statements for any of the years presented
Refer to Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations located in our 10 K for the fiscal year ended July 31 2024 filed on September 16 2024 for the discussion of the comparison of the fiscal year ended July 31 2024 to the fiscal year ended July 31 2023 the earliest of the three fiscal years presented in the consolidated financial statements
In addition to the key business metrics presented above we believe that the following non GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations Management uses these non GAAP measures to compare our performance to that of prior periods for trend analysis for purposes of determining executive and senior management incentive compensation and for budgeting and planning purposes We believe that the use of these non GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with other software companies because it provides consistency and comparability with past financial performance and assists in comparisons with other companies many of which present similar non GAAP financial measures to investors However our management does not consider these non GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP
The non GAAP financial information is presented for supplemental informational purposes only should not be considered a substitute for financial information presented in accordance with GAAP and may be different from similarly titled non GAAP measures used by other companies The principal limitation of these non GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in our financial statements In addition they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non GAAP financial measures We urge investors to review the reconciliation of non GAAP financial measures to the comparable GAAP financial measures included herein and not to rely on any single financial measure to evaluate our business
1 During the fiscal year ended July 31 2025 we recorded a 53 6 million loss on retirement of debt in other income expense comprised of a 53 3 million loss on extinguishment of a portion of the 2025 Convertible Senior Notes and a 0 3 million loss on the induced conversion of a portion of the 2025 Convertible Senior Notes Prior to fiscal year 2025 there were no transactions similar to the retirement of debt in any periods presented in the consolidated statements of operations
Our cash and cash equivalents are comprised of cash and liquid investments with remaining maturities of 90 days or less from the date of purchase primarily commercial paper and money market funds Our investments primarily consist of corporate debt securities U S government and agency debt securities commercial paper asset backed securities and non U S government securities which include state municipal and foreign government securities
As of July 31 2025 approximately 90 3 million of our cash and cash equivalents were domiciled in foreign jurisdictions We may repatriate foreign earnings to the United States in the future to the extent that the repatriation is not restricted by local laws or there are no substantial incremental costs associated with such repatriation
Our working capital increased to 962 6 million as of July 31 2025 compared to 457 9 million as of July 31 2024 primarily due to proceeds received from the issuance of the 2029 Convertible Senior Notes in October 2024 and operating cash flow partially offset by settlement of the 2025 Convertible Senior Notes and the purchase of capped calls related to the 2029 Convertible Senior Notes We are required to and have the ability to settle the principal of the 2029 Convertible Senior Notes in cash and any conversion premium in cash equity or a combination of both
In December 2024 we entered into a revolving credit agreement the Credit Agreement which provides for a senior secured revolving credit facility in an aggregate principal amount of 300 0 million the 2025 Credit Facility At our discretion it allows flexibility for an uncommitted upsize of the aggregate principal amount of the 2025 Credit Facility or the establishment of incremental term loan facilities in each case as further set forth in the Credit Agreement As of July 31 2025 there were no outstanding borrowings under the 2025 Credit Facility and we were in compliance with related covenants
In September 2022 our board of directors authorized and approved a share repurchase program of up to 400 0 million of our outstanding common stock During fiscal years 2024 and 2025 we did not repurchase any shares of our common stock due to the market price of our shares As of July 31 2025 138 2 million remained available for future share repurchases subject to our compliance with the terms of the Credit Agreement
Our cash flows from operations are significantly impacted by the timing of invoicing and collections of accounts receivable annual bonus payments as well as payments of payroll commissions payroll taxes and other taxes We expect that we will generate positive cash flows from operations on an annual basis in the future although this may fluctuate significantly on a quarterly basis In particular we typically use more cash during our first fiscal quarter which is the quarter ending October 31 as we generally pay cash bonuses to our employees for the prior fiscal year and seasonally higher sales commissions from increased customer orders booked in our fourth fiscal quarter of the prior year We typically generate a significant portion of our annual operating cash flow in our fourth fiscal quarter which is the quarter ending July 31 due to the significant number of customer agreements with annual billings in that quarter Additionally our capital expenditures may fluctuate depending on future office build outs and software development activities subject to capitalization
We believe that our existing cash and cash equivalents and other sources of liquidity will be sufficient to fund our operations for at least the next 12 months Our future cash requirements will depend on many factors including our rate of revenue growth the expansion of our sales and marketing activities the timing and extent of our spending to support our research and development and cloud operations efforts investments in cloud infrastructure cybersecurity and operating costs and expansion into other markets We also may invest in or acquire complementary businesses applications or technologies or may execute on a board authorized share repurchase program which may require the use of significant cash resources and or additional financing
Net cash provided by operating activities increased by 105 1 million in fiscal year 2025 as compared to fiscal year 2024 The increase in cash provided by operating activities was primarily attributable to a 146 5 million increase in net income after excluding the impact of non cash charges such as deferred taxes stock based compensation expense depreciation and amortization expense loss on retirement of debt and other non cash items offset by an increase of 41 4 million of cash used in working capital activities
Net cash used in investing activities increased by 184 6 million in fiscal year 2025 as compared to fiscal year 2024 The increase in cash used in investing activities was primarily due to higher net purchases of available for sale securities transactions of 154 5 million 26 9 million cash paid as purchase consideration for the acquisition of Quantee higher capital expenditures and capitalized software development costs of 1 9 million a decrease of 0 9 million in proceeds from the sale of strategic investments and an increase of 0 4 million of acquisition of new strategic investments
Net cash provided by financing activities increased by 81 2 million in fiscal year 2025 as compared to fiscal year 2024 The increase in cash provided by financing activities was primarily because of 671 8 million cash received net of paid issuance costs from the issuance of the 2029 Convertible Senior Notes and an increase of 2 9 million cash received from the issuance of common stock upon exercise of stock options partially offset by 353 5 million used to retire 220 9 million aggregate principal amount of the 2025 Convertible Senior Notes 179 1 million used to settle the outstanding principal of the 2025 Convertible Senior Notes at maturity 58 8 million used to purchase capped calls related to the 2029 Convertible Senior Notes and 2 1 million used to establish our revolving credit facility
Our estimated future obligations consist of leases royalties purchase obligations debt and taxes as of July 31 2025 Refer to Note 8 Leases Note 9 Commitments and Contingencies and Note 11 Income Taxes to our consolidated financial statements included in this Annual Report on Form 10 K for more information
During the year ended July 31 2025 we retired 220 9 million aggregate principal amount of the 2025 Convertible Senior Notes in cash for 354 0 million which included related accrued interest of 0 5 million and issued 690 0 million aggregate principal amount of the 2029 Convertible Senior Notes In March 2025 we fully settled at maturity the outstanding 179 1 million aggregate principal amount of the 2025 Convertible Senior Notes through aggregate cash payments totaling 180 2 million which included related accrued interest of 1 1 million See Note 7 Debt
Through July 31 2025 we did not have any relationships with unconsolidated entities or financial partnerships such as entities often referred to as structured finance or special purpose entities which would have been established for the purpose of facilitating off balance sheet arrangements or other contractually narrow or limited purposes
We are exposed to market risks in the ordinary course of our business Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates We do not hold or issue financial instruments for trading purposes
Our exposure to market risk for changes in interest rates relates primarily to our cash cash equivalents and investments Our cash cash equivalents and investments as of July 31 2025 and 2024 were 1 483 2 million and 1 129 5 million respectively primarily consisting of cash money market funds corporate debt securities U S government and agency debt securities commercial paper asset backed securities and non U S government securities which include state municipal and foreign government securities Changes in interest rates primarily in the United States affect the interest earned on our cash cash equivalents and investments and their market value A hypothetical one percent increase in interest rates is estimated to result in a decrease of 5 3 million and 3 3 million in the market value of our available for sale securities as of July 31 2025 and 2024 respectively Any realized gains or losses resulting from such interest rate changes would only occur if we sold the investments prior to maturity
Our results of operations ARR and cash flows are subject to fluctuations due to changes in foreign currency exchange rates particularly changes in the Australian Dollar British Pound Canadian Dollar Euro Indian Rupee Japanese Yen New Zealand Dollar Polish Zloty and Swiss Franc the currency of the locations within which we have significant operations The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy We believe our operating activities act as a natural hedge for a substantial portion of our foreign currency exposure because we typically collect revenue and incur costs in the currency of the location in which we provide our services However because our relationships with our customers are long term in
nature it is difficult to predict if our operating activities will provide a natural hedge in the future Additionally changes in foreign currency exchange rates can affect our financial results due to transaction gains or losses related to revaluing certain monetary asset and monetary liability balances that are denominated in currencies other than the functional currency of the entity in which they are recorded Our monetary assets and liabilities denominated in currencies other than the functional currency of the entity in which they are recorded consist primarily of trade accounts receivable unbilled accounts receivable trade accounts payable and intercompany receivables and payables For the periods ended July 31 2025 and 2024 we recorded a foreign currency gain of 16 7 million and loss of 10 8 million respectively as a component of other income expense in our consolidated statements of operations primarily due to currency exchange rate fluctuations We will continue to experience fluctuations in foreign currency exchange rates If a hypothetical ten percent change in foreign currency exchange rates were to occur in the future the resulting transaction gain or loss is estimated to be approximately 60 7 million As our international operations grow we will continue to assess our approach to managing our risk relating to fluctuations in currency rates
