Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________

FORM 10-Q

______________________________________________________________

(Mark one)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2023

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from	to	.

Commission file number: 001-35394

______________________________________________________________

Guidewire Software, Inc.

(Exact name of registrant as specified in its charter)

______________________________________________________________

Delaware	36-4468504	
(State or other jurisdiction of	(I.R.S. Employer	
Incorporation or organization)	Identification No.)	
970 Park Place, Suite 200	94403	
San Mateo, California		
(Address of principal executive offices)	(Zip Code)	

(650) 357-9100

(Registrant’s telephone number, including area code)

______________________________________________________________

2850 South Delaware Street, Suite 400

San Mateo, California 94403
(Former name, former address and former fiscal year, if changed since last report)

______________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered	
Common Stock, $0.0001 par value	GWRE	New York Stock Exchange	

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of

1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Table of Contents

	Table of Contents					
Large accelerated filer	☒	Accelerated filer	☐	
Non-accelerated filer	☐	Smaller reporting company	☐	
				Emerging growth company	☐	

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes	☐	No ☒

On May 30, 2023, the registrant had 81,444,895 shares of common stock issued and outstanding.

	Table of Contents											
											Guidewire Software, Inc.											
											Index											
	Part I – Financial Information												
	Item 1.	Financial Statements (unaudited):							3		
																						
			Condensed Consolidated Balance Sheets as of April 30, 2023 and July 31, 2022		4		
																					
			Condensed Consolidated Statements of Operations for the Three and Nine Months Ended April 30, 2023 and 2022	5		
																					
			Condensed Consolidated Statements of Comprehensive Income (Loss) for the	Three and Nine Months Ended April 30,	6		
			2023 and 2022								
																					
			Condensed Consolidated Statements of Changes in Stockholders’ Equity for the		Three and Nine Months Ended April 30,	7		
			2023 and 2022								
																			
			Condensed Consolidated Statements of Cash Flows for the Nine Months Ended April 30, 2023 and 2022	9		
																					
			Notes to Condensed Consolidated Financial Statements							11		
																
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25		
																			
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk							44		
																			
	Item 4.	Controls and Procedures							45		
																		
	Part II – Other Information							46		
																	
	Item 1.	Legal Proceedings						46		
																	
	Item 1A.	Risk Factors								46		
																
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds							69		
															
	Item 6.	Exhibits							70		
																								
	Signatures																		71		

Table of Contents

FORWARD-LOOKING STATEMENTS

The section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as other parts of this Quarterly Report on Form 10-Q 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, 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 “Part II – Other Information – Item 1A. Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q are based on information available to us as of the filing date of this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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.

SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

The principal risks and uncertainties affecting our business include the following:

•	growth prospects of the property and casualty (“P&C”) insurance industry and our company;

•	the developing market for subscription services and uncertainties related to this sales and delivery model, including the migration of our existing term license customers to cloud-based offerings on a subscription basis, the security of our cloud-based operations, or failure to meet stipulated service levels with our subscription services;

•	our gross and operating margins and factors that affect such margins, including costs related to operating, securing and enhancing our subscription services;

•	trends in and timing of future sales, including the mix between license and subscription revenue and seasonality;

•	our competitive environment and changes thereto;

•	competitive attributes of our software applications and delivery models;

•	change in our revenue mix resulting in potential declines in our subscription and support gross margin or our services gross margin;

•	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”);

•	the timing, success, and number of professional services engagements and the billing rates and utilization of our professional services employees and contractors;

•	challenges to further increase sales both in the United States and internationally;

•	potential failure of any of our established services or products to satisfy customer demands or to maintain market acceptance;

•	our sales and implementation cycles are lengthy and variable, depend upon factors outside our control, and could cause us to expend significant time and resources prior to generating revenue;

•	our large customers have substantial negotiating leverage, which may require that we agree to terms and conditions that result in increased cost of revenue, decreased revenue, and lower average selling prices and gross margins;

Table of Contents

•	our business depends on customers renewing and expanding their license, support, and subscription contracts for our services and products;

•	potential inability to develop, introduce, and market new and enhanced versions of our services and products;

•	effectiveness of our research and development and cloud operations investment and efforts;

•	our ability to comply with current and evolving local and foreign data privacy laws, including the General Data Protection Regulation in the European Union (“EU”) and in the United Kingdom (“U.K.”), the California Consumer Privacy Act, the California Privacy Rights Act, and regulations in various other jurisdictions in the United States and abroad, and maintain the security of our customers’ data, our cloud-based services or products, and the related costs and liabilities that we may incur;

•	retaining existing and hiring new personnel;

•	expenses to be incurred, and benefits to be achieved, from our acquisitions;

•	our provision for tax liabilities, judgments related to revenue recognition, and other critical accounting estimates;

•	the timing and amount of any share repurchases by us;

•	the impact of new or revised regulations, laws, including tax laws in jurisdictions in which we operate, and accounting standards;

•	our ability to apply accounting guidance that requires management to make estimates and assumptions and to adapt to and interpret the requirements of new guidance, to clearly explain to stockholders how new guidance affects reporting of our results of operations, and to develop and maintain effective disclosure controls and procedures or internal controls to prevent errors and fraud;

•	our exposure to market risks, including geographical and political events such as escalation in the ongoing conflict between Russia and Ukraine, escalating tensions in the South China Sea, supply chain disruptions, bank failures and associated financial instability and crises, and inflation, that may negatively impact our customers, partners, and vendors or our business operations;

•	data privacy concerns could result in regulatory changes and impose additional costs and liabilities on us and limit our use of information;

•	the effect of uncertainties related to global pandemics and any mutations or related strains of harmful viruses on the U.S. and global economies, our business, our employees, results of operations, financial condition, demand for our products, sales and implementation cycles, and the health of our customers’ and partners’ businesses;

•	data security breaches of our cloud-based services or products or unauthorized access to our customers’ or employees’ data;

•	our stock price may be volatile, which could result in securities class action litigation against us;

•	our ability to successfully defend litigation brought against us; and

•	our ability to satisfy future liquidity requirements.

The summary risk factors described above should be read together with the text of the Risk Factors included in Item 1A of Part II of this Quarterly Report on Form 10-Q and the other information set forth in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes thereto, as well as in other documents that we file with the U.S. Securities and Exchange Commission (the “SEC”). Additional risks and uncertainties beyond those summarized above or discussed elsewhere in this Quarterly Report on Form 10-Q may apply to our business, activities, or operations as currently conducted or as we may conduct them in the future or in the markets in which we operate or may in the future operate.

