Mike Rosenbaum: Yes, interesting question. So first of all, you got to understand for these big cloud deals, they’re very often very long sales cycles, very involved very involved, often pretty significant proof-of-concept phases, even pilots. We work with these — these decisions are not taken lightly, and we’re involved in them for many, many months of sometimes over a year on a particular deal. Close rates over the past couple of years and especially through the cloud transition have remained stable. We provided some detail around this at the Analyst Day, and you’ll find this in the slides we prepared and the talk track that we went through around competitive win rates, close rates very pleased, I’d say, maybe I shouldn’t say that.
Maybe I should say I’m never pleased until we get it to 100, right? It’s a competitive market. But we have remained steady throughout the transition and continue to feel more and more confident about our position competitively. The reason I call out these competitive deals over the past few quarters is just simply that it’s almost like — we consider it almost a bit of an expansion to our total addressable market. And that once a carrier modernizes to a system. We sort of expect that it’s not going to come back up for grabs for maybe 5, 10 years, and to see a few of these deals and now multiple quarters in a row where we see these customers coming back to market and looking for us to make that shift from a sort of modernized system or a modernized system decision to Guidewire.
We just see that as a very positive trend and something that we think just points in our favor in terms of being able to support our growth projections, bookings projections and ability to address the overall insurance market.
Jeff Cooper: Yes. The only thing I would add is just like the value of the stock, right? The more risk associated with the Company that has an impact on the overall stock price. So as we negotiate these deals, the more proof points we have, the more we can derisk the path from going to where they are today to our cloud that helps us as we think about building a business case and making the case to the insurer that now is the time to go and that these price points are reasonable. It is clear that some of the early, early adopters got preferential pricing because they were taking a bigger risk. And as we think about future engagements, we are going to be firmer and firmer on how we think about discounting. This is part of the strategy all along.
So I think we’re starting to see that. These deals are still heavily negotiated. As Mike said, you never want to lose one of these because when you lose one, you feel like it goes away for 10, 15 years. So, we fight tooth and nail to make sure that we’re well positioned and win. But it is our expectation that we can do better on discounting as we look ahead.
David Unger: I really appreciate all that detail, guys. And a little more higher level here. So I know it’s early, but is there a way to think about the insurance industry’s budget commitment trends as we look forward into next year, our commitment to software spend versus the prior year and their appetite to convert to the cloud.
Mike Rosenbaum: Yes, it’s a great question. And I think we’ve talked over the past few quarters about the shocks that the industry has dealt with in terms of inflation, weather-related risk and loss and the cycle that they have to follow in terms of getting rate increases approved by regulators and how that all flows through the system. So, as we get through a cycle of that, and hopefully, we have a stable inflation environment, we have a stable interest rate environment, knock on wood or hopefully, we get stable climate-related, weather-related risk environment, that’s harder to control, obviously. Those things are work to our favor in terms of creating the type of stability that enables them to feel comfortable making a big project decision around core system modernization.
So certainly, that is improving. And we watch it very closely, and hopefully, that stability continues, and it will help increase the propensity for these deals to be greenlighted, which results in our bookings events for us.
Operator: Our next question comes from the line of Tyler Radke with Citi. Please proceed with your question.
Tyler Radke: And apologies, if this was covered earlier popping around a couple of earnings calls tonight. But Jeff, I was hoping just on the — if we look at the ARR guidance, obviously, you beat the high end by $1 million here in Q1. But if I look at Q2, it came in, I think, a little bit below where consensus is modeling. And overall, it looks like the first half from a net new perspective is down versus a year ago, and that’s expected to improve in the second half. I know there’s ramp in timing factors that are at play. But can you just help us understand that a bit more? And was there any change in the ramp of the contracts you’re expecting to kind of layer in this year?
Jeff Cooper: Our Q2 outlook is very consistent with our expectation as we went into the year. We obviously have a lot more visibility than you all in terms of when the ramps hit, and that has a big variable into how we model out quarter-by-quarter. So Q1 got us off to a good start. We’re very pleased with it. We always kind of think about our business on an annual cadence. I think we’re off to a very good start. Q2 is consistent. The ramps are falling the way we expected them to fall the attrition profile in the business is still very, very small and kind of following the way we expected it to fall. So, there’s really no change to our internal expectations. We understand that you all have to make your best guess on your quarterly estimates, but very consistent with how we thought about it as we started the year.
Tyler Radke: That’s helpful. And Mike, you talked about how the number of deals you closed in the quarter was better than you expected. Was there any timing factors there pulling stuff in? And then if you could just talk about kind of the composition of those deals just in terms of the size and they, on the smaller side of things, just given the seasonality of your business? Any additional color there would be great.
Mike Rosenbaum: No, there wasn’t anything special about pulling in deals or anything. It’s just continued positive momentum in the business. And like I said, especially coming out of a strong Q4, typically, you end up with a strong Q4 by pulling deals in from Q1. And so then we use that sort of an explanation for light Q1, but we followed up a strong Q4 with a very solid Q1. And I think that, that speaks volumes about the momentum that we have in business. Deal count was also — it was great to see. We had four migrations, which I was very, very happy to see. So it’s not all the net new or it’s not all migrations. It’s a good spread. And like I said, we see this deal in Japan is just phenomenal. It’s a phenomenal milestone for us when you think about the long term and the potential that we have internationally and especially in Japan, I was very, very excited to see that deal close.
And like we said, like we work for a lot of years building relationships and making sure they understand the strategy and the story and building confidence in getting a deal like that in Japan across the line in Q1 was great. So I wouldn’t read anything special into it. In terms of deal size, pretty normal, kind of where we expect it to be. And like I said, really strong start to the year.
Jeff Cooper: Yes. The only thing I’d add to is, look, I had obviously modeled a little bit lower bookings activity in Q1 as we went into the quarter. So — and some of that was just a reflection of the strength of Q4. So, we were pleased to see the activity in Q1. It was a little bit higher than what we’d modeled. But it was not, I wouldn’t say there was any sort of unnatural pull in. It’s just — we look at this on an annual cadence, and we got off to a good start.
Operator: Our next question comes from the line of Mike Funk with Bank of America. Please proceed with your question.
Unidentified Analyst: This is Matt on for Mike Funk. You mentioned especially high close rates in the prepared remarks. Can you provide any incremental color on how deals are moving through different stages of the pipeline relative to prior Qs?