We do not have material exposure to market risk with respect to investments in financial instruments as our investments primarily consist of high quality liquid investments purchased with a remaining maturity of three years or less We do not use derivative financial instruments for speculative or trading purposes However this current position does not preclude our adoption of specific hedging strategies in the future
Our strategic investments in privately held securities are in various classes of equity The particular securities we hold and their rights and preferences relative to those of other securities within the capital structure may impact the magnitude by which our investment value moves in relation to movements in the total enterprise value of the company in which we are invested As a result our investment in a specific company may move by more or less than any change in value of that overall company In addition the financial success of our investment in any company is typically dependent on a liquidity event such as a public offering acquisition or other favorable market event reflecting appreciation to the value of our investment All of our investments particularly those in privately held companies are therefore subject to a risk of partial or total loss of invested capital
We have audited the accompanying consolidated balance sheets of Guidewire Software Inc and subsidiaries the Company as of July 31 2025 and 2024 the related consolidated statements of operations comprehensive income loss stockholders equity and cash flows for each of the years in the three year period ended July 31 2025 and the related notes collectively the consolidated financial statements We also have audited the Company s internal control over financial reporting as of July 31 2025 based on criteria established in
In our opinion the consolidated financial statements referred to above present fairly in all material respects the financial position of the Company as of July 31 2025 and 2024 and the results of its operations and its cash flows for each of the years in the three year period ended July 31 2025 in conformity with U S generally accepted accounting principles Also in our opinion the Company maintained in all material respects effective internal control over financial reporting as of July 31 2025 based on criteria established in
The Company s management is responsible for these consolidated financial statements for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Annual Report on Internal Control Over Financial Reporting Our responsibility is to express an opinion on the Company s consolidated financial statements and an opinion on the Company s internal control over financial reporting based on our audits We are a public accounting firm registered with the Public Company Accounting Oversight Board United States PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the consolidated financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the consolidated financial statements Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk Our audits also included performing such other procedures as we considered necessary in the circumstances We believe that our audits provide a reasonable basis for our opinions
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the consolidated financial statements and 2 involved our especially challenging subjective or complex judgments The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
As discussed in Notes 1 and 2 to the consolidated financial statements revenue was derived principally from subscriptions to cloud services software licensing arrangements and implementation and other professional services The Company recognized total revenue of 1 202 5 million for the year ended July 31 2025 The Company s software licensing arrangements are sold under an initial term and subscriptions to cloud services generally have a five year term with a customer option to renew on an annual basis after the initial term Consideration for subscriptions to cloud services and software licensing arrangements is typically billed in advance on an annual basis over the term
We identified the evaluation of revenue from subscriptions to cloud services and software licensing arrangements with non standard terms and conditions as a critical audit matter Significant auditor judgment was required to evaluate the Company s assessment of the impact on revenue recognition of non standard terms and conditions including the identification and evaluation of the accounting impact of contract modifications related to software licensing term extensions and arrangements that provide a customer with the ability to transition from a software licensing arrangement to a subscription to cloud services during the contractual term
The following are the primary procedures we performed to address this critical audit matter We evaluated the design and tested the operating effectiveness of an internal control related to the critical audit matter This control is related to the identification and evaluation of subscriptions to cloud services and software licensing arrangements with non standard terms and conditions We tested certain subscriptions to cloud services and software licensing arrangements by reading the underlying customer agreements and evaluating the Company s assessment of the contractual terms and conditions in accordance with revenue recognition requirements Specifically this included an evaluation of the Company s identification and assessment of non standard terms and conditions that could give rise to special accounting consideration
Guidewire Software Inc a Delaware corporation was incorporated on September 20 2001 Guidewire Software Inc together with its subsidiaries the Company provides a technology platform which combines core systems of record with digital analytics and artificial intelligence AI applications The Company s technology platform supports core insurance operations including underwriting policy administration claim management and billing insights into data that can improve business decision making and digital sales service and claims experiences for policyholders agents and other key stakeholders The Company s customers are primarily property and casualty insurance carriers
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America GAAP The consolidated financial statements and notes include the Company and its wholly owned subsidiaries and reflect all adjustments all of which are normal and recurring in nature that in the opinion of management are necessary for a fair presentation of the periods presented All intercompany balances and transactions have been eliminated in consolidation
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts of assets and liabilities reported disclosures about contingent assets and liabilities and reported amounts of revenue and expenses Significant items subject to such estimates include but are not limited to revenue recognition the useful lives of property and equipment and intangible assets accounts receivable and unbilled accounts receivable allowances valuation allowance for deferred tax assets stock based compensation annual bonus attainment income tax uncertainties fair value of convertible senior notes and investments valuation of goodwill and intangible assets fair value of acquired assets and assumed liabilities software development costs to be capitalized leases and contingencies These estimates and assumptions are based on management s best estimates and judgment Management regularly evaluates its estimates and assumptions using historical experience and other factors however actual results could differ from these estimates
The Company has determined that the chief executive officer is the chief operating decision maker The Company s chief executive officer reviews financial information presented on a consolidated basis for purposes of assessing performance and making decisions on how to allocate resources and assess performance Accordingly the Company has determined that it operates in a single reportable segment Since the Company operates in one operating segment all required financial segment information can be found in the consolidated financial statements and accompanying notes
The functional currency of the Company s foreign subsidiaries is their respective local currency The Company translates all assets and liabilities of foreign subsidiaries to U S dollars at the current exchange rate as of the applicable balance sheet date Revenue and expenses are translated at the average exchange rate prevailing during the period in which the transactions occur The effects of foreign currency translations are recorded in accumulated other comprehensive income loss as a separate component of stockholders equity in the accompanying consolidated balance sheets Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency of the recording entity are included in other income expense in the consolidated statements of operations
Cash and cash equivalents are comprised of cash and highly liquid investments with remaining maturities of 90 days or less at the date of purchase Cash equivalents primarily consist of commercial paper and money market funds
Unearned acquisition consideration holdback subject to service conditions is held in escrow and considered restricted cash The unearned consideration acquisition holdback included in prepaid expenses and other current assets was 1 2 million at July 31 2025 and 2024 in the consolidated balance sheets
The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed The Company s estimates of fair value are based upon assumptions believed to be reasonable but which are inherently uncertain and subject to refinement and as a result actual results may differ from estimates During the measurement period which may be up to one year from the acquisition date if new information is obtained about facts and circumstances that existed as of the acquisition date the Company may record adjustments to the fair value of these assets and liabilities with the corresponding offset to goodwill Upon the conclusion of the measurement period or final determination of the fair value of assets acquired and liabilities assumed whichever comes first subsequent adjustments if any are recorded to the consolidated statements of operations
Management determines the appropriate classification of investments at the time of purchase based upon management s intent with regard to such investments All investments in the periods presented have been classified as available for sale
The Company classifies investments as short term when they have remaining contractual maturities of one year or less from the balance sheet date and as long term when the investments have remaining contractual maturities of more than one year from the balance sheet date Investments are recorded at fair value with unrealized holding gains and losses net of taxes generally included in accumulated other comprehensive income loss Unrealized losses related to the credit worthiness of an investment if any are recorded in other income expense net on the consolidated statements of operations
Property and equipment are stated at cost less accumulated depreciation and amortization Depreciation is calculated on a straight line basis over the estimated useful lives of the assets Maintenance and repairs that do not extend the life or improve an asset are expensed in the period incurred
Certain development costs related to software delivered to customers self managed software incurred subsequent to the establishment of technological feasibility are subject to capitalization and amortized over the estimated lives of the related products Technological feasibility is established upon completion of a working model Costs incurred subsequent to the establishment of technological feasibility have not been material and therefore all software development costs related to self managed software have been charged to research and development expense in the accompanying consolidated statements of operations as incurred