_____________

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.”

2

Table of Contents

PART I – Financial Information

ITEM 1.	Financial Statements (unaudited)

3

	Table of Contents							
		GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES					
		CONDENSED CONSOLIDATED BALANCE SHEETS						
		(unaudited, in thousands)							
				April 30,			July 31,		
				2023			2022		
									
ASSETS							
CURRENT ASSETS:							
	Cash and cash equivalents	$	266,615	$	606,303		
	Short-term investments		421,202			369,865		
	Accounts receivable, net of allowances of $42 and $359, respectively		129,068			143,797		
	Unbilled accounts receivable, net		128,166			71,515		
	Prepaid expenses and other current assets		61,454			61,223		
	Total current assets		1,006,505			1,252,703		
Long-term investments		119,098			187,507		
Unbilled accounts receivable, net		14,541			13,914		
Property and equipment, net		53,595			80,740		
Operating lease assets		44,721			90,287		
Intangible assets, net		15,840			21,361		
Goodwill		372,214			372,192		
Deferred tax assets, net		230,526			191,461		
Other assets		59,486			56,732		
TOTAL ASSETS	$	1,916,526	$	2,266,897		
LIABILITIES AND STOCKHOLDERS’ EQUITY							
							
CURRENT LIABILITIES:							
	Accounts payable	$	35,578	$	40,440		
	Accrued employee compensation		72,548			90,962		
	Deferred revenue, net		143,228			170,776		
	Other current liabilities		24,074			35,340		
	Total current liabilities		275,428			337,518		
Lease liabilities		36,518			105,123		
Convertible senior notes, net		396,743			358,216		
Deferred revenue, net		5,688			7,500		
Other liabilities		7,042			6,883		
	Total liabilities		721,419			815,240		
STOCKHOLDERS’ EQUITY:							
	Common stock		8			8		
	Additional paid-in capital		1,794,531			1,755,476		
	Accumulated other comprehensive income (loss)		(15,076)			(19,845)		
	Retained earnings (accumulated deficit)		(584,356)			(283,982)		
	Total stockholders’ equity		1,195,107			1,451,657		
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,916,526	$	2,266,897		

See accompanying Notes to Condensed Consolidated Financial Statements.

4

	Table of Contents													
		GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES									
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS								
		(unaudited, in thousands except shares and per share amounts)								
				Three Months Ended			Nine Months Ended		
				April 30,				April 30,			
				2023			2022			2023			2022		
Revenue:													
	Subscription and support	$	107,499	$	86,851	$	312,321	$	250,138		
	License		50,602			53,894			164,669			163,845		
	Services		49,389			56,703			158,393			154,032		
	Total revenue		207,490			197,448			635,383			568,015		
Cost of revenue:													
	Subscription and support		52,281			51,831			156,896			148,157		
	License		1,243			1,951			4,961			6,544		
	Services		55,048			59,742			178,993			158,805		
	Total cost of revenue		108,572			113,524			340,850			313,506		
Gross profit:													
	Subscription and support		55,218			35,020			155,425			101,981		
	License		49,359			51,943			159,708			157,301		
	Services		(5,659)			(3,039)			(20,600)			(4,773)		
	Total gross profit		98,918			83,924			294,533			254,509		
Operating expenses:													
	Research and development		63,055			58,440			182,927			169,368		
	Sales and marketing		46,864			44,615			138,113			134,127		
	General and administrative		46,815			43,273			129,078			118,252		
	Total operating expenses		156,734			146,328			450,118			421,747		
Income (loss) from operations		(57,816)			(62,404)			(155,585)			(167,238)		
	Interest income		6,627			1,000			16,657			2,373		
	Interest expense		(1,683)			(4,885)			(5,034)			(14,512)		
	Other income (expense), net		(3,356)			(6,932)			(5,889)			(13,794)		
Income (loss) before provision for (benefit from) income taxes		(56,228)			(73,221)			(149,851)			(193,171)		
	Provision for (benefit from) income taxes		(10,660)			(15,777)			(25,776)			(43,770)		
Net income (loss)	$	(45,568)	$	(57,444)	$	(124,075)	$	(149,401)		
Net income (loss) per share:													
													
	Basic and diluted	$	(0.56)	$	(0.69)	$	(1.51)	$	(1.79)		
Shares used in computing net income (loss) per share:													
													
	Basic and diluted		81,832,244			83,689,429			82,407,950			83,440,231		

See accompanying Notes to Condensed Consolidated Financial Statements.

5

	Table of Contents													
		GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES									
		CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)						
		(unaudited, in thousands)											
				Three Months Ended			Nine Months Ended		
				April 30,				April 30,			
				2023			2022			2023			2022		
Net income (loss)	$	(45,568)	$	(57,444)	$	(124,075)	$	(149,401)		
Other comprehensive income (loss):													
	Foreign currency translation adjustments		(356)			(2,769)			1,828			(5,856)		
	Unrealized gains (losses) on available-for-sale securities		1,851			(5,163)			4,516			(8,818)		
	Tax benefit (expense) on unrealized gains (losses) on available-for-sale		(421)			1,218			(920)			2,072		
	securities													
	Reclassification adjustment for realized gains (losses) included in net income		(89)			81			(655)			173		
	(loss)													
	Total other comprehensive income (loss)		985			(6,633)			4,769			(12,429)		
Comprehensive income (loss)	$	(44,583)	$	(64,077)	$	(119,306)	$	(161,830)		

