GWRE 2025Q2

Greetings, and welcome to the Guidewire Software, Inc. second quarter of fiscal 2025 financial results conference call. As a reminder, this call is being recorded and will be posted on our investor relations page later today. I would now like to turn the call over to Alex Hughes, Vice President of Investor Relations. Thank you, Alex. You may now begin. Thank you, Grace. Hello, everyone. With me today is Mike Rosenbaum, Chief Executive Officer, and Jeff Cooper, Chief Financial Officer. I complete the disclosure of our results can be found in our press release issued today as well as in our related Form 8-Ks furnished to the SEC. Both of which are available on the investor relations section of our website. Today's call is being recorded, and a replay will be available following its conclusion. Statements today include forward-looking ones regarding our financial results, products, customer demand, operations, the impact of local, national, and geopolitical events on our business, and other matters. These statements are subject to risks, uncertainties, and assumptions based on management's current expectations as of today and should not be relied upon as representing our views as of any subsequent date. Please refer to the press release and the risk factors and documents we file with the SEC to clear most recent annual report on Form 10-K, our prior and forthcoming quarterly reports on Form 10-Q filed and to be filed with the SEC. For information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. We will also refer to certain non-GAAP financial measures to provide additional information to investors. All commentary on margins, profitability, and expenses are on a non-GAAP basis unless stated otherwise. A reconciliation of non-GAAP to GAAP measures is provided in our press release. Reconciliations and additional data are also posted in the supplement on our IR website. Finally, like last quarter, investor relations is conducting this earnings call via Zoom audio rather than a telebridge. This means we will manage the Q&A portion of today's call internally with the help of Grace moderating, who you just heard from, and myself managing Q&A. Please be patient if we encounter any short pause in any of the handoffs during Q&A. And with that, I'll hand it off to Mike.