The Company capitalizes software development costs for technology applications that provide new or significantly enhanced functionality that the Company will offer solely as a cloud based subscription Capitalized costs are primarily comprised of compensation for employees who are directly associated with cloud software development projects The Company begins to capitalize costs when preliminary development efforts are successfully completed management has authorized and committed project funding it is probable that the project will be completed and the software will be used as intended If any of these criteria cease being met before the software reaches its intended use any capitalized costs related to the project will be impaired When the software reaches its intended use which is typically once the technology applications are available for general release capitalized costs are amortized to cost of revenue over the estimated useful lives of the related assets generally estimated to be three to five years Costs incurred prior to meeting these capitalization criteria and costs incurred for training and maintenance are recorded as research and development
The Company accounts for leases under Accounting Standards Codification Topic 842 Leases ASC 842 issued by the Financial Accounting Standards Board Under ASC 842 the Company determines if an arrangement is a lease at inception of the agreement If an arrangement is determined to be a lease an operating lease asset also known as a right of use asset and lease liability are recorded based on the present value of lease payments over the non cancellable lease term In connection with determining the present value of the lease payments the Company considers only payments that are fixed and determinable at the time of commencement including non lease components that are fixed throughout the lease term Variable components of the lease payments such as utilities maintenance and taxes are expensed as incurred and not included in determining the present value of the lease liability As the Company s leases generally do not provide an implicit rate the Company s incremental borrowing rate calculated based on available information at the lease commencement date is used in determining the present value of the lease payments The Company s incremental borrowing rate is a hypothetical rate based on the Company s understanding of its credit rating The lease term used to calculate the lease liability and operating lease asset includes options to extend or terminate the lease if it is reasonably certain the Company will exercise that option Operating lease assets also include any lease payments made prior to commencement and are recorded net of any lease incentives received Lease expense is recognized on a straight line basis over the lease term and is reflected in the consolidated statements of operations in each of the cost of revenue and operating expense categories
The Company may also enter into agreements to sublease unoccupied office space Any sublease payments received in excess of the straight line rent expense related to the subleased space are recorded as an offset to operating expenses over the sublease term
The Company evaluates its long lived assets consisting of property and equipment operating lease assets and intangible assets for indicators of possible impairment when events or changes in circumstances indicate that the carrying amount of certain assets may not be recoverable Impairment exists if the carrying amount of such assets exceed the estimates of future net undiscounted cash flows expected to be generated by such assets Should impairment exist the impairment loss would be measured based on the excess carrying amount of the assets over the estimated fair value of the assets There have been no long lived asset impairments during the periods presented
The Company tests goodwill for impairment annually during the fourth quarter of each fiscal year and in the interim whenever events or changes in circumstances indicate that the carrying amount may not be recoverable The Company evaluates qualitative factors to determine whether it is more likely than not that the fair value of the Company s single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the goodwill impairment test In performing the qualitative assessment the Company considers events and circumstances including but not limited to macroeconomic conditions industry and market considerations cost factors overall financial performance changes in management or key personnel changes in strategy changes in customers changes in the composition or carrying amount of a reporting unit s net assets and changes in the price of the Company s common stock If after assessing the totality of events or circumstances the Company determines that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount then the goodwill impairment test is not performed There have been no goodwill impairments during the periods presented
In March 2018 the Company issued 400 0 million aggregate principal amount of 1 25 Convertible Senior Notes due March 2025 the 2025 Convertible Senior Notes In October 2024 the Company issued 690 0 million aggregate principal amount of 1 25 Convertible Senior Notes due October 2029 the 2029 Convertible Senior Notes and together with the 2025 Convertible Senior Notes the Convertible Senior Notes
The Company accounts for the Convertible Senior Notes as a liability measured at amortized cost Debt issuance costs incurred in connection with the issuance of the Convertible Senior Notes are reflected in the consolidated balance sheets as a direct deduction from the carrying amount of the outstanding Convertible Senior Notes These costs are amortized using the effective interest rate method over the terms of the Convertible Senior Notes and are included within interest expense on the consolidated statements of operations
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash cash equivalents investments accounts receivable and unbilled accounts receivable The Company maintains its cash cash equivalents and investments with high quality financial institutions The Company is exposed to credit risk for cash held in financial institutions in the event of a default to the extent that such amounts recorded in the consolidated balance sheets are in excess of amounts that are insured by the Federal Deposit Insurance Corporation
No customer individually accounted for 10 or more of the Company s revenue for the years ended July 31 2025 2024 and 2023 For the periods ended July 31 2025 and 2024 the Company had one customer which were different customers in each period which accounted for 10 or more of the Company s total accounts receivable
Accounts receivable are recorded at invoiced amounts and do not bear interest While the Company does not require collateral the Company performs ongoing credit evaluations of its customers The Company maintains an allowance for credit losses based upon the expected collectability of its accounts receivable and unbilled accounts receivable The expectation of collectability is based on historical loss patterns the number of days that billings are past due and an evaluation of the potential risk of loss associated with delinquent accounts Credit losses are recorded in general and administrative expense while billing and other revenue adjustments are recorded against the corresponding revenue financial statement line item in the consolidated statements of operations
The Company s revenue is derived from contracts with customers The majority of the Company s revenue is derived from subscriptions to its cloud services licensing arrangements for its software and implementation and other professional services arrangements The Company accounts for revenue in accordance with Accounting Standards Codification 606 Revenue from Contracts with Customers ASC 606 The core principle of ASC 606 is to recognize revenue upon the transfer of products to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products When using the term products the Company is generally referring to both our subscription services and term license software
The Company considers the terms and conditions of written contracts and its customary business practices in identifying its contracts The Company determines it has a contract with a customer when the contract is approved the Company can identify each party s rights regarding the products to be transferred the Company can identify the payment terms for the products the Company has determined that the customer has the ability and intent to pay and the contract has commercial substance In general contract terms will be reflected in a written document that is signed by both parties At contract inception the Company evaluates whether two or more contracts with the same customer should be combined and accounted for as a single contract The customer s ability and intent to pay is based on a variety of factors including the customer s historical payment experience or in the case of a new customer credit and financial information pertaining to the customer
Contracts may be modified to account for changes in contract scope or price The Company considers contract modifications to exist when the modification either creates new rights or obligations or changes the existing enforceable rights and obligations of either party Contract modifications for products that are distinct from the existing contract and are priced commensurate with their standalone selling price are treated as separate contracts and are accounted for prospectively Contract modifications for products that are distinct but are not priced commensurate with their standalone selling price or are not distinct from the existing contract may affect the initial transaction price or the allocation of the transaction price to the performance obligations in the contract In such cases recognized revenue may be adjusted
capable of being distinct whereby the customer can benefit from the service or product either on its own or together with other resources that are readily available from the Company or third parties and
To the extent a contract includes multiple promised services or products the Company applies judgment to determine whether promised services or products are capable of being distinct and distinct in the context of the contract If these criteria are not met the promised services or products are accounted for as a combined performance obligation
Subscriptions are typically sold with a five year initial term with a customer option to renew on an annual basis after the initial term Term licenses have an initial term with a customer option to renew on an annual basis after the initial term Support for term licenses follows the same contract periods Professional services typically are time and materials contracts that last for an average period of approximately one year
The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring services or products to the customer Consideration may vary due to discounts incentives and potential service level credits or contractual penalties Variable consideration is estimated and included in the transaction price if in the Company s judgment it is probable that there will not be a significant future reversal of cumulative revenue under the contract
Self managed software licenses and subscription services may be subject to either fixed or variable installments Variable installments are generally subject to changes in a customer s Direct Written Premium DWP or a customer s Gross Written Premium GWP with certain cloud delivered products priced based on usage or other metrics When consideration is subject to variable installments the Company estimates variable consideration using the expected value method based on historical DWP or GWP usage to the extent that a significant revenue reversal is not probable to occur
The Company elected the practical expedient to evaluate whether a significant financing component exists when the contract term is greater than one year and the timing of revenue recognition occurs in advance of invoicing This timing difference occurs when control of the software license is transferred at a point in time usually at the contract onset but the customer payments occur over time This timing difference can also occur when subscription services have significant ramps in the annual invoice amount over the committed term A significant financing component generally does not exist under the Company s standard contracting and billing practices