See accompanying Notes to Condensed Consolidated Financial Statements

6

Table of Contents

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited, in thousands except share amounts)
							Additional			Accumulated			Retained			Total		
	Common stock						other			earnings					
				paid-in			comprehensive			(accumulated			stockholders’		
	Shares			Amount			capital			income (loss)			deficit)			equity		
Balance as of July 31, 2022	84,084,209		$	8		$	1,755,476		$	(19,845)		$	(283,982)		$	1,451,657		
Net income (loss)	—			—			—			—			(69,318)			(69,318)		
Issuance of common stock upon vesting of restricted stock	373,380			—			—			—			—			—		
units ("RSUs")																		
Stock-based compensation	—			—			35,249			—			—			35,249		
Repurchase and retirement of common stock	(2,581,478)			—			(40,000)			—			(160,000)			(200,000)		
Foreign currency translation adjustment	—			—			—			(2,701)			—			(2,701)		
Unrealized gain (loss) on available-for-sale securities, net of	—			—			—			(1,201)			—			(1,201)		
tax																		
Reclassification adjustment for realized gain (loss) on	—			—			—			(216)			—			(216)		
available-for-sale securities, included in net income (loss)																		
Adoption of Accounting Standards Update ("ASU") 2020-06	—			—			(68,003)			—			39,694			(28,309)		
Balance as of October 31, 2022	81,876,111		$	8		$	1,682,722		$	(23,963)		$	(473,606)		$	1,185,161		
Net income (loss)	—			—			—			—			(9,189)			(9,189)		
Issuance of common stock upon exercise of stock options	217			—			2			—			—			2		
Issuance of common stock upon vesting of RSUs	336,440			—			—			—			—			—		
Stock-based compensation	—			—			36,296			—			—			36,296		
Foreign currency translation adjustment	—			—			—			4,885			—			4,885		
Unrealized gain (loss) on available-for-sale securities, net of	—			—			—			3,367			—			3,367		
tax																		
Reclassification adjustment for realized gain (loss) on	—			—			—			(350)			—			(350)		
available-for-sale securities, included in net income (loss)																		
Balance as of January 31, 2023	82,212,768		$	8		$	1,719,020		$	(16,061)		$	(482,795)		$	1,220,172		
Net income (loss)	—			—			—			—			(45,568)			(45,568)		
Issuance of common stock upon exercise of stock options	6,365			—			225			—			—			225		
Issuance of common stock upon vesting of RSUs	347,370			—			—			—			—			—		
Stock-based compensation	—			—			35,286			—			—			35,286		
Repurchase and retirement of common stock	(855,192)			—			40,000			—			(55,993)			(15,993)		
Foreign currency translation adjustment	—			—			—			(356)			—			(356)		
Unrealized gain (loss) on available-for-sale securities, net of	—			—			—			1,430			—			1,430		
tax																		
Reclassification adjustment for realized gain (loss) on	—			—			—			(89)			—			(89)		
available-for-sale securities, included in net income (loss)																		
Balance as of April 30, 2023	81,711,311		$	8		$	1,794,531		$	(15,076)		$	(584,356)		$	1,195,107		

7

Table of Contents

							Additional			Accumulated			Retained			Total		
	Common stock						other			earnings					
				paid-in			comprehensive			(accumulated			stockholders’		
	Shares			Amount			capital			income (loss)			deficit)			equity		
Balance as of July 31, 2021	83,194,157		$	8		$	1,617,204		$	(6,218)		$	(66,100)		$	1,544,894		
Net income (loss)	—			—			—			—			(51,276)			(51,276)		
Issuance of common stock upon exercise of stock options	1,518			—			17			—			—			17		
Issuance of common stock upon vesting of RSUs	335,653			—			—			—			—			—		
Stock-based compensation	—			—			32,533			—			—			32,533		
Repurchase and retirement of common stock	(226,172)			—			—			—			(26,262)			(26,262)		
Foreign currency translation adjustment	—			—			—			(724)			—			(724)		
Unrealized gain (loss) on available-for-sale securities, net of	—			—			—			(868)			—			(868)		
tax																		
Reclassification adjustment for realized gain (loss) on	—			—			—			69			—			69		
available-for-sale securities, included in net income (loss)																		
Balance as of October 31, 2021	83,305,156		$	8		$	1,649,754		$	(7,741)		$	(143,638)		$	1,498,383		
Net income (loss)	—			—			—			—			(40,681)			(40,681)		
Issuance of common stock upon exercise of stock options	7,230			—			80			—			—			80		
Issuance of common stock upon vesting of RSUs	329,987			—			—			—			—			—		
Stock-based compensation	—			—			38,148			—			—			38,148		
Repurchase and retirement of common stock	(96,373)			—			—			—			(11,189)			(11,189)		
Foreign currency translation adjustment	—			—			—			(2,363)			—			(2,363)		
Unrealized gain (loss) on available-for-sale securities, net of	—			—			—			(1,933)			—			(1,933)		
tax																		
Reclassification adjustment for realized gain (loss) on	—			—			—			23			—			23		
available-for-sale securities, included in net income (loss)																		
Balance as of January 31, 2022	83,546,000		$	8		$	1,687,982		$	(12,014)		$	(195,508)		$	1,480,468		
Net income (loss)	—			—			—			—			(57,444)			(57,444)		
Issuance of common stock upon exercise of stock options	1,684			—			18			—			—			18		
Issuance of common stock upon vesting of RSUs	268,543			—			—			—			—			—		
Stock-based compensation	—			—			33,241			—			—			33,241		
Repurchase and retirement of common stock	—			—			—			—			—			—		
Foreign currency translation adjustment	—			—			—			(2,769)			—			(2,769)		
Unrealized gain (loss) on available-for-sale securities, net of	—			—			—			(3,945)			—			(3,945)		
tax																		
Reclassification adjustment for realized gain (loss) on	—			—			—			81			—			81		
available-for-sale securities, included in net income (loss)																		
Balance as of April 30, 2022	83,816,227		$	8		$	1,721,241		$	(18,647)		$	(252,952)		$	1,449,650		

See accompanying Notes to Condensed Consolidated Financial Statements.

8

Table of Contents

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Nine Months Ended April 30,		
	2023		2022		
CASH FLOWS FROM OPERATING ACTIVITIES:						
Net income (loss)	$	(124,075)	$	(149,401)	
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:						
Depreciation and amortization		19,911			25,745	
Amortization of debt discount and issuance costs		1,274			10,719	
Amortization of contract costs		13,000			9,720	
Stock-based compensation		106,294			103,033	
Changes to allowance for credit losses and revenue reserves		(304)			2,707	
Deferred income tax		(31,034)			(47,457)	
Amortization of premium (accretion of discount) on available-for-sale securities, net		(2,458)			4,615	
Accelerated depreciation related to lease assignment		26,921			—	
Gain from lease assignment		(18,419)			—	
Other non-cash items affecting net income (loss)		(315)			221	
Changes in operating assets and liabilities:						
Accounts receivable		14,756			15,530	
Unbilled accounts receivable		(57,278)			(18,450)	
Prepaid expenses and other assets		(12,718)			(13,664)	
Operating lease assets		(11,348)			8,009	
Accounts payable		(6,725)			4,287	
Accrued employee compensation		(18,392)			(32,255)	
Deferred revenue		(29,360)			(31,218)	
Lease liabilities		953			(9,891)	
Other liabilities		(5,525)			(3,782)	
Net cash provided by (used in) operating activities		(134,842)			(121,532)	
CASH FLOWS FROM INVESTING ACTIVITIES:						
Purchases of available-for-sale securities		(358,823)			(506,006)	
Sales of available-for-sale securities		339,849			64,746	
Maturities of available-for-sale securities		42,370			627,527	
Purchases of property and equipment		(2,614)			(7,976)	
Capitalized software development costs		(8,877)			(9,187)	
Acquisition of strategic investments		(8,051)			(10,521)	
Acquisition of business, net of acquired cash		—			(43,830)	
Net cash provided by (used in) investing activities		3,854			114,753	
CASH FLOWS FROM FINANCING ACTIVITIES:						
Proceeds from issuance of common stock upon exercise of stock options		227			116	
Repurchase and retirement of common stock		(213,993)			(37,451)	
Net cash provided by (used in) financing activities		(213,766)			(37,335)	
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash		1,659			(5,641)	
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(343,095)			(49,755)	
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period		614,686			384,910	
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period	$	271,591	$	335,155	