Thank you, Alex. Good afternoon, and thanks to everyone for joining us today. I want to start by extending my sympathy to those affected by the Los Angeles wildfires and the more recent floods in Kentucky. In 2023, there were 28 events in the United States that each caused at least a billion dollars of loss. And in 2024, there were 27. In Europe, flooding and convective storms caused $14 billion in insured losses in 2024, and the recent fires in LA are estimated to have caused an insured loss of $30 billion. The P&C industry acts as a financial backstop for families and businesses impacted by these catastrophes. More than ever, a well-functioning P&C market is critical to providing consumers, businesses, and communities the peace of mind and the confidence they need to invest and live with the risks associated with catastrophic weather events. This critical function is one of the reasons why everyone at Guidewire Software, Inc. is proud to play a role in the insurance industry. Our mission is to provide a technology platform that powers agility in the P&C industry, which helps support a more vibrant and effective insurance market. One that helps people, businesses, and governments understand risk in economic terms and make rational decisions about these risks and how to prepare for, mitigate, and avoid them. This mission was established when Guidewire Software, Inc. was founded. It has since motivated us to build a market-defining software category supporting insurance core systems and to ensure that through our cloud-based evolution, we will play a critical role in the industry for decades to come. Turning to the second quarter and the current state of our business, I could not be more pleased with our progress and the quality of engagement we have with the market. This includes steady progression and engagement with some of our largest on-prem customers. It is becoming more and more clear that the industry's transition to the cloud is steadily accelerating. Regarding the detail of the second quarter, we produced solid sales activity with ARR finishing above the high end of our outlook. We closed twelve cloud deals. This included four full insurance suite deals, one insurance now deal, and the remainder for one or two core x center applications. As a reminder, full insurance suite deals include all three applications or x centers as we sometimes refer to them, policy center, claims center, and billing center. Since launching Guidewire Cloud Platform, our thesis has been that we will see growing demand from new customers replacing legacy systems as we prove out our cloud capability with our customer base. In Q2, we welcomed five new customers, including one in Brazil and one in Belgium. We had a large global specialty insurer start their Guidewire journey with BillingCenter and look forward to the opportunity to expand to Policy Center and Claim Center in the future. Finally, with respect to new customers, we closed a full suite competitive takeaway at a tier three insurer that is a subsidiary of a larger entity where we see meaningful future growth potential. We also closed six cloud migrations in the quarter, which is critical for our ongoing intention and commitment to migrate 100% of our on-prem customer base to our cloud platform. Two of the six included expansion into new business lines or new core modules. Looking at our deals by geography, this quarter was led by North America and Europe, with about a third of the deals in Europe. Competing effectively outside the United States often requires us to invest in country and market-specific functionality. I was particularly pleased to see this investment translate into three tier one deals, including with two large London market insurers. Across the board, our sales activity in Q2 was concentrated at tier one and tier two insurers where customer requirements are focused on the ability to handle significant complexity and scale. With respect to the industry overall, I’ve been asked regularly about the potential short-term impact of the wildfires on Guidewire Software, Inc. Overall, I would say that the property and casualty insurance industry is incredibly resilient and is designed to absorb these types of catastrophes. The one silver lining from these recent events is that they have increased awareness of the importance of maintaining a high-functioning insurance market where insurers are enabled to evaluate and price risks responsibly. Turning to operations, we are seeing strong growth in cloud deployments and customers are more efficiently taking updates, keeping them current with recent innovations and functionality. Instrumental to our success driving adoption and deployments is our growing cloud ecosystem partners. There are now 26,000 Guidewire-focused practitioners across 38 system integrators, and the number of Guidewire cloud-certified professionals has passed 10,500. Another dimension of our partner ecosystem that is equally important to our long-term vision is our technology partners. As we've grown cloud, we’ve accelerated the number of cloud apps from both Guidewire and our technology partners. Guidewire Marketplace now has over 500 applications, including over 270 from technology partners. There have been over 6,000 app downloads in just the first half of this year. In summary, it was a great quarter, with continued momentum across the business. We feel great about how the year is shaping up and couldn't be happier with everyone in the company helping us to continue to deliver reliable ARR and revenue growth while simultaneously improving margins. All of this is based on an unwavering commitment to the success of every single customer program our company supports, which is ultimately what positions us well for the future. Finish with a personal note about one of the customers which really exemplifies our mission and the impact our platform can have in critical times. During the LA fires, California Casualty leveraged Guidewire Software, Inc. to proactively identify and rapidly contact over 400 at-risk policyholders, ensuring their safety and offering immediate aid, including needed housing. By overlaying fire layers on address policies in Guidewire Software, Inc., they were able to identify total lost homes, often preempting customer assessments. This swift action enabled them to provide over 90% of total loss home orders with full coverage payments within two months so customers could move forward with plans to either rebuild or purchase a new home. We're proud to play our small role in this effort and the industry. And with that, I'll turn it over to Jeff to discuss the financials.