If the contract contains a single performance obligation the entire transaction price is allocated to the single performance obligation Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on its standalone selling price SSP in relation to the total fair value of all performance obligations in the arrangement Some of the Company s performance obligations such as support implementation services training services and a portion of subscription services have observable inputs that are used to determine the SSP of those distinct performance obligations Where SSP is not directly observable the Company determines the SSP using information that may include market conditions and other observable inputs In circumstances when available information to determine SSP is highly variable or uncertain such as for term licenses the Company will use the residual method
The majority of the Company s contracts contain multiple performance obligations such as when licenses are sold with support implementation services or training services Additionally as customers enter into subscription agreements to migrate from an existing term license agreement customers may be under contract for self managed licenses and support in addition to subscription services for a period of time which may require an allocation of the transaction price to each performance obligation New and migration subscription agreements also typically include implementation configuration and training services which may require an allocation of the transaction price to each performance obligation
The Company recognizes revenue when control of the services or products is transferred to a customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products The Company is principally
Self managed term and perpetual software licenses comprise the majority of distinct performance obligations that are satisfied at a point in time Revenue is recognized at the point in which the self managed software licenses are made available to a customer Consideration for self managed software licenses is typically billed in advance on an annual basis over the license term
Revenue from subscription arrangements is recognized ratably over the subscription period using a time based measure of progress as customers receive the benefits from their subscriptions over the contractually agreed upon term Subscription agreements generally have an initial term of five years with annual renewals thereafter In some instances customers sign subscription agreements with an initial term of seven or more years Consideration for subscription arrangements is typically billed in advance on an annual basis over the contract period and the annual billing may ramp over the contract period
Revenue from support activities associated with self managed licenses is a stand ready obligation which is generally recognized over the contractually agreed upon term using a time based measure of progress as customers receive benefits from the availability of support technicians over the support period Consideration for support activities is typically billed in advance on an annual basis The Company s support activities are consistently priced as a percentage of the associated self managed software license
In substantially all of the Company s professional service contracts services are separately identifiable performance obligations for which related revenue and costs are recognized according to when each service obligation is delivered The majority of the Company s professional services engagements are billed and recognized on a time and materials basis In select situations the Company will contract professional services on a fixed fee basis where the Company generally recognizes services revenue over time using an input method The measure of progress of the professional services being provided under these fixed fee arrangements is based on hours incurred compared to estimates of the total hours to complete the performance obligation
When professional services are sold with a self managed license or subscription arrangement the Company evaluates whether the performance obligations are distinct or separately identifiable or whether they constitute a single performance obligation
Accounts receivable net represents amounts billed to customers in accordance with contract terms for which payment has not yet been received It is presented net of any allowances as part of current assets in the consolidated balance sheets
Unbilled accounts receivable net represents amounts that are unbilled due to agreed upon contractual terms in which billing occurs subsequent to revenue recognition This situation typically occurs when the Company transfers control of self managed software licenses to customers up front but invoices customers annually over the term of the license Additionally subscription agreements with ramped billing schedules could result in unbilled accounts receivable in the early years of the committed term Unbilled accounts receivable is classified as either current or non current based on the duration of remaining time between the date of the consolidated balance sheets and the anticipated due date of the underlying receivables Unbilled accounts receivable is evaluated for credit losses based upon the expected collectibility of future accounts receivable customer payment history global economic conditions and ongoing credit evaluations of customers Unbilled accounts receivable is presented net of allowance for credit losses if applicable in the consolidated balance sheets This balance represents contract assets
Contract costs include customer acquisition costs which consist primarily of sales commissions and related payroll taxes paid to sales personnel and referral fees paid to third parties and costs to fulfill a contract which consist primarily of royalties payable to third party software providers that support both the Company s software offerings and support services The short term portion is presented as prepaid and other current assets The long term portion is presented as other assets
Deferred costs represent costs related to our professional services that have been deferred to align with revenue recognition The short term portion is presented as prepaid and other current assets The long term portion is presented as other assets
Deferred revenue net represents amounts that have been invoiced and for which the Company has the right to bill but that have not been recognized as revenue because the related services or products have not been transferred to the customer Deferred revenue consists primarily of subscriptions and support services that are billed annually in advance but recognized over time Deferred revenue that will be realized during the 12 month period following the date of the consolidated balance sheets is recorded as current The remaining deferred revenue is recorded as non current These balances represent contract liabilities
The Company may receive consideration from its customers in advance of performance on a portion of the contract thereby creating a contractual liability and on another portion of the contract perform in advance of receiving consideration thereby creating a contractual asset Contract assets and liabilities related to rights and obligations in a contract are interdependent Therefore contract assets and liabilities are presented net at the contract level as either a single contract asset or a single contract liability in the consolidated balance sheets
Remaining performance obligations represent contracted revenue that has not yet been recognized which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods The Company excludes amounts related to professional services contracts that are on a time and materials basis from remaining performance obligations
Customer acquisition costs are capitalized only if the costs are incrementally incurred to obtain a customer contract and the expected amortization period is greater than one year Contract costs are classified as either current or non current based on the duration of time remaining between the date of the consolidated balance sheets and the anticipated amortization date of the associated costs Capitalized customer acquisition costs related to software licenses subscriptions and support services are amortized over the anticipated period in which the benefit is expected to be received which the Company estimates to be approximately five years The amortization of customer acquisition costs is classified as a sales and marketing expense in the consolidated statement of operations
Costs to fulfill a contract or fulfillment costs are only capitalized if they relate directly to a contract with a customer the costs generate or enhance resources that will be used to satisfy performance obligations in the future and the costs are expected to be recoverable Fulfillment costs would be generally amortized over the same period of time as the customer acquisition costs The amortization of fulfillment costs is classified as a cost of revenue in the consolidated statement of operations
The Company generally provides a warranty for its software services and products to its customers for periods ranging from three to 12 months The Company s software products are generally warranted to be free of defects in materials and workmanship under normal use and to substantially perform as described in published documentation The Company s services are generally warranted to be performed in a professional manner and to materially conform to the specifications set forth in the related customer contract In the event there is a failure of such warranties the Company generally will correct the problem or provide a reasonable workaround or replacement product If the Company cannot correct the problem or provide a workaround or replacement product then the customer s remedy is generally limited to a refund of the fees paid for the non conforming products or services Warranty expense has been insignificant to date
The Company accounts for stock based compensation using the fair value method which requires the Company to measure stock based compensation based on the grant date fair value of the awards and recognize the compensation expense over the requisite service period The Company recognizes compensation expense net of actual forfeitures The Company has granted stock options time based restricted stock units RSUs and performance based restricted stock units PSUs RSUs and PSUs are collectively
The fair value of the Company s RSUs and PSUs is equal to the market value of the Company s common stock on the date of grant These awards are subject to time based vesting which generally occurs over a period of three to four years The Company recognizes compensation expense for awards that contain only service conditions on a straight line basis over the requisite service period which is generally the vesting period of the respective awards The Company recognizes the compensation cost for awards that contain performance conditions using the graded vesting method and a portion of the expense may fluctuate depending on changing estimates of the achievement of the performance conditions
The fair value of the Company s stock options and ESPP purchase rights is estimated at the grant date using the Black Scholes option pricing model Stock options are subject to time based vesting which generally occurs over a period of two years The Company recognizes compensation expense for stock options and ESPP purchase rights that contain only service conditions on a straight line basis over the requisite service period which is generally the vesting period of the respective stock options and each offering period of the ESPP purchase rights The inputs used in the Black Scholes option pricing model which are subjective and generally requires significant judgment to determine include
The expected term represents the period that the stock based awards are expected to be outstanding The simplified method calculates the expected term as the average of the time to vesting and the contractual life of the options For stock options the Company uses the simplified method to determine its expected term because of its limited history of stock option exercise activity For the ESPP purchase rights the Company uses the length of each offering period which is approximately 0 5 years