`

9

Table of Contents

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:					
Cash paid for interest	$	5,000	$	5,000	
Cash paid for income taxes, net of tax refunds	$	4,417	$	3,672	
Accruals for purchase of property and equipment	$	2,748	$	164	
Accruals for capitalized software development costs	$	804	$	910	
Accrual for shares repurchased	$	2,000		—	

See accompanying Notes to Condensed Consolidated Financial Statements.

10

Table of Contents

GUIDEWIRE SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. The Company and Summary of Significant Accounting Policies and Estimates

Company

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 operations, digital engagement, analytics, and artificial intelligence 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.

Basis of Presentation and Consolidation

The Company’s condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The condensed 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 interim periods presented. All intercompany balances and transactions have been eliminated in consolidation. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted under the rules and regulations of the SEC.

These condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and related notes, together with management’s discussion and analysis of financial condition and results of operations, presented in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2022.

Reclassification

Effective as of the beginning of fiscal year 2023, the Company revised its allocation methodology and presentation of certain expenses. The change resulted in facilities expenses, information technology infrastructure and software expenses, and information security infrastructure and software expenses being allocated to all functional departments based on headcount, with the remaining previously allocated costs being recorded within general and administrative expenses. The impact was an increase in general and administrative expenses and a decrease in cost of revenue and other operating expense categories. Accordingly, prior period amounts have been reclassified to conform to the current period presentation in the Company's condensed consolidated financial statements and the accompanying notes presented herein.

Use of Estimates

In preparing the condensed consolidated financial statements and related disclosures in conformity with GAAP and pursuant to the rules and regulations of the SEC, the Company must make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ materially from these estimates.

Significant Accounting Policies

There have been no changes in the Company’s significant accounting policies from those that were disclosed in the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended July 31, 2022, except for those disclosed herein.

Convertible Senior Notes

In March 2018, the Company issued $400.0 million aggregate principal amount of 1.25% Convertible Senior Notes due 2025 (the “Convertible Senior Notes”). Prior to the adoption of ASU 2020-06 on August 1, 2022, upon the issuance of the Convertible Senior Notes, the Company separated the Convertible Senior Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that did not have an associated convertible feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the Convertible Senior Notes as a whole. The difference between the principal amount of the Convertible Senior Notes and the liability component was initially recorded as a debt discount and was amortized as interest expense using the effective interest method over the term of the Convertible Senior Notes. Refer to Recently Adopted Accounting Pronouncements section for the adoption impact of ASU 2020-06.

11

Table of Contents

Restricted Cash

Unearned acquisition consideration holdback subject to service conditions is held in escrow and considered restricted cash. At April 30, 2023, $2.9 million was included in prepaid expenses and other current assets and $2.1 million was included in other assets in the condensed consolidated balance sheet.

Concentration of Credit Risk

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 condensed consolidated balance sheets are in excess of amounts that are insured by the Federal Deposit Insurance Corporation.

One customer accounted for 10% or more of the Company's revenue in the three months ended April 30, 2023 and 2022. No customer accounted for 10% or more of the Company’s revenue in the nine months ended April 30, 2023 or 2022. No customer accounted for 10% or more of the Company's accounts receivable as of April 30, 2023 and July 31, 2022.

Recently Adopted Accounting Pronouncements

Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

On August 1, 2022, the Company adopted ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments. In addition, this ASU amends the requirement for calculating diluted earnings per share for convertible instruments by using the “if-converted” method instead of the treasury stock method. The use of the “if-converted” method will not impact the Company's diluted earnings per share in the periods in which the Company has a net loss.

The Company adopted the ASU using the modified retrospective transition method, and the prior period condensed consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for that period. As a result of the adoption, the Company accounts for the Convertible Senior Notes as a single liability and no longer separately accounts for the liability and equity components. The adoption of this ASU also resulted in the de-recognition of a deferred tax liability, which represented a basis difference in the face value of the Convertible Senior Notes due to the previous allocation of a portion of the proceeds to the equity component. Additionally, the Company recorded a cumulative adjustment to decrease the beginning balance of the accumulated deficit on August 1, 2022, which represented a reversal of the previously recorded amortization of debt discount through July 31, 2022.

The following table summarizes the adjustments made to the condensed consolidated balance sheet as of August 1, 2022 as a result of applying the modified retrospective adoption method (in thousands):

					Cumulative effect			Adjusted beginning		
	Balances reported as			adjustment due to					
			adoption of ASU 2020-		balance as of August 1,		
		of July 31, 2022			06			2022		
Deferred tax assets, net	$	191,461	$	8,944	$	200,405		
Convertible senior notes, net		(358,216)			(37,253)			(395,469)		
Additional paid-in capital		(1,755,476)			68,003			(1,687,473)		
Accumulated deficit		283,982			(39,694)			244,288		

Other Accounting Pronouncements

Other recent accounting pronouncements that will be applicable to the Company are not expected to have a material impact on its present or future financial statements.

