Mike Rosenbaum: I think the answer is certainly both that the ARR position the market. If you just think of us purely as one of the players, one of the options to choose when you’re going to do a Guidewire implementation, the more capacity, the more demand in that market, it creates an opportunity. It makes for a better, more efficient implementation market. Instead of there could be like a supply side driver behind the competitiveness of Guidewire services relative to partners. Also, like I said, like we’re engineering to occur. And so it’s partially our choice. But certainly, I think that our win rate and the momentum and success of the InsuranceSuite application wins is making it clear that Guidewire is the platform and the company to partner with, if you want to participate in this industry transformation. And so I think you see a lot of that in the outcome this quarter.
Dylan Becker: Okay. Got it. That makes sense. And then going back to Mike, maybe sticking with you on the equilibrium dynamic, too. So seeing a lot of improvement on that loss ratio side. Can you remind us what that has on capacity to invest, right? Like is this — is this kind of incentivizing the initiative of maybe not accelerating, but continuing that investment cadence or is this something that could cause an insurance carrier to rest on their laurels and say, hey, all right, we’re through the thick of it, at least some of those pressures near term. It doesn’t seem like the latter, but I wanted to stress test it. Thanks.
Mike Rosenbaum: No. I really don’t think it is the latter. And this is something that we have spent a lot of time thinking about talking to customers about very carefully. Honestly, this has been one of the highlights for me in terms of our perspective about the role we play in the industry and how long term it really is. Most of our customers have been in business for, let’s say, more than 50, sometimes 100 and in some cases, almost 200 years. They have seen these cycles before and they know how to work through them. And the decision that they make about their core systems partner is very often a decade level decision. This isn’t something that they’re changing out every couple of years based on the profitability of the insurance side of their business, but it’s something that they can really take a long-term view around.
This was great for us in that it enabled us to continue to see healthy demand through. It was a very difficult time for the industry from a profitability perspective. And it’s nice to see that the industry is recovering and pushing the rates through the system. And like I said, getting back to more of an equilibrium state. And I don’t think that, that can hurt Guidewire’s demand. I think we saw a healthy demand when it was tough. And as things improve, I don’t think that that’s going to hurt by causing people to rest. I think that there is a growing understanding that agility, that technology flexibility and agility is very, very important for remaining competitive, remaining up to date with prices remaining as efficient as possible with respect to claims processing and submission management and underwriting, like these things are not changing.
And that is resonating with these prospects and with these customers. And I think that we’re going to continue to see demand growth. So anyway, thanks for the question. I appreciate it.
Dylan Becker: Yeah. It makes perfect sense. Thanks, Mike.
Operator: Thank you. Our next question comes from the line of Michael Turrin with Wells Fargo. Please proceed with your question.
Michael Turrin: Hey, great. Thanks. Appreciate you taking the questions. The commentary is pretty consistent. The press release mentions 11 cloud deals. Maybe you can just level set for us how you’d score cloud progress for fiscal ’25 thus far and the mix of what you’re seeing there and how it all stacks up relative to where your expectations were heading into the year.
Mike Rosenbaum: We’re very happy with the progress so far this year. As Jeff mentioned, driving linearity into our business has been a focus of ours for the past few years, is not relying on massive Q4 to carry the day on the fiscal year. And we have done a phenomenal job driving a rigor into the organization so that we’re hitting our targets in Q1 and Q2 and Q3 and Q4. And being where we are at this point in the fiscal year, it just feels very good, right? We’re creating steady demand. We’re able to get those deals through the process and closed in a healthy way, and we feel great about that. And that’s kudos, I guess, to us, if that’s appropriate to say in terms of driving just operational rigor in the business, but it also speaks to the demand for the products that we’re seeing and the demand for the product category in general in the insurance industry.
And all those things tell me like this has been a really, really good start to the year, and we’re in a good position halfway through it.
Michael Turrin: Thanks for that. Jeff, the cash flow targets moved up for the year even with the services revenue shortfall, maybe speak to your ability to manage to free cash flow even as some of the contribution there shifts a bit. Thanks.
Jeffrey Cooper: I think we touched on this a bit at the Analyst Day. We’re just at this pretty exciting inflection point in this cloud transition, where we’re starting to see that part of the model really flex. So that’s great to see. Collections has been really strong. The overall cloud gross margin profile has been really strong. And all of those dynamics just give us a lot of confidence into the cash flow forecast for this year and as we think about executing to some of those longer-term targets as well. So in general, just off to a great start, ahead of where I expected to be midway through the year, and that gives us confidence to raise target a bit.
Michael Turrin: All helpful. Thank you.
Operator: Thank you. Our question comes from the line of Matt VanVliet with BTIG. Please proceed with your question.