The risk free interest rate is based on the U S Treasury yield curve in effect at the time of grant for zero coupon U S Treasury notes with maturities approximately equal to the expected term of the options and the offering period of each ESPP purchase rights
Income taxes are accounted for under the asset and liability method Under this method the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse All deferred tax assets and liabilities are classified as non current on the consolidated balance sheets The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date A valuation allowance against deferred tax assets is recorded when it is more likely than not that some portion or all of such deferred tax assets will not be realized and is based on both positive and negative evidence about the future including future reversals of existing taxable temporary differences projected future taxable income tax planning strategies and results of recent operations
The effective tax rate in any given financial statement period may differ materially from the statutory rate These differences may be caused by changes in tax regulations and resulting changes in the deferred tax valuation allowance changes in the mix and level of income or losses changes in the expected outcome of tax audits permanent differences for stock based compensation including excess tax benefits research and development credits the tax rate differences between the United States and foreign countries foreign withholding taxes certain non deductible expenses including executive compensation acquisition related expenses and provisions under the Tax Cuts and Jobs Act of 2017 the Tax Act including a provision to tax global intangible low taxed income of foreign subsidiaries a special deduction for foreign derived intangible income and a base erosion anti abuse tax that may tax certain payments between a U S corporation and its foreign subsidiaries
In November 2023 the Financial Accounting Standards Board FASB issued ASU No 2023 07 Segment Reporting Topic 280 Improvements to Reportable Segment Disclosures which requires public entities to disclose information about their reportable segments significant expenses and other segment items that are regularly provided to the Chief Operating Decision Maker the CODM Public entities with a single reportable segment are required to apply the disclosure requirements in ASU No 2023 07 as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis The Company adopted the standard for its annual reporting effective August 1 2024 While the standard requires additional disclosures related to the
Company s single reportable segment in its 2025 annual reporting adoption of the standard did not have any impact on the consolidated operating results financial condition or cash flows The standard requires retrospective application to all prior periods presented
In November 2024 the FASB issued ASU No 2024 04 Debt Debt with Conversion and Other Options Subtopic 470 20 Induced Conversions of Convertible Debt Instruments which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion The new standard was early adopted by the Company beginning August 1 2024 and applied retrospectively for all periods presented The new standard did not have an impact on prior periods presented on the consolidated financial statements
In December 2023 the FASB issued ASU No 2023 09 Income Taxes Topic 740 Improvements to Income Tax Disclosures which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction It also includes certain other amendments to improve the effectiveness of income tax disclosures The new standard will be effective and the Company will adopt it beginning August 1 2025 on a prospective basis and adoption will impact the Company s disclosures
In November 2024 the FASB issued ASU No 2024 03 Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures Subtopic 220 40 Disaggregation of Income Statement Expenses which requires public business entities to disclose qualitative and quantitative information about certain costs and expenses in the notes to the financial statements on an interim and annual basis The new standard will be effective and the Company will adopt it for the annual period beginning August 1 2027 and for the interim periods beginning after August 1 2028 Upon adoption the guidance can be applied prospectively or retrospectively The adoption of this ASU will impact the Company s disclosures
In July 2025 the FASB issued ASU No 2025 05 Income Statement Reporting Financial Instruments Credit Losses Subtopic 326 20 Measurement of Credit Losses for Accounts Receivable and Contract Assets which provides a practical expedient for all entities related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606 The new standard will be effective and the Company will adopt it beginning August 1 2026 on a prospective basis The Company is currently assessing the impact of adopting this standard on the consolidated financial statements
Unbilled accounts receivable net increased by 40 4 million primarily due to the impact of subscription orders with ramped billing schedules where billings occur later than revenue recognition and to a lesser extent due to the timing of billing on services projects
The current portion of contract acquistion costs of 21 1 million and 17 7 million is included in prepaid and other current assets on the consolidated balance sheets as of July 31 2025 and 2024 respectively The non current portion of contract acquisition costs of 46 8 million and 37 0 million is included in other assets on the consolidated balance sheets as of July 31 2025 and 2024 respectively The Company amortized 20 1 million 17 8 million and 18 0 million of contract acquisition costs during the fiscal years ended July 31 2025 2024 and 2023 respectively
The current portion of costs to fulfill a contract of 5 9 million and 6 0 million is included in prepaid and other current assets in the consolidated balance sheets as of July 31 2025 and July 31 2024 respectively The non current portion of costs to fulfill a contract of 3 5 million and 4 7 million is included in other assets in the consolidated balance sheets as of July 31 2025 and July 31 2024 respectively The Company amortized 10 8 million 10 6 million and 9 0 million of costs to fulfill a contract during the fiscal years ended July 31 2025 2024 and 2023 respectively
The aggregate amount of consideration allocated to remaining performance obligations either not satisfied or partially satisfied was approximately 3 1 billion as of July 31 2025 During the fiscal year ended July 31 2025 there was an increase in the number of cloud arrangements that were longer in duration than the typical five year initial term Support services and professional services are generally satisfied within one year Professional services under time and material contracts are not included in the remaining performance obligations calculation as these arrangements can be cancelled at any time
Company does not consider any portion of the unrealized losses at July 31 2025 to be credit losses The Company has recorded the securities at fair value in its consolidated balance sheets with unrealized gains and losses reported as a component of accumulated other comprehensive income loss The amount of unrealized gains and losses reclassified into earnings are based on the specific identification of the securities sold The realized gains and losses from sales of securities are presented in the consolidated statements of comprehensive income loss
Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs
Level 2 Inputs other than quoted prices included within Level 1 that are observable unadjusted quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data and
On April 16 2025 the Company completed its acquisition of Quantee Sp z o o Quantee a Poland based insurtech company specializing in dynamic pricing software for net cash consideration of approximately 27 9 million subject to transaction adjustments to cover potential claims and indemnities after closing Additionally the Company awarded 6 4 million in holdback consideration subject to service conditions subsequent to closing
In conjunction with the purchase price allocation the Company determined that Quantee s separately identifiable intangible assets were acquired technology and customer relationships The valuation models were based on estimates of future operating projections of Quantee and rights to sell new products containing the acquired technology as well as judgments on the discount rates used and other variables The Company developed forecasts based on a number of factors including future revenue and operating cost projections a discount rate that is representative of the weighted average cost of capital and royalty and long term sustainable growth rates based on a market analysis These fair value measurements were based on significant inputs that were not observable in the market and thus represents a Level 3 measurement The Company amortizes the acquired intangibles over their estimated useful lives as set forth in the table below
The preliminary allocation of purchase price is pending the final working capital adjustment and the resolution of certain post closing matters and is therefore subject to potential future measurement period adjustments The measurement period will end no later than April 15 2026
The preliminary allocation of the purchase consideration included goodwill of 21 4 million related to the acquired workforce expected synergies and the opportunity to sell into and expand the Company s customer base The goodwill recorded is not expected to be deductible for income tax purposes The preliminary allocation also consisted of amounts allocated to acquired technology and customer relationships
During the fiscal year ended July 31 2025 the Company entered into a revolving credit agreement guaranteed by its material domestic subsidiaries and secured by a security interest in substantially all of the assets of the Company and each guarantor including certain property and equipment subject to customary exclusions See Note 7 Debt Revolving Credit Facility below for further information
Depreciation expense excluding the amortization of capitalized software development costs was 7 2 million 6 9 million and 36 3 million for the fiscal years ended July 31 2025 2024 and 2023 respectively Depreciation expense for the fiscal year ended July 31 2023 includes 26 9 million of accelerated depreciation expense recorded from the date the lease was assigned through the date that the lease term ended related to the assignment to an unrelated third party of the Company s previous office headquarters which was recognized in general and administrative expenses on the consolidated statements of operations Refer to Note 8 Leases for information about the lease assignment of the previous office headquarters
The Company recognized amortization of capitalized software development costs in cost of subscription and support revenue on the consolidated statements of operations of 13 0 million 11 6 million and 9 9 million during the fiscal years ended July 31 2025 2024 and 2023 respectively
Amortization expense was 5 4 million 5 5 million and 6 9 million during the years ended July 31 2025 2024 and 2023 respectively The future amortization expense for existing intangible assets as of July 31 2025 based on their current useful lives is as follows in thousands
The Company s other assets include strategic investments in privately held companies in which the Company does not have a controlling interest or the ability to exert significant influence The strategic investments consist of non marketable equity securities that do not have readily determinable market values Level 3 which are recorded using the measurement alternative at cost less impairment and adjusts cost for subsequent observable changes in fair value and an investment in a limited partnership which is recorded using the net asset value practical expedient Level 3 in accordance with ASC 820 Changes in fair value are recorded in other income expense on the consolidated statements of operations
During the fiscal year ended July 31 2025 one of the Company s investees was acquired by a publicly traded company As a result the Company received 5 7 million in consideration for its equity interest in the investee composed of 3 4 million cash and 2 4 million of the acquirer s shares which were subsequently sold for 2 3 million and recognized a 3 7 million gain in excess of cost in other income expense net on the consolidated statements of operations