12

	Table of Contents													
2. Revenue												
	Disaggregation of Revenue												
	Revenue by service or product type is as follows (in thousands):												
					Three Months Ended			Nine Months Ended	
					April 30,				April 30,		
					2023			2022			2023			2022	
	Subscription and support													
	Subscription	$	89,091	$	66,419	$	254,083	$	186,419	
	Support		18,408			20,432			58,238			63,719	
	License												
	Term license		50,556			53,848			164,512			163,703	
	Perpetual license		46			46			157			142	
	Services			49,389			56,703			158,393			154,032	
	Total revenue	$	207,490	$	197,448	$	635,383	$	568,015	

Revenue by service or product type and by geography is as follows (in thousands):

				Three Months Ended April 30, 2023					
	Subscription			License			Services			Total		
	and support											
													
United States	$	71,764	$	33,528	$	33,100	$	138,392		
Canada		18,176			1,932			4,341			24,449		
Other Americas		1,441			439			892			2,772		
Total Americas		91,381			35,899			38,333			165,613		
United Kingdom		2,385			4,334			451			7,170		
Other EMEA		7,934			4,017			7,276			19,227		
Total EMEA		10,319			8,351			7,727			26,397		
Total APAC		5,799			6,352			3,329			15,480		
Total revenue	$	107,499	$	50,602	$	49,389	$	207,490		

			Three Months Ended April 30, 2022					
			Subscription			License			Services		Total		
			and support										
															
United States	$	57,690	$	35,859	$	35,842		$	129,391			
Canada			14,276			3,016			8,585			25,877			
Other Americas			1,053			454			438			1,945			
Total Americas			73,019			39,329			44,865			157,213			
United Kingdom			2,288			4,210			946			7,444			
Other EMEA			5,991			3,934			8,273			18,198			
Total EMEA			8,279			8,144			9,219			25,642			
Total APAC			5,553			6,421			2,619			14,593			
Total revenue	$	86,851	$	53,894	$	56,703		$	197,448			
	13														

	Table of Contents															
					Nine Months Ended April 30, 2023				
				Subscription				License			Services		Total		
				and support											
																
United States	$	210,189	$	90,458	$	107,925		$	408,572		
Canada			51,763				11,537			14,818			78,118		
Other Americas			4,397				1,291			1,997			7,685		
	Total Americas			266,349				103,286			124,740			494,375		
United Kingdom			7,535				16,273			1,758			25,566		
Other EMEA			21,424				18,211			24,127			63,762		
	Total EMEA			28,959				34,484			25,885			89,328		
	Total APAC			17,013				26,899			7,768			51,680		
	Total revenue		$	312,321			$	164,669		$	158,393		$	635,383		
														
					Nine Months Ended April 30, 2022				
				Subscription				License			Services		Total		
				and support											
																
United States	$	166,431	$	92,445	$	100,285		$	359,161		
Canada			40,254				13,529			17,830			71,613		
Other Americas			3,138				691			1,861			5,690		
	Total Americas			209,823				106,665			119,976			436,464		
United Kingdom			7,038				18,986			2,958			28,982		
Other EMEA			16,589				12,027			21,671			50,287		
	Total EMEA			23,627				31,013			24,629			79,269		
	Total APAC			16,688				26,167			9,427			52,282		
	Total revenue	$	250,138	$	163,845	$	154,032		$	568,015		

No country or region, other than those presented above, accounted for more than 10% of total revenue during the three and nine months ended April 30, 2023 and 2022.

Customer Contract – Related Balance Sheet Amounts

Amounts related to customer contract-related arrangements are included on the condensed consolidated balance sheets as follows (in thousands):

		April 30, 2023			July 31, 2022	
Unbilled accounts receivable, net	$	142,707	$	85,429	
Contract costs, net	$	41,213	$	44,235	
Deferred revenue, net	$	148,916	$	178,276	

As of April 30, 2023 and July 31, 2022, there was no allowance for credit losses associated with unbilled accounts receivable. Contract costs

The current portion of contract costs of $14.9 million and $ 14.8 million is included in prepaid and other current assets in the Company’s condensed consolidated balance sheets as of April 30, 2023 and July 31, 2022, respectively. The non-current portion of contract costs of $26.3 million and $ 29.4 million is included in other assets in the Company’s condensed consolidated balance sheets as of April 30, 2023 and July 31, 2022, respectively. The Company amortized $ 4.4 million and $3.4 million of contract costs during the three months ended April 30, 2023 and 2022, respectively, and amortized $13.0 million and $9.7 million during the nine months ended April 30, 2023 and 2022, respectively.

14

Table of Contents

Deferred revenue

During the three and nine months ended April 30, 2023, the Company recognized revenue of approximately $27.9 million and $152.2 million, respectively, related to the Company’s deferred revenue balance reported as of July 31, 2022.

Remaining Performance Obligations

The aggregate amount of consideration allocated to remaining performance obligations either not satisfied or partially satisfied was approximately $1.2 billion as of April 30, 2023. Subscription services are typically satisfied over three to five years, support services are generally satisfied within one year, and professional services are typically 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.

3. Fair Value of Financial Instruments

Available-for-sale investments within cash equivalents and investments consist of the following (in thousands):

					April 30, 2023				
		Amortized			Unrealized			Unrealized		Estimated Fair	
		Cost			Gains			Losses			Value	
Commercial paper	$	161,716	$	—	$	—	$	161,716	
Corporate bonds		217,731			136			(2,402)			215,465	
Certificates of deposit		28,468			—			—			28,468	
U.S. Government bonds		47,698			96			(1,094)			46,700	
Money market funds		127,872			—			—			127,872	
U.S. Government agency securities		89,464			88			(128)			89,424	
Asset-backed securities		50,790			11			(336)			50,465	
Foreign government bonds		14,608			13			(259)			14,362	
Total	$	738,347	$	344	$	(4,219)	$	734,472	

					July 31, 2022					
		Amortized		Unrealized Gains			Unrealized		Estimated Fair		
		Cost					Losses			Value		
Commercial paper	$	197,998	$	—	$	—	$	197,998		
Corporate bonds		320,474			8			(4,880)			315,602		
Certificates of deposit		43,715			—			—			43,715		
U.S. Government bonds		47,014			—			(1,312)			45,702		
Money market funds		349,492			—			—			349,492		
U.S. Government agency securities		37,572			—			(586)			36,986		
Asset-backed securities		54,782			—			(611)			54,171		
Foreign government bonds		15,109			—			(361)			14,748		
Municipal bonds		205			—			—			205		
Total	$	1,066,361	$	8	$	(7,750)	$	1,058,619		

The Company does not consider any portion of the unrealized losses at April 30, 2023 to be credit losses. The Company has recorded the securities at fair value in its condensed 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 condensed consolidated statements of comprehensive income (loss).