Thanks, Mike. We had a great Q2, and the full year is tracking ahead of our expectations. ARR finished at $918 million, which reflected strong sequential ARR additions in the quarter. This was driven by healthy new sales activity and new ARR sold from deals in prior periods with ramps, which we sometimes refer to as ARR from ARR backlog. As a result, we added $45 million of net new ARR, which is roughly what we added in Q4 last year, which is always our largest seasonal quarter. So it is exciting to see the model play out in this manner. Total revenue was $289 million, up 20% year over year and above the high end of our outlook. Subscription and support revenue finished Q2 at $178 million, reflecting 35% year-over-year growth, and our continued insurance suite cloud momentum. Services revenue finished at $48 million, which was in line with our expectations. Now let me turn to profitability for the second quarter, which we will discuss on a non-GAAP basis. Gross profit was $189 million, representing 25% year-over-year growth. Overall gross margin was 65%, subscription and support gross margin was 69% compared to 65% a year ago, and continues to track a bit ahead of our expectations. Services gross margin was 6% compared to negative 11% a year ago. The services business finished the quarter in line with our expectations. As a reminder, Q2 services revenue is usually lower as a result of the impact of the holidays on services deliveries. We finished Q2 with operating profit of $54 million. This finished ahead of our outlook as both gross profit was higher than expectations and operating expenses finished lower than expectations. We have been more measured in our hiring in the first half, but we do expect to see increased hiring in the back half of the year and this hiring will be focused on product development teams. We ended the quarter with $1.4 billion in cash and cash equivalents. Operating cash flow ended the quarter at $86 million, which is ahead of our expectations due to strong collections in the quarter. Before turning to our outlook, I want to quickly touch on some actions we have taken related to our 2025 convertible notes, which are set to mature later this month. In Q2, we retired an additional $100 million at face value of our 2025 convertible notes. The real cost associated with this was $153 million, and this resulted in a $53 million charge to other income on a GAAP basis. We did this when our share price was between $170 and $177 per share, with the intent to limit share dilution risk associated with the converts that are coming due. We will repay the $179 million left outstanding in Q3 utilizing net share settlement. Based on current share price levels and when you factor in the impact of the call spread that we purchased in conjunction with issuing the 2025 converts, we now expect share dilution of less than 10,000 shares as we close things out, although this number will be impacted by the share price over the next couple of weeks. Had we not bought back the converts that we've retired in the last couple of quarters, then the share dilution would have been over 700,000 shares. So I'm pleased that we got in front of this. Now let me go through our updated outlook for fiscal year 2025. Starting with the top line, given our performance in the first half and our strong visibility into the second half, we are raising our ARR outlook to $1 billion to $1.01 billion, which reflects growth of 16% to 17% year over year. Confidence in our ARR outlook is informed by, one, strong growth in ARR from ramping deals in the back half with a notable jump in Q4, two, our view into the pipeline for the back half of the year, and three, our continued high win rates. I also want to comment quickly on ARR visiting higher seasonality in Q4 this year due to the timing of ARR ramps. The key dynamic of net new ARR additions in a period is the amount of ARR coming from the backlog or from ramping deals sold in prior periods. Since these ramps are clearly outlined in customer contracts, we have clear visibility into these increases. This year, we will see strong growth in new ARR from ramps in the back half. This is due to the realization of ramps from strong sales activity we experienced last year and in fiscal 2023. With respect to seasonality, this year, we expect nearly three times more ARR from backlog to come in Q4 compared to Q3. This is a significantly larger quarter-over-quarter step up compared to last year. To some extent, this is just how the ramps are landing this year, and these dynamics can shift a bit year to year. But we thought it would be helpful to call out this dynamic to help you all better understand the expected net new ARR increase in Q4. As a reminder, our ARR outlook assumes foreign currency exchange rates of the end of our last fiscal year, and we update ARR exchange rates at year end. If we update ARR today based on current exchange rates, we would see an approximately $9 million negative adjustment. We will certainly quantify this at year end, and we will continue to monitor FX rates throughout the remainder of the fiscal year. For total revenue in fiscal 2025, we now expect between $1.164 billion and $1.174 billion. We expect approximately $653 million in subscription revenue and $718 million in subscription and support revenue. Given higher than expected services bookings in the first half of the year, we now expect services revenue to be approximately $210 million. Turning to margins of profitability, which we'll discuss on a non-GAAP basis, we still expect subscription and support gross margins to be 69% for the year. Our expectation for services margins and total margins also remain unchanged at 12% and 65%. As a result of raising our revenue outlook, and a bit slower hiring than we originally expected, we are lifting our outlook for operating income. We expect GAAP operating income of between $10 million and $20 million and non-GAAP operating income of between $175 million and $185 million for the fiscal year. We expect stock-based compensation to be approximately $160 million, representing 9% growth year over year. We're also increasing our cash flow from operations for the year to be between $230 million and $260 million. Turning to our outlook for Q3, we expect ARR to finish between $942 million and $947 million. Our outlook for total revenue is between $283 million and $289 million. We expect subscription support revenue of approximately $178 million. Subscription and support revenue is tracking around $2 million per day and Q3 has three fewer days than Q2, which explains the modest sequential growth. We expect services revenue of approximately $52 million in Q3. We expect subscription and support margins of between 68% and 69%. Services margins to be around 10% and total gross margins around 64%. Our outlook for non-GAAP operating income is between $36 million and $42 million. Alex, you can now open the call for questions.