During the fiscal year ended July 31 2024 one of the Company s investees was acquired by a privately held limited partnership As a result the Company received 12 1 million in consideration for its equity interest in the investee composed of 6 5 million cash and 5 6 million of an ownership interest in the privately held limited partnership and recognized a 1 8 million gain in excess of cost as a component of other income expense net on the consolidated statements of operations
The Company calculates basic earnings per share by dividing the net income loss by the weighted average number of shares of common stock outstanding for the period For calculating diluted earnings per share the Company uses the treasury stock method for options to purchase common stock Stock Awards and ESPP purchase rights and the if converted method for the Convertible Senior Notes
The following table sets forth the computation of the Company s basic and diluted net income loss per share for the fiscal years ended July 31 2025 2024 and 2023 in thousands except share and per share amounts
The following weighted average shares of potential common stock were excluded from the computation of diluted net income loss per share for the periods presented because including them would have been anti dilutive
During the fiscal year ended July 31 2025 there was no dilutive effect on net income loss per share due to maturity and settlement of the outstanding principal balance of the 2025 Convertible Senior Notes During the fiscal years ended July 31 2024 and 2023 the average market price of the Company s common stock did not exceed the initial conversion price of the 2025 Convertible Senior Notes
In March 2018 the Company issued 400 0 million aggregate principal amount of the 2025 Convertible Senior Notes The 2025 Convertible Senior Notes were unsecured bore interest at 1 25 per year payable semi annually on March 15 and September 15 and matured on March 15 2025 unless repurchased redeemed or converted The 2025 Convertible Senior Notes were convertible at the option of holders at an initial conversion rate of 8 7912 shares of common stock per 1 000 principal equivalent to an initial conversion price of approximately 113 75 per share of the Company s common stock No sinking fund was provided
In October 2024 the Company retired 120 9 million aggregate principal amount and 0 2 million of related debt issuance costs of the 2025 Convertible Senior Notes for 200 5 million in cash which included related accrued interest of 0 1 million The retirement was accounted for as an induced conversion resulting in an inducement expense of 0 3 million recorded in other income
In December 2024 the Company retired 100 0 million aggregate principal amount and 0 1 million of related debt issuance costs of the 2025 Convertible Senior Notes for 153 5 million in cash which included related accrued interest of 0 3 million The retirement was accounted for as a debt extinguishment resulting in an extinguishment expense of 53 3 million recorded in other income expense net on the consolidated statements of operations
The 2025 Convertible Senior Notes matured on March 15 2025 During the period from January 15 2025 through the close of business on March 13 2025 holders of the 2025 Convertible Senior Notes had the option to convert their outstanding 2025 Convertible Senior Notes and they elected to convert substantially all of the outstanding notes In accordance with the holders elections the Company fully settled the outstanding 179 1 million aggregate principal amount of the 2025 Convertible Senior Notes through aggregate cash payments totaling 180 2 million which included related accrued interest of 1 1 million and the gross issuance of 671 202 shares of common stock The share amount does not reflect the impact of the capped calls related to the 2025 Convertible Senior Notes See Note 7 Debt Capped Calls for further information
The fair value of the 2025 Convertible Senior Notes was 528 0 million at July 31 2024 The Company estimates the fair value of the Convertible Senior Notes using commonly accepted valuation methodologies and market based risk measurements that are directly observable such as unadjusted quoted prices in markets that are not active Level 2
In October 2024 the Company offered and sold 690 0 million aggregate principal amount of its 2029 Convertible Senior Notes The 2029 Convertible Senior Notes were issued in accordance with the Indenture dated as of October 18 2024 between the Company and U S Bank Trust Company National Association as trustee the 2029 Indenture The net proceeds from the issuance of the 2029 Convertible Senior Notes were 671 8 million after deducting issuance costs
The 2029 Convertible Senior Notes are unsecured obligations of the Company with interest payable semi annually in arrears at a rate of 1 25 per year on May 1st and November 1st of each year The 2029 Convertible Senior Notes will mature on November 1 2029 unless repurchased redeemed or converted prior to such date Before August 1 2029 holders of the 2029 Convertible Senior Notes will have the right to convert their 2029 Convertible Senior Notes only upon the occurrence of certain events On or after August 1 2029 the 2029 Convertible Senior Notes are convertible at any time at the election of holders until the close of business on the second scheduled trading day immediately preceding the maturity date The 2029 Convertible Senior Notes will have an initial conversion rate of 4 0875 shares of common stock per 1 000 principal equivalent to an initial conversion price of approximately 244 65 per share of the Company s common stock The conversion rate is subject to customary adjustments upon the occurrence of certain events but will not be adjusted for any accrued and unpaid interest The consideration due upon conversion will consist of cash up to at least the proportional amount of the principal amount being converted and any excess of the proportional conversion value for that trading day that will not be settled in cash will be settled in shares of the Company s common stock
The Company may redeem the 2029 Convertible Senior Notes at its option on or after November 5 2027 and on or before the 20th scheduled trading day immediately before the maturity date at a redemption price equal to 100 of the principal amount thereof plus accrued and unpaid interest if i the 2029 Convertible Senior Notes are Freely Tradable as defined in the 2029 Indenture as of the date the Company sends the related redemption notice and all accrued and unpaid additional interest if any has been paid in full as of the most recent interest payment date occurring on or before the date the Company sends the related redemption notice and ii the last reported sale price of the Company s common stock has been at least 130 of the conversion price on 1 each of at least 20 trading days whether or not consecutive during the 30 consecutive trading day period ending on and including the trading day immediately preceding the date on which the Company provides notice of redemption and 2 the trading day immediately preceding the date on which the Company provides notice of redemption No sinking fund is required to be provided for the 2029 Convertible Senior Notes Upon the occurrence of a fundamental change as defined in the 2029 Indenture prior to the maturity date holders may require the Company to repurchase all or a portion of the 2029 Convertible Senior Notes for cash at a price equal to 100 of the principal amount of the notes to be repurchased plus any accrued and unpaid interest to but excluding the fundamental change repurchase date
The 2029 Convertible Senior Notes rank senior in right of payment to any of the Company s indebtedness that is expressly subordinated in right of payment to the 2029 Convertible Senior Notes and equal in right of payment to any of its indebtedness that is not so subordinated The 2029 Convertible Senior Notes are effectively junior in right of payment to any of the Company s secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally junior to all indebtedness and other liabilities including trade payables and any preferred equity of its current or future subsidiaries
The effective interest rate of the 2025 Convertible Senior Notes after the adoption of ASU 2020 06 on August 1 2022 was 1 7 The if converted value of the 2025 Convertible Senior Notes exceeded the outstanding principal by 6 8 million as of July 31 2024
In connection with each offering of the Convertible Senior Notes the Company purchased capped calls with certain financial institutions pursuant to capped call confirmations collectively the Capped Calls The initial strike price of the Capped Calls corresponds to the initial conversion price of each of the Convertible Senior Notes By entering into the Capped Calls the Company expects to reduce the potential dilution to its common stock or in the event the conversion is settled in cash to reduce its cash payment obligation in the event that at the time of conversion its stock price exceeds the conversion price under the Convertible Senior Notes The Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company including a merger event a tender offer and a nationalization insolvency or delisting involving the Company Additionally the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls including changes in law insolvency filings and hedging disruptions The Capped Calls were recorded in the period purchased as a reduction of the Company s additional paid in capital in the accompanying consolidated balance sheets and are not accounted for as derivatives
In connection with the March 2025 settlement of the 2025 Convertible Senior Notes the Company received 697 140 gross shares of common stock from the settlement of the Capped Calls related to the 2025 Convertible Senior Notes These shares received from the settlement of such Capped Calls offset the 671 202 shares issued to holders of the 2025 Convertible Senior Notes upon maturity As a result the Company received 25 938 net shares which were retired resulting in a small decrease in the Company s shares outstanding
In December 2024 the Company entered into a revolving credit agreement the Credit Agreement with Bank of America N A as administrative agent and certain other financial institutions from time to time thereto with the administrative agent the Lenders which provides for a senior secured revolving credit facility in an aggregate principal amount of 300 million the 2025 Credit Facility At the Company s discretion it allows flexibility for an uncommitted upsize of the aggregate principal amount of the 2025 Credit Facility or the establishment of incremental term loan facilities in each case as further set forth in the Credit Agreement
The loans under the 2025 Credit Facility bear interest i for U S Dollar denominated loans at the Company s option at either a the bank s base rate plus an applicable margin ranging from 0 25 to 1 25 per annum or b a term SOFR as defined in the Credit Agreement plus an applicable margin ranging from 1 25 to 2 25 per annum and ii for alternative currency denominated loans at the applicable alternative currency rate whether a daily rate or a term rate plus an applicable margin ranging from 1 25 to 2 25 per annum in each case such applicable margins to be determined based on the Company s total net leverage ratio
In addition to paying interest on the outstanding principal under the 2025 Credit Facility the Company is required to pay i a commitment fee ranging from 0 175 to 0 30 per annum to be determined based on the Company s total net leverage ratio on the actual daily unused amount of each Lender s commitment under the 2025 Credit Facility ii a letter of credit fronting fee of 0 125 per annum of the daily amount available to be drawn under outstanding letters of credit and iii certain other customary fees and expenses of the Lenders and agents
The Credit Agreement contains customary covenants including but not limited to restrictions on the Company s ability to merge and consolidate with other companies dispose of assets incur indebtedness or grant liens or other security interests on assets in each case subject to certain customary exceptions The financial covenants require as of the end of each fiscal quarter that a the Company has a minimum consolidated net cash interest coverage ratio of 3 00 1 00 and b the Company does not exceed a maximum total net leverage ratio of 3 75 1 00 The maximum total net leverage ratio is subject to a step up by 0 50 1 00 at the election of the Company for four fiscal quarters following certain material acquisitions subject to certain customary exceptions