The following table summarizes the contractual maturities of the Company’s available-for-sale investments measured at fair value (in thousands):

15

	Table of Contents										
						April 30, 2023					
			Less Than 12		12 Months or			Total		
				Months			Greater					
Commercial paper	$	161,716	$	—	$	161,716		
Corporate bonds		185,314			30,151			215,465		
Certificates of deposit		28,468			—			28,468		
U.S. Government bonds		14,275			32,425			46,700		
Money market funds		127,872			—			127,872		
U.S. Government agency securities		86,171			3,253			89,424		
Asset-backed securities		3,623			46,842			50,465		
Foreign government bonds		7,935			6,427			14,362		
Total	$	615,374	$	119,098	$	734,472		

Fair Value Measurement

Available-for-sale investments

The following tables summarize the Company’s available-for-sale investments measured at fair value, by level within the fair value hierarchy (in thousands):

						April 30, 2023							
			Level 1			Level 2		Level 3				Total			
Cash equivalents:															
Commercial paper	$	—	$	54,339	$	—	$	54,339			
U.S. Government bonds			—			1,979			—			1,979			
Money market funds			127,872			—			—			127,872			
U.S. Government agency securities			—			9,982			—			9,982			
Total cash equivalents			127,872			66,300			—			194,172			
Short-term investments:															
Commercial paper			—			107,377			—			107,377			
Corporate bonds			—			185,314			—			185,314			
Certificates of deposit			—			28,468			—			28,468			
U.S. Government bonds			—			12,296			—			12,296			
U.S. Government agency securities			—			76,189			—			76,189			
Asset-backed securities			—			3,623			—			3,623			
Foreign government bonds			—			7,935			—			7,935			
Total short-term investments			—			421,202			—			421,202			
Long-term investments:															
Corporate bonds			—			30,151			—			30,151			
U.S. Government bonds			—			32,425			—			32,425			
U.S. Government agency securities			—			3,253			—			3,253			
Asset-backed securities			—			46,842			—			46,842			
Foreign government bonds			—			6,427			—			6,427			
Total long-term investments			—			119,098			—			119,098			
Total	$	127,872	$	606,600	$	—	$	734,472			
	16														

	Table of Contents												
							July 31, 2022					
				Level 1			Level 2		Level 3				Total	
Cash equivalents:												
Commercial paper	$	—	$	132,066	$	—	$	132,066	
Certificates of deposit		—			9,689			—			9,689	
Money market funds		349,492			—			—			349,492	
U.S. Government agency securities		—			10,000			—			10,000	
Total cash equivalents		349,492			151,755			—			501,247	
Short-term investments:												
Commercial paper		—			65,932			—			65,932	
Corporate bonds		—			203,960			—			203,960	
Certificates of deposit		—			34,026			—			34,026	
U.S. Government bonds		—			25,429			—			25,429	
U.S. Government agency securities		—			26,986			—			26,986	
Asset-backed securities		—			8,627			—			8,627	
Foreign government bonds		—			4,700			—			4,700	
Municipal bonds		—			205			—			205	
Total short-term investments		—			369,865			—			369,865	
Long-term investments:												
Corporate bonds		—			111,642			—			111,642	
U.S. Government bonds		—			20,273			—			20,273	
Asset-backed securities		—			45,544			—			45,544	
Foreign government bonds		—			10,048			—			10,048	
Total long-term investments		—			187,507			—			187,507	
	Total	$	349,492	$	709,127	$	—	$	1,058,619	

Convertible Senior Notes

The fair value of the Convertible Senior Notes was $ 382.0 million and $387.6 million at April 30, 2023 and July 31, 2022, respectively. 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). Effective August 1, 2022 with the adoption of ASU 2020-06, the Company carries the Convertible Senior Notes at par value less unamortized debt issuance costs on its condensed consolidated balance sheets. For further information on the Convertible Senior Notes, see Note 6 “Convertible Senior Notes”.

Strategic Equity Investments

The Company’s other assets include strategic equity 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). The Company records these strategic investments at cost less impairment and adjusts cost for subsequent observable changes in fair value. During the three and nine months ended April 30, 2023, the Company invested $2.2 million and $8.3 million in new and existing strategic equity investments, respectively. At April 30, 2023 and July 31, 2022, the Company’s total strategic equity investments was $26.0 million and $18.0 million, respectively.

No impairment charge or unrealized gain or loss related to strategic investments were recognized during the three and nine months ended April 30, 2023 and 2022.

17

Table of Contents

4.	Balance Sheet Components Property and Equipment, Net
Property and equipment consist of the following (in thousands):

		April 30, 2023			July 31, 2022	
Computer hardware	$	15,702	$	14,472	
Purchased software		5,082			5,124	
Capitalized software development costs		48,596			38,724	
Equipment and machinery		2,833			8,248	
Furniture and fixtures		5,868			11,467	
Leasehold improvements		22,665			59,059	
Total property and equipment		100,746			137,094	
Less accumulated depreciation		(47,151)			(56,354)	
Property and equipment, net	$	53,595	$	80,740	

As of April 30, 2023 and July 31, 2022, no property and equipment was pledged as collateral. Depreciation expense, excluding the amortization of capitalized software development costs, was $28.6 million and $3.6 million for the three months ended April 30, 2023 and 2022, respectively, and $34.7 million and $10.8 million for the nine months ended April 30, 2023 and 2022, respectively. Depreciation expense for the three and nine months ended April 30, 2023 includes $26.9 million of accelerated depreciation expense, recorded from the date the lease was signed 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 condensed consolidated statements of operations. Refer to Note 7 “Leases” for information about the lease assignment of the previous office headquarters.

The Company recognized amortization expense related to capitalized software development costs in cost of subscription and support revenue on the condensed consolidated statements of operations of $2.6 million and $1.6 million during the three months ended April 30, 2023 and 2022, respectively, and $7.2 million and $4.3 million during the nine months ended April 30, 2023 and 2022, respectively.

5. Net Income (Loss) Per Share

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 options to purchase common stock and Stock Awards, the Company uses the treasury stock method for calculating diluted earnings per share in all periods presented. Effective August 1, 2022, the Company adopted ASU 2020-06 which requires the use of the if-converted method for the Convertible Senior Notes. Prior to August 1, 2022, the Company used the treasury stock 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 three and nine months ended

April 30, 2023 and 2022 (in thousands, except share and per share amounts):

			Three Months Ended			Nine Months Ended		
			April 30,				April 30,				
			2023			2022			2023			2022			
Numerator:															
Net income (loss)	$	(45,568)	$	(57,444)	$	(124,075)	$	(149,401)			
															
Net income (loss) per share:															
Basic and diluted	$	(0.56)	$	(0.69)	$	(1.51)	$	(1.79)			
															
Denominator:															
Weighted average shares used in computing net income (loss) per share:															
Basic and diluted			81,832,244			83,689,429			82,407,950			83,440,231			
	18														

Table of Contents

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:

	Three Months Ended		Nine Months Ended	
	April 30,			April 30,		
	2023			2022		2023			2022	
Stock options	40,041			14,942	13,243			20,008	
Stock awards	2,547,035			617,209	2,082,196			1,983,783	
Convertible senior notes	3,516,480			—	3,516,480			44,556	

During the three and nine months ended April 30, 2023, the average market price of the Company’s common stock did not exceed the initial conversion price of the Convertible Senior Notes. During the three months ended April 30, 2022, the average market price of the Company’s common stock did not exceed the initial conversion price of the Convertible Senior Notes.