Great. Raise your hand if you're ready to ask a question, and we'll get to you.

You called out, and it's very clear the resiliency and date and gravity around the data cloud opportunity today. There's a lot of uncertainty in the world, but carriers clearly need agility here. Wondering on the decisioning angle from carriers how much adaptability and interoperability comes into play in those conversations? And now that you have kind of that tipping point of 50%, maybe how you're thinking about leading into some of those conversations with legacy on-prem customers around what that end of life journey looks like based on prior comments around 100% getting to the cloud over time.

Thanks, Dylan. Yeah, for sure. I would say there's a growing recognition that operating core systems, both claims and policy/underwriting rating and pricing systems on modern platforms with modern capabilities, brings a level of agility to your operations, an insurance operation that enables them to be more competitive. They need to be able to manage indemnity more effectively. They need to be able to manage down cycle times, which increases their expense ratios and profitability. They need to be able to set prices and define rates as effectively as they possibly can. They don't want to be burdened by these legacy systems. Either because the IT execution expense, let's say, for making changes is high, or because they don't have access to the data they need to be able to make the decisions that they need. All that adds up to they need modern systems, and they got to figure out a way to get there. That is absolutely helping us, kind of across the board. Every insurance company in the world is thinking about this. Now, doing these programs, as you're aware, is pretty significant. These are multiyear programs that we've got to kind of slot into their plans over the course of a decade, in some cases. That's just the unfortunate reality. But the pace around which we're having these conversations is really improving, and the quality of the conversations is improving. You can just get a feel and a sense of 'I can't claim it to actually be inevitable', but it kind of feels that way. It's like, we recognize that Guidewire Software, Inc. is distinguishing itself and is probably the right place. That just gives us confidence in what we built and how it's going to positively impact the market. You know, I think that the end of life conversations that we have about our ability to support our on-prem customer base, that's sometimes difficult, but I think we're taking a very mature and careful approach and talking to every single one of our customers about what they expect and need from us, and what they can expect from us, you know, and what we're prepared to do, trying to give everybody as much time to make these decisions as possible. So far, we've received a lot of positive feedback about the approach that we're taking to giving them time to plan and working with them on what the approach is going to be. So I don't know. You add all that up and Guidewire Software, Inc. had a good quarter, and that adds up into a lot of positive visibility for us into the second half and into next fiscal.

That's great. No. No. Very helpful and very clear, the momentum that you guys are seeing. Maybe, Jeff, for you, as a function of that, it's given you a lot of kind of incremental levers to play with across the model, I would think of, and nice to see kind of the upside flowing through. You called out kind of the uptick in hiring in the second half. How do you think about that balance of kind of margin outperformance with the opportunity to reinvest and kind of double down given this opportunity tends to be or seems to be kind of slightly accelerating here as well? Thanks.

Yeah. I mean, we're thrilled with the opportunity to continue to sell into our install base and, you know, add new customers. That is our number one focus, and we're not gonna, you know, focus. We'll have a strong focus on driving continual margin expansion, but we can do that while also continuing to grow into our market. We see some really interesting investment areas, and that's part of the reason why we accelerated some R&D investment this year. It's taken us a little bit longer to get some of that hiring going, but we have line of sight into some accelerated hiring in the back half of the year that will be targeted in some of these interesting investment areas that we're focused on. So we think we're doing we got a healthy balance there between, you know, making sure we're focusing on the growth opportunity in front of us.

Great. Thanks for taking my question. Mike, you touched on kind of the California situation. And, you know, one of the kind of the concerning issues kind of leading up to that was large insurers leaving because of price caps. It seems like maybe some of that is starting to shift back. I saw Allstate is coming back after getting some price caps lifted. Would you characterize this as a tailwind for Guidewire Software, Inc. since you guys disproportionately skew higher tier versus the lower tiers that might have backfilled those large guys that left the state?