The 2025 Credit Facility has a scheduled maturity of December 2 2029 provided that the Credit Agreement provides for a maturity date of 91 days prior to the earlier maturity date of any individual or related series of other indebtedness with an aggregate outstanding principal amount that exceeds the greater of x 107 5 million and y 50 of Consolidated EBITDA as defined in the Credit Agreement as of the most recent four fiscal quarter period preceding such 91st day for which financial statements were required to be delivered pursuant to the Credit Agreement unless the Company maintains either a a total net leverage ratio lower than 2 00 1 00 or b liquidity greater than 125 of the aggregate outstanding principal amount of such indebtedness
The Credit Agreement includes customary events of default that include among other things non payment of principal interest or fees inaccuracy of representations and warranties violation of certain covenants cross default to certain other indebtedness bankruptcy and insolvency events material judgments change of control and certain material ERISA as defined in the Credit Agreement events in each case subject to certain customary exceptions and grace periods During the continuance of an event of default the Lenders may take a number of actions including among others declaring the entire aggregate amount then outstanding under the 2025 Credit Facility to be due and payable
The Company s obligations under the Credit Agreement are required to be guaranteed by the Company s material domestic subsidiaries The Company s obligations under the Credit Agreement are secured by a security interest in substantially all of the assets of the Company and each guarantor Revolving loans may be prepaid and revolving loan commitments may be permanently reduced by the Company in whole or in part without penalty or premium
The Company s lease obligations consist of operating leases for office facilities and equipment with lease periods expiring through fiscal year 2032 Some leases include one or more options to renew Lease renewals are not assumed in the determination of the lease term until the exercise of the renewal option is deemed to be reasonably certain
In February 2023 the Company assigned the Lease Assignment the remaining lease term of its previous headquarters and concurrently entered into a sublease for office space in San Mateo California with the same third party for its worldwide headquarters As a result of the Lease Assignment the Company recognized an 8 5 million loss in general and administrative operating expenses during the fiscal year ended July 31 2023 on the consolidated statements of operations The loss is comprised of an 18 4 million gain from the de recognition of the operating lease asset of 56 9 million the de recognition of the lease liability of 75 5 million and
other expenses related to the Lease Assignment of 0 2 million offset by accelerated depreciation expense related to property and equipment primarily consisting of leasehold improvements at the previous headquarters of 26 9 million In fiscal year 2023 upon lease commencement of the new worldwide headquarters the Company recognized a 27 1 million operating lease asset and 19 6 million lease liability
Lease expense for leases with an initial term of 12 months or less is excluded from the table above and was 0 9 million 0 8 million and 0 9 million in each of the fiscal years ended July 31 2025 2024 and 2023 respectively
Purchase commitments represent royalty obligations and commitments to purchase goods and services entered into in the ordinary course of business for which a penalty could be imposed if the agreement was cancelled for any reason other than an event of default as described by the agreement During fiscal year 2023 the Company entered into an agreement with a cloud infrastructure services provider for a total obligation of 600 million over a five year period Purchase commitments do not include lease obligations refer to Note 8
From time to time the Company is involved in various legal proceedings and receives claims arising from the normal course of business activities The Company has not recorded any accrual for claims as of July 31 2025 and 2024 respectively The Company has not accrued for estimated losses in the accompanying consolidated financial statements as the Company has determined that no provision for liability nor disclosure is required related to any claim against the Company because a there is not a reasonable possibility that a loss exceeding amounts already recognized if any may be incurred with respect to such claim b a reasonably possible loss or range of loss cannot be estimated or c such estimate is immaterial The Company expenses legal fees in the period in which they are incurred
The Company sells software licenses and services to its customers under Software License Agreements SLA and Software Subscription Agreements SSA SLAs and SSAs contain the terms of the contractual arrangement with the customer and generally include certain provisions for defending the customer against any claims that the Company s software infringes upon a patent copyright trademark or other proprietary right of a third party SLAs and SSAs also generally indemnify the customer against judgments settlements fines penalties costs and expenses resulting from a claim Losses against the customer in the event the Company s software is found to infringe upon such third party rights
The Company has not had to reimburse any of its customers for Losses related to indemnification provisions and no material claims against the Company were outstanding as of July 31 2025 and 2024 For several reasons including the lack of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases under various SLAs and SSAs the Company cannot estimate the amount of potential future payments if any related to indemnification provisions
The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees expenses judgments fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of these persons is or is threatened to be made a party by reason of the person s service as a director or officer including any action by the Company arising out of that person s services as the Company s director or officer or that person s services provided to any other company or enterprise at the Company s request The Company maintains director and officer insurance coverage that may enable the Company to recover a portion of any future amounts paid
Aggregate intrinsic value at each period end represents the total market value of Stock Awards at the Company s closing stock price of 226 22 150 07 and 84 82 on July 31 2025 2024 and 2023 respectively Aggregate intrinsic value for released Stock Awards represents the total market value of released Stock Awards at date of release
In September 2023 and September 2024 certain executive officers were granted Stock Awards that cliff vest after three years subject to continued service until such time with the opportunity to increase the number of vested awards based on Company financial performance and for a select number of awards the market performance of the Company s common stock The fair value of the awards will be recognized over the three year performance period and may increase or decrease depending on the estimated attainment of Company financial performance criteria The Company determined the fair value of the portion of the awards subject to the market performance of the Company s common stock using a Monte Carlo simulation model which included the following assumptions
For the portion of the award subject to the market performance of the Company s common stock stock based compensation expense is recognized over the requisite service period regardless of whether or not the market condition is ultimately satisfied subject to continued service over the period
Prior to fiscal year 2024 certain executives and employees of the Company received PSUs which vest over three years with 50 vesting annually over the three year period and the remaining 50 vesting at the end of the third year
Aggregate intrinsic value at each fiscal year end represents the difference between the Company s closing stock price of 226 22 150 07 and 84 82 on July 31 2025 2024 and 2023 respectively and the exercise price of outstanding stock options Aggregate intrinsic value for exercised options represents the difference between the Company s stock price at date of exercise and the exercise price
In December 2024 the Company s stockholders approved the 2024 ESPP at the Company s annual meeting of stockholders with an initial pool of 3 000 000 shares of the Company s common stock that may be issued under the ESPP The ESPP generally provides for six month offering periods beginning on January 6 and July 6 of each calendar year where each offering period has one purchase period The Company s first ESPP offering period began on July 6 2025 Eligible employees may authorize payroll deductions between 1 and 15 of their base salary compensation to purchase shares of common stock at 85 of the lower of the market price on the date of commencement of the applicable offering period or on the last day of each six month purchase period The ESPP does not allow eligible employees to increase their contributions during any offering period
No common stock was issued under the ESPP during the fiscal year ended July 31 2025 The weighted average grant date fair value related to rights to acquire shares of common stock under the ESPP during the fiscal year ended July 31 2025 was 63 29 per share
As of July 31 2025 and 2024 the Company was authorized to issue 500 000 000 shares of common stock with a par value of 0 0001 per share and of these 84 530 418 and 83 025 637 shares of common stock were issued and outstanding respectively As of July 31 2025 and 2024 the Company had reserved shares of common stock for future issuance as follows
On December 15 2020 the Company s stockholders adopted the 2020 Stock Plan 2020 Plan for the purpose of granting equity based incentive awards The Company initially reserved 5 000 000 shares of its common stock for the issuance of awards under the 2020 Plan The shares available for issuance are subject to adjustment in the event of a stock split stock dividend or other defined changes in the Company s capitalization The 2020 Plan replaced the Company s 2011 Stock Plan however awards outstanding under the 2011 Stock Plan will continue to be governed by their existing terms On December 20 2022 the Company s stockholders approved the amendment and restatement of the 2020 Stock Plan to increase the total number of shares of common stock available for issuance under the 2020 Stock Plan by 1 780 000 On December 19 2023 the Company s stockholders approved the amendment and restatement of the 2020 Stock Plan to increase the total number of shares of common stock available for issuance under the 2020 Stock Plan by 3 800 000
The shares the Company issues under the 2020 Plan will be from the Company s pool of authorized but unissued shares The shares of common stock underlying any awards under the 2011 Stock Plan that are forfeited canceled held back upon exercise or settlement of an award to cover the exercise price or tax withholding reacquired by the Company prior to vesting satisfied without any issuance of stock or are otherwise terminated other than by exercise are added back to the shares of stock available for issuance under the 2020 Plan as amended
In September 2022 the Company s board of directors authorized and approved a share repurchase program of up to 400 0 million of the Company s outstanding common stock Share repurchases under the program may be made from time to time in the open market in privately negotiated transactions and otherwise at the discretion of management of the Company and in accordance with applicable federal securities laws including Rule 10b 18 of the Exchange Act and other applicable legal requirements Such repurchases may also be made in compliance with Rule 10b5 1 trading plans entered into by the Company As of July 31 2025 138 2 million remained available to purchase under the authorized and approved share repurchase program