6. Convertible Senior Notes

In March 2018, the Company offered and sold $400.0 million aggregate principal amount of its 1.25% Convertible Senior Notes due 2025. The Convertible Senior Notes were issued in accordance with the Indenture, dated as of March 13, 2018, between the Company and U.S. Bank National Association, as trustee (the “Trustee”) (the “Base Indenture”), as amended and supplemented by the First Supplemental Indenture, dated as of March 13, 2018, between the Company and the Trustee (together with the Base Indenture, the “Indenture”). The net proceeds from the issuance of the Convertible Senior Notes were $387.2 million, after deducting issuance costs.

The net carrying value of the liability component, unamortized debt discount and unamortized debt issuance costs of the Convertible Senior Notes was as follows (in thousands):

		April 30, 2023			July 31, 2022	
Principal	$	400,000	$	400,000	
Less unamortized:						
Debt discount(1)		—			37,253	
Debt issuance costs		3,257			4,531	
Net carrying amount	$	396,743	$	358,216	

(1)	Effective August 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method which resulted in the accounting for the Convertible Senior Notes as a single liability and no longer required the liability and equity components to be accounted for separately. The prior period has not been retrospectively adjusted and continues to be reported under the accounting standards in effect for that period.

The effective interest rate of the Convertible Senior Notes after the adoption of ASU 2020-06 on August 1, 2022 is 1.69%. Prior to the adoption of ASU 2020-06, the effective interest rate of the Convertible Senior Notes was 5.53%.

The following table sets forth the interest expense recognized related to the Convertible Senior Notes (in thousands):

		Three Months Ended			Nine Months Ended	
		April 30,				April 30,		
		2023			2022			2023			2022	
Contractual interest expense	$	1,250	$	1,250	$	3,750	$	3,750	
Amortization of debt discount(1)		—			3,257			—			9,648	
Amortization of debt issuance costs		426			366			1,274			1,071	
Total	$	1,676	$	4,873	$	5,024	$	14,469	

(1)	Effective August 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method which resulted in the accounting for the Convertible Senior Notes as a single liability and no longer required the amortization of debt discount. The prior period has not been retrospectively adjusted and continues to be reported under the accounting standards in effect for that period.

As of April 30, 2023, the if-converted value did not exceed the outstanding principal of the Convertible Senior Notes.

19

Table of Contents

7. Leases

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 new 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 three and nine months ended April 30, 2023 on the condensed 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 April 2023, the Company was granted access to a portion of its new worldwide headquarters and recognized a $17.3 million operating lease asset and $9.8 million lease liability. The difference consists of initial direct costs and lease incentives given related to the Lease Assignment. The Company expects access to the remaining portion of its new worldwide headquarters in the fourth quarter of fiscal year 2023, at which point the Company will record an additional operating lease asset and lease liability.

Components of operating lease costs were as follows (in thousands):

		Three Months Ended			Nine Months Ended	
		April 30,				April 30,		
		2023			2022			2023			2022	
Operating lease cost1	$	1,724	$	3,862	$	9,524	$	12,047	
Variable lease cost		1,157			1,280			3,617			4,130	
Sublease income		(206)			(378)			(898)			(1,124)	
Net operating lease cost	$	2,675	$	4,764	$	12,243	$	15,053	

(1)	Lease expense for leases with an initial term of 12 months or less is excluded from the table above and was $0.2 million and $0.2 million for the three months ended April 30, 2023 and 2022, respectively, and $0.7 million and $0.6 million for the nine months ended April 30, 2023 and 2022, respectively.

Future operating lease payments as of April 30, 2023 were as follows (in thousands):			
Fiscal Year Ending July 31,			
2023 (remainder of fiscal year)	$	1,366	
2024		8,390	
2025		8,073	
2026		7,667	
2027		6,717	
2028		3,646	
Thereafter		12,218	
Total future lease payments		48,077	
Less imputed interest		(5,267)	
Total lease liability balance	$	42,810	

20

Table of Contents

Supplemental information related to leases was as follows (in thousands, except for lease term and discount rate):

		April 30, 2023			July 31, 2022	
Operating lease assets	$	44,721	$	90,287	

Current portion of lease liabilities	$	6,292	$	12,238	
Non-current portion of lease liabilities		36,518			105,123	
Total lease liabilities	$	42,810	$	117,361	

Weighted average remaining lease term (years)		6.89			7.65	
Weighted average discount rate		3.50 %			4.00 %	

The Lease Assignment executed in February 2023 resulted in a reduction of the associated operating lease assets and lease liabilities as stated above.

Supplemental cash and non-cash information related to operating leases was as follows (in thousands):

		Three Months Ended			Nine Months Ended	
		April 30,				April 30,		
		2023			2022			2023			2022	
Cash payments for operating leases	$	1,941	$	4,234	$	10,797	$	14,579	
Operating lease assets obtained in exchange for lease liabilities	$	(46,836)	$	1,230	$	(46,781)	$	1,663	

21

Table of Contents

8. Commitments and Contingencies

Except as discussed below, there has been no material change in the Company’s contractual obligations and commitments other than in the ordinary course of business since the Company’s fiscal year ended July 31, 2022.

Effective during the nine months ended April 30, 2023, the Company terminated its existing agreement and entered into a new agreement with a cloud infrastructure services provider for a total obligation of $600 million over a five-year period.

Effective during the nine months ended April 30, 2023, the Company assigned 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 new worldwide headquarters. See Note 7 “Leases”.

See the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2022 for additional information regarding the Company’s contractual obligations.

Legal Proceedings

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 April 30, 2023 or July 31, 2022. The Company has not accrued for estimated losses in the accompanying condensed 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.

Indemnification

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 April 30, 2023 or July 31, 2022. 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.