Well, I don't know whether overall it's a headwind or a tailwind. I would say generally, there is recognition that a lot of the insurance policies in the state of California probably need to be repriced, and the state of California is working through that with our insurance customers in a proactive way. I think it's obviously catastrophic what happened in LA and incredibly unfortunate, but everyone recognizes that, because of that, insurance is very important for the state of California. I think there's a lot of insurance companies who are excited to find a way to participate in that market and help provide that service to consumers like me, honestly, who live in the state of California. That dynamic is generally helpful for Guidewire Software, Inc. I don't know that it's like we're better suited or we're suited, but it's just well-suited to what I'd say, like bringing modern technology to the insurance industry so that we can price risk effectively, that we can manage claims effectively, that we can manage catastrophes, when and if they occur as efficiently as possible, and all of that tends to support our core value proposition. So that's how I would frame it.

Yeah. I mean, look. Embedded in our guide is relatively modest margin expansion in the back half of the year off of the first half of the year or kind of remaining relatively the same? We really manage and measure our progress on this metric on an annual basis. And quarter to quarter, there may be some small fluctuations based on certain customer go-live events where usage patterns tick up or when AWS credits get realized. But we generally think about this on how we manage the full year, and we're pleased with the amount of expansion we're expecting to see this year, and we expect to see that, you know, to continue to steadily march towards our near-term and longer-term targets as we look out into the future.

Hello, everyone. Mike, initially, we recall you being skeptical about the application of AI. What are you seeing today that makes you feel that AI could be a game changer? Is it just about modernizing core systems and streamlining workflows, or do you think there is an opportunity to leverage extensive data to create value for your customers? And is Guidewire Software, Inc. positioned well, with the access and rights to this enormous data that calls your customers to provide some competitive offering?

Yeah. Thanks for the question. So first of all, I would say the insurance industry, in our opinion, is generally well-positioned to benefit a great deal from generative AI. There are a number of areas that we are working on right now in collaboration with customers and prospects around the application of generative AI to insurance use cases. I think we are hopeful and excited about the potential to increase the productivity of development teams working with Guidewire Software, Inc. and that provides a boost to the industry and a benefit to our customers. We're excited about the application of generative AI to the claims adjusters and the work that they need to do, interacting with claims files, and documents and the interactions that they have with claimants and managing that very, very complicated business processes effectively. We also think that there's a significant opportunity for generative AI in underwriting, specifically around document management evaluation of submissions, comparison of what the underwriters are reading in those summarized documents versus the risk appetites carriers have. Just generally improving the efficiency of the underwriting process. So, like, those are three very high-level examples of where I think it will be applied, and more excited to play a part in that. Also would say there's a we had an interesting conversation with a set of very senior IT executives in the industry, and they said there's also a huge opportunity for us in what you might call classic AI or just straightforward machine learning. Associated with the shared data asset that we can collect and manage on behalf of all of our cloud customers. Regardless of large language models and generative AI, there's an opportunity to apply artificial intelligence and machine learning to that use case, improve business efficiencies. So very, very excited about all of this. But I always remind everybody at Guidewire Software, Inc. that first and foremost, our job is to make sure that every single core system project that we do, that we embark on with our customers is successful. I want to maintain that perfect track record or as close to perfect as we possibly can. I want to invest in ensuring that we are winning every single core system worldwide that we compete in and making sure that those programs go successfully. Now we've created some space in the business model at Guidewire Software, Inc. over the past couple of years. It's very positive, and Jeff kind of referenced that in terms of our ability to hire. Our ability to tackle these incremental use cases. So we're excited about that. It's not the number one priority at Guidewire Software, Inc. right now. The number one priority at Guidewire Software, Inc. right now, like I said, is to make sure these programs go well, to make sure we can continue to win in our core business. We're doing that super effectively. I think that strategy is working very well for us. I think we actually are incredibly well positioned to bring tangible real benefit based on generative AI to the P&C industry. But we're gonna do that carefully.