In September 2022 the Company entered into an accelerated share repurchase ASR agreement with a large financial institution whereupon the Company provided them with a prepayment of 200 0 million and received an initial delivery of 2 581 478
shares of the Company s common stock Under the terms of the ASR the total number of shares delivered and average price paid per share was determined at the settlement date based on the volume weighted average price over the term of the ASR less an agreed upon discount The ASR was settled in full with the delivery of an additional 648 001 shares of common stock during the third quarter of fiscal year 2023 which resulted in total repurchases under the ASR of 3 229 479 shares of common stock at an average purchase price of 61 93 per share
During the fiscal years ended July 31 2025 and 2024 respectively the Company did not repurchase any shares of common stock During the fiscal year ended July 31 2023 the Company repurchased 4 041 284 shares of common stock at an average price of 64 78 per share for an aggregate purchase price of 261 8 million which includes the shares repurchased under the ASR agreement
The Company recognized an income tax benefit of 20 4 million for the fiscal year ended July 31 2025 compared to an income tax benefit of 20 7 million for the fiscal year ended July 31 2024 The Company s fiscal year 2025 income tax benefit was similar to the fiscal year 2024 income tax benefit even though the Company generated more pre tax income due to an increase in deductions from stock based compensation the foreign derived intangible income deduction change in valuation allowance and an increase in research and development tax credits partially offset by non deductible debt retirement expense and non deductible executive compensation
The effective tax rate differs from the statutory U S Federal income tax rate of 21 mainly due to the debt retirement expense which is non deductible for tax purposes and other permanent differences for stock based compensation including excess tax benefits research and development credits foreign earnings taxed in the United States the foreign derived intangible income deduction and certain non deductible expenses including executive compensation limitation
The Company considered both positive and negative evidence including future reversals of existing taxable temporary differences projected future taxable income tax planning strategies differences between prior book and tax profits losses and results of future operations and determined that a valuation allowance was not required for a significant portion of its deferred tax assets A valuation allowance of 66 3 million and 65 8 million remained as of July 31 2025 and 2024 respectively primarily related to California U S Federal and Canada deferred tax assets The increase of 0 5 million in the valuation allowance in the current fiscal year relates primarily to net operating losses and income tax credits in certain tax jurisdictions for which no tax benefit is expected to be recognized offset by a release of valuation allowances on foreign tax credits
As of July 31 2025 the Company had U S Federal California and other states net operating loss NOL carryforwards of 15 7 million 50 2 million and 145 2 million respectively The U S Federal and California NOL carryforwards will start to expire in 2032 and 2034 respectively The NOL carryforwards in other states will primarily start to expire in various years between 2026 and 2034
Federal and California laws impose restrictions on the utilization of NOL carryforwards and R D credit carryforwards in the event of a change in ownership of the Company as defined by Internal Revenue Code 382 and 383 The Company experienced an ownership change in the past that does not materially impact the availability of its carryforwards However should there be an ownership change in the future the Company s ability to utilize existing carryforwards could be substantially restricted
As of July 31 2025 the Company has recorded a provisional estimate for foreign withholding taxes on undistributed earnings from foreign subsidiaries of 1 8 million The Company may repatriate foreign earnings in the future to the extent that the repatriation is not restricted by local laws or there are no substantial incremental costs associated with such repatriation
In the United States on July 4 2025 H R 1 was signed into law Among other provisions the legislation reinstates immediate expensing for domestic research and experimental expenditures extends 100 bonus depreciation for qualified property placed in service beginning January 20 2025 and makes certain other provisions of the Tax Cuts and Jobs Act permanent The Company is evaluating the impact of the provisions of this legislation that are effective subsequent to fiscal year 2025 and will reflect its impact in its financial statements in the periods in which they are effective
During the year ended July 31 2025 the Company s unrecognized tax benefits increased by 4 2 million As of July 31 2025 the Company had unrecognized tax benefits of 16 4 million that if recognized would affect the Company s effective tax rate The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense in its consolidated statements of operations As of July 31 2025 the total interest and penalties related to unrecognized tax benefits was not material
The Company or one of its subsidiaries files income taxes in the U S Federal jurisdiction and various state and foreign jurisdictions If the Company utilizes NOL carryforwards or tax credits in future years the U S Federal state and local and non U S tax authorities may examine the tax returns covering the period in which the net operating losses and tax credits arose As a result the Company s tax returns in the U S and California remain open to examination from fiscal years 2002 through 2025
The Organization for Economic Co operation and Development has implemented a framework for a global minimum corporate tax of 15 applied on a country by country basis for companies with global revenues and profits above certain thresholds referred to as Pillar 2 Pillar 2 provisions did not have a material impact on the Company s financial statements for any of the years presented
The Company s employee savings and retirement plan in the United States is qualified under Section 401 k of the Internal Revenue Code Employees on the Company s U S payroll are automatically enrolled when they meet eligibility requirements unless they decline participation Upon enrollment employees are provided with tax deferred salary deductions and various investment options Employees may contribute up to 60 of their eligible salary up to the statutory prescribed annual limit The Company matches employees contributions up to 6 000 per participant per calendar year Certain of the Company s foreign subsidiaries also have defined contribution plans in which a majority of its employees participate and the Company makes matching contributions The Company s contributions to its 401 k and foreign subsidiaries plans were 15 4 million 14 1 million and 13 3 million for the fiscal years ended July 31 2025 2024 and 2023 respectively
The Company has one reportable segment that conducts business globally and is managed operated and organized on a consolidated basis The Company s chief executive officer is the chief operating decision maker Since the Company operates in one segment financial information revenue by type and revenue by geographic area presented in the consolidated financial statements represents the operations of the Company s single segment
Our management with the participation of our principal executive officer and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a 15 e and 15d 15 e under the Exchange Act as of the end of the period covered by this Annual Report on Form 10 K Based on such evaluation our principal executive officer and principal financial officer have concluded that as of such date our disclosure controls and procedures were effective
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rule 13a 15 f or 15d 15 f of the Exchange Act Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that i pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets ii provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors and iii provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of our assets that could have a material effect on our financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
issued by the Committee of Sponsoring Organizations of the Treadway Commission Based on this assessment and those criteria management concluded that our internal control over financial reporting was effective at a reasonable level of assurance as of July 31 2025
Our internal control over financial reporting has been audited by KPMG LLP an independent registered public accounting firm as stated in their report which appears in Part II Item 8 of this Annual Report on Form 10 K
Our management including our principal executive officer and principal financial officer does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud A control system no matter how well conceived and operated can provide only reasonable not absolute assurance that the objectives of the control system are met Because of the inherent limitations in all control systems no evaluation of controls can provide absolute assurance that all control issues and instances of fraud if any within the Company have been detected These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake Additionally controls can be circumvented by the individual acts of some persons by collusion of two or more people or by management override of the control The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions Over time controls may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate Because of the inherent limitations in a cost effective control system misstatements due to error or fraud may occur and not be detected
There were no changes in our internal control over financial reporting during the quarter ended July 31 2025 identified in management s evaluation pursuant to Rules 13a 15 d or 15d 15 d of the Exchange Act that materially affected or are reasonably likely to materially affect our internal control over financial reporting
We have adopted a Code of Business Conduct and Ethics that applies to all of our directors officers and employees including our principal executive officer our principal financial officer our principal accounting officer and all other executive officers The Code of Business Conduct and Ethics is posted on our investor relations website
The other information required by this item will be contained in our definitive proxy statement to be filed with the SEC in connection with our 2025 Annual Meeting of Stockholders the Proxy Statement which is expected to be filed not later than 120 days after the end of our fiscal year ended July 31 2025 and is incorporated in this report by reference
Credit Agreement dated as of December 2 2024 among Guidewire Software Inc as borrower certain subsidiaries as guarantors Bank of America N A as administrative agent and certain other lenders thereunder
The certifications furnished in Exhibit 32 1 hereto are deemed to accompany this Annual Report on Form 10 K and will not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 as amended Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933 as amended or the Securities Exchange Act of 1934 as amended except to the extent that the registrant specifically incorporates it by reference
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
Each person whose individual signature appears below hereby authorizes and appoints Mike Rosenbaum Jeff Cooper and Winston King and each of them with full power of substitution and resubstitution and full power to act without the other as his or her true and lawful attorney in fact and agent to act in his or her name place and stead and to execute in the name and on behalf of each person individually and in each capacity stated below and to file any and all amendments to this Annual Report on Form 10 K and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission granting unto said attorneys in fact and agents and each of them full power and authority to do and perform each and every act and thing ratifying and confirming all that said attorneys in fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated

Company Name	Guidewire Software, Inc. Vist SEC web-site
Category	SERVICES-PREPACKAGED SOFTWARE
Trading Symbol	GWRE