Guidewire Software, Inc. (NYSE:GWRE) Q2 2023 Earnings Call Transcript

Mike Rosenbaum: Yes, super question. So the go-live activity has a lot to do with how the projects proceed, whether or not there’s any delays and anything that you catch and whether or not those goal updates are pushed out. I would say generally, all — unlike, I think, every project dynamics a bit like this is like you somewhat aspirationally at the beginning and then unfortunately, you get circumstances that cause a go-live to push out. So we do see those from time to time. And so I hesitate to have you like cash me start to forecast go-lives because that’s not my intention. But I would say it does match our expectations. You know what I mean, like the pace of it is starting to be something that I’d say our company is going to get used to executing at that pace sort of maybe forever, right?

Because when you do the math, we like to do these over the weekends because it inevitably involves some transition downtime for these companies, these core systems when they actually swap over. have to be taken down before they drop back up on the new thing and so you want to do that on the weekend. And so that creates a big complicated project to execute flawlessly between Friday night and Monday morning. And so what we’re doing is looking ahead at every single weekend now until forever sort of filling up those based on the demand that we are seeing. And so it was in line. These things are never perfect and so it wasn’t exactly every single 16 months ago that we thought would go live in the quarter, it went live in the quarter. But we’re very happy with the execution this quarter.

And like I said, I think that this is going to end up being — I kind of tried to point to this in my prepared remarks, it’s like this is going to be just a steady, steady part of Guidewire from now and for time just the numbers in the customer base and the new business activity that we see. — bear that out. If we keep doing deals and we keep filling the pipeline, we keep closing deals and then fill in the pipeline for go-lives, that activity, that go-live activity feels just keep going as it does, the demand on the platform will keep growing. The revenue on the platform will keep growing. And because we’re able to control the headcount and the infrastructure expense, the margin around that product will keep improving. And you see that in this quarter in a really positive way.

So I’m just very, very excited about the progress, the execution and maybe the determination of the people at Guidewire to make those projects happen.

Tyler Radke: We’ll hold you to $50 million a quarter from here on out. Perfect. A quick follow-up for Jeff. Just on the margins. Obviously, a lot of good cost savings stuff this year between hyperscaler contract negotiations and real estate consolidation. Should we think about these as upside to your targets that you gave out? Or just help us understand how those play into those.