Alright. Wonderful. Thanks so much. Really nice to see continued progress in the quarter. Just two for me. Mike, you talked about some of these platform deals that you're seeing with larger insurers. Maybe can you walk us through, you know, where are their opportunities you see to consolidate budget within your existing base? Right? I know you've historically had a lot of customers that may use you for one line or, you know, use you for two products and use a competitor for another line or for another set of products. Where do you see those consolidation opportunities, and what kind of tools do you have in your arsenal to maybe use kind of the innovation that you've been bringing as a consolidation opportunity that I’ve got a follow-up.

Yeah. It's a great question, and I'll answer it this way. I think for a lot of our big on-prem customers, they're generally very successful and happy with their on-prem implementations of Guidewire Software, Inc. And so that has made it challenging for us to sell them the new thing in the cloud upgrade. You know, when they're successful and they're operational and they're reaping the benefits of the investment that they've made, in that implementation, for them to think about the next phase is sometimes challenged because they've got other priorities. What we're always looking for and what I think you're kind of pointing to is what's a compelling event that they have that can align to a cloud upgrade on the Guidewire Software, Inc. side. Is there an incremental initiative around a new line of business or a consolidation of claims operations across different lines of business that create a logical program to do something significant with Guidewire Software, Inc. that is logical then to attach to a cloud upgrade? Our patience in working with these customers about what their long-term strategies are around their business objectives helps us get our cloud upgrade opportunities aligned to what makes sense for them. In each case, I can think of a compelling business event that is behind the uptick in the conversation that we're having with that customer. As long as we can keep those things aligned, I think it's just like I said, it's slowly accelerating the confidence that we have in those ultimate cloud upgrades.

Sure. I think the team has done a good job ensuring that we're selling our services, but we're working very closely with the partner ecosystem and the SI community to figure out what the rules of engagement and how we trade off and work together to tackle this massive opportunity. We've seen services revenue tick up this year. It's a highly strategic organization. We have the capacity to deliver, as I've said previously, a little over $200 million of services revenue. We are executing towards that number. Longer term, we expect to see those margins tick up a little bit. But, again, the primary focus of this organization is towards that mission that Mike highlighted, to ensure that every single one of our customer programs are successful. The team is looking at how we use Gen AI certainly in AI in implementation programs, around developer productivity. We're also for the first time, doing a little bit of an expansion of our services organization into the India office to create some avenues for some lower cost delivery options for us that could also help long-term on the margins. But again, our focus here will be maintaining a very healthy services organization that is a highly strategic function for us, getting it to an appropriate margin, but one that's primary goal is making sure that software implementations are successful.

Great. Thank you. Mike, I want to follow up on your answer to Rishi's question in cloud migrations there. So maybe not a new motion to push for kind of that concurrent cross-sell at the time of migration, but any color on how much that customer willingness has increased over the last year or so? Is there any way to quantify that if you take another center at the time of upgrading to the cloud and it only adds, like, x percent to the cost of the time? Like, how much of a benefit is it to the customer to take that extra cross-sell at point of migration versus doing them separately?

I wouldn't say that there's really an economic driver behind that bundling or that connection of the two things. It's more about getting familiar with the new operating model, getting the teams trained up and comfortable with our cloud platform, the Guidewire Software, Inc. applications in the cloud. That sort of just creates the logical conclusion that we should do these kinds of programs, not exactly simultaneously, but the decision should be made in conjunction with one another. I don’t think there's any, like, one thing that I would point to that says this is causing us to have a little bit more confidence in the future as it relates to these large companies. It's just more maturity of the platform. It's the track record of success. It's our confidence and our ability to distinguish ourselves in the market, you know, certainly vis-à-vis three or four years ago. Just steadily improving quarter after quarter. It's just a continued track record of success that builds confidence, not just with us and our customers, but also the systems integrators and the general eco. The risks associated with making that decision to go to Guidewire Software, Inc. cloud are just lower and lower every day. Look, I don't at all take that for granted. Everybody at Guidewire Software, Inc. works incredibly hard to make sure that that remains true. But we've done very well for the past couple of years, and it's gonna continue. I have confidence it can continue to improve. I think that is what's behind this uptick in the perspective of these customers.

Great. Thanks so much for taking the questions. I guess Europe was a notable call-out for you guys. Could you just bifurcate how the cloud conversation is evolving between the major geographical footprints and maybe any notable similarities or differences you're seeing in those conversations would be helpful.

Yeah. Thanks very much. Certainly, if you think back over the past five years, there was a trend towards America, Canada leading the charge. But in the last, I don't know, I want to say six quarters or so, we're really seeing a step up all over the globe. Like, we have successfully won and implemented cloud deals all over the world: Asia Pacific, Japan, Europe, multiple countries in Europe. Generally, I think that the business model, the concepts, the approach, it's being well vetted. It's well accepted. There are still concerns, but it's not so much about cloud. It's just there's other things. It's not like a philosophical difference in architecture. The architecture is sound and the architecture works, and we've got customers that can validate that it works all over the world in every country that we operate. Whereas it was kind of led by America and followed by me and APAC, it certainly is a difference just because of lead times. We are seeing strong support and momentum in each of the theaters where we operate now.

Hey, guys. Thanks for taking the questions here. Mike, nice to see the full suite momentum that you called out in the quarter. Just wondering when you look at the advantage of going full suite on cloud, how would that compare to what customers had done on-prem with full suite in the past? And what is getting these customers that are going full suite across the goal line? Is it a procurement advantage? Is it a data advantage? Are there other factors out there? What do you see in today?

I think the biggest thing is our proven track record of success. This is the most important thing. You know, whereas maybe if you're hesitant about is this really gonna work and is the right model, then you kind of make a decision that's like what do we need? What's the burning platform that we need to make a decision on right now? And then delay that secondary decision into some future period. The more confidence that we can create in the market based on our track record, ultimately this makes sense. There's more incentive for us and for the customer to sort of do that full suite deal all at once. That is the business dynamic that's really driving this. It’s kind of simple. We have three applications. What do you use for claims? What do you use for your policy administration? Do you use for your billing platform? That conversation is going to happen every single time we talk to a customer about any of those applications. So to the degree that there is confidence that ultimately we are going to go with you for the full suite, it's logical to then turn that into one deal. When there's anxieties about is it the right platform and is it really gonna work, those are kind of like from a couple years ago. There's a sense that it's logical to delay that decision. But more and more, it's just a little bit more straightforward for us to be able to make a full suite argument right at that initial point of sale. Now, it doesn't happen every time. Some customers, based on the complexity of their implementations and the lines of business that they run, it doesn't make sense to do that. But that conversation does certainly happen as part of the deal cycle for us.

Yeah. Thank you for taking the question. One quick one actually. So earlier, you mentioned the one competitive takeaway during the quarter, I think, at a subsidiary, a larger insurer. The question, though, is, what factors do you think functionality otherwise that is contributing to the competitive takeaways? And are you seeing a shift in the competitive landscape, either in your favor or maybe competitors now getting more aggressive?

Yeah. I think you're typically gonna see a competitive takeaway when either there's some upgrade cycle that is necessary on a competitive installed application that where there's a desire to reassess and decide for a new platform. Or a failed implementation. We see both. There is, like, I call it out just because we're so focused on these successful implementations. It is there is a possibility that these implementations just don't succeed. They'll go to market; we can get a new vendor to run the program. So we see both of those. I don’t think you're gonna name names, but I think we still compete. For all of our deals. There's still a competitive marketplace. The win rates have steadily been improving quarter over quarter. A lot has to do with the track record of success and the investment we've been able to make in the products and application in the platform and the products. The win rates have improved, but we compete all over the world with different vendors.

Well, hey. I just wanna thank everybody for joining us on the call. It was a great quarter. Couldn't be more excited about the second half and the momentum that we've established. We look forward to talking to a lot of you throughout the quarter. Otherwise, we'll see you on the Q3 call. Thanks very much.