9.	Stock-Based Compensation Expense and Shareholders’ Equity Stock-Based Compensation Expense

Stock- based compensation expense related to stock options and Stock Awards is included in the Company’s condensed consolidated statements of operations as follows (in thousands):

22

	Table of Contents													
				Three Months Ended			Nine Months Ended		
				April 30,				April 30,			
				2023			2022			2023			2022		
Stock-based compensation expense	$	35,284	$	33,241	$	106,829	$	103,921		
Net impact of deferred stock-based compensation		(265)			(313)			(535)			(888)		
Total stock-based compensation expense, net	$	35,019	$	32,928	$	106,294	$	103,033		
Stock-based compensation expense is included in the following categories:													
													
Cost of subscription and support revenue	$	3,580	$	3,450	$	10,488	$	9,886		
Cost of license revenue		93			170			359			541		
Cost of services revenue		4,631			5,025			14,377			15,766		
Research and development		10,084			8,124			29,676			24,840		
Sales and marketing		7,432			6,787			22,343			24,279		
General and administrative		9,199			9,372			29,051			27,721		
Total stock-based compensation expense	$	35,019	$	32,928	$	106,294	$	103,033		

Total unrecognized stock-based compensation expense related to the Company’s stock options and Stock Awards as of April 30, 2023 is as follows:

		Unrecognized Expense		Weighted Average Expected		
				Recognition Period		
		(in thousands)		(in years)		
Stock Options	$	3,099	1.3		
Stock Awards		282,157	2.6		
Total unrecognized stock-based compensation expense	$	285,256				

Stock Awards

A summary of Stock Awards activity under the Company’s equity incentive plans is as follows:

	Stock Awards Outstanding			
	Number of Stock			Weighted			Aggregate		
				Average Grant		Intrinsic Value (in		
	Awards Outstanding		Date Fair Value			thousands)(1)		
Balance as of July 31, 2022	2,785,353	$	110.47	$	216,478		
Granted	2,188,020	$	66.08					
Released	(1,057,190)	$	102.67	$	73,090		
Canceled	(231,910)	$	100.96					
Balance as of April 30, 2023	3,684,273	$	86.94	$	280,705		
							
Expected to vest as of April 30, 2023	3,684,273	$	86.94	$	280,705		

(1)	Aggregate intrinsic value at each period end represents the total market value of Stock Awards at the Company’s closing stock price of $76.19 and $77.72 on April 30, 2023 and July 31, 2022, respectively. Aggregate intrinsic value for released Stock Awards represents the total market value of released Stock Awards at date of release.

Stock Options

A summary of stock option activity under the Company’s equity incentive plans is as follows:

23

	Table of Contents										
						Stock Options Outstanding				
			Number of Stock			Weighted		Weighted Average			Aggregate	
			Options			Average		Remaining			Intrinsic	
			Outstanding		Exercise Price		Contractual Life			Value(1)	
								(in years)		(in thousands)	
Balance as of July 31, 2022	75,706	$	61.93	8.7	$	1,196	
Granted	121,168	$	66.76						
Exercised	(6,582)	$	34.60			$	255	
Canceled	(2,720)	$	69.60						
Balance as of April 30, 2023	187,572	$	65.90	9.1	$	2,114	
							
Vested and expected to vest as of April 30, 2023	187,572	$	65.90	9.1	$	2,114	
												
Exercisable as of April 30, 2023	8,224	$	11.64	3.8	$	531	

(1)	Aggregate intrinsic value at each period end represents the difference between the Company’s closing stock price of $76.19 and $77.72 on April 30, 2023 and July 31, 2022, respectively, and the exercise price of outstanding options. Aggregate intrinsic value for exercised options represents the difference between the Company’s stock price at date of exercise and the exercise price.

Share Repurchase Program

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.

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 will be determined upon settlement based on the volume weighted average price over the term of the ASR, less an agreed upon discount. At settlement, the financial institution may be required to deliver additional shares of the Company’s common stock to the Company or, under certain circumstances, the Company may be required to make a cash payment or deliver shares of the Company’s common stock to the financial institution, with the method of settlement at the Company’s election. As of April 30, 2023, the ASR was settled in full with the delivery of an additional 648,001 shares of common stock 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.

In addition to the shares received upon settlement of the ASR, the Company repurchased 207,191 shares at an average price of $77.19 per share under the approved share repurchase program during the three months ended April 30, 2023.

During the nine months ended April 30, 2023, the Company repurchased a total of 3,436,670 shares at an average price of $62.85 per share. As of April 30, 2023, $184.0 million remained available for future share repurchases.

During the three months ended April 30, 2022, the Company did not repurchase any shares of common stock. During the nine months ended April 30, 2022, the Company repurchased 322,545 shares of common stock at an average price of $116.11 per share under a previously completed share repurchase program.

24

Table of Contents

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the Risk Factors included in Item 1A of Part II of this Quarterly Report on Form 10-Q. All information presented herein is based on our fiscal calendar. Unless otherwise stated, references in this report 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.

Overview

Guidewire delivers a leading platform that property and casualty (“P&C”) insurers trust to engage, innovate, and grow efficiently. Guidewire’s platform combines core operations, digital engagement, analytics, and artificial intelligence (“AI”) applications delivered as a cloud service or self-managed software. As a partner to our customers, we continually evolve to enable their success and assist them in navigating a rapidly changing insurance market.

Our core operational services and products are InsuranceSuite Cloud, InsuranceNow, and InsuranceSuite for self-managed installations. These services and products are transactional systems of record that support the entire insurance lifecycle, including insurance product definition, distribution, underwriting, policyholder services, and claims management. Our digital engagement applications enable digital sales, omni-channel service, and enhanced claims experiences for policyholders, agents, vendor partners, and field personnel. Our analytics and AI offerings enable insurers to manage data more effectively, gain insights into their business, drive operational efficiencies, and underwrite new and evolving risks. To support P&C insurers globally, we have localized, and will continue to localize, our platform for use in a variety of international regulatory, language, and currency environments.

InsuranceSuite Cloud is a highly configurable and scalable product, delivered as a service, and primarily comprised of three core applications (PolicyCenter Cloud, BillingCenter Cloud, and ClaimCenter Cloud) 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 Guidewire cloud operations team. InsuranceSuite Cloud is designed to support multiple releases each year to ensure that cloud customers remain on the latest version and gain fast access to our innovation efforts. Additionally, InsuranceSuite Cloud embeds digital and analytics capabilities natively into our platform. Most new sales and implementations are for InsuranceSuite Cloud.

InsuranceNow is a complete, cloud-based application that offers policy, billing, and claims management functionality to insurers.

InsuranceSuite for self-managed installations is comprised of three core applications (PolicyCenter, BillingCenter, and ClaimCenter) that can be licensed separately or together and can be deployed and updated by our customers and their implementation partners.

Our customers range from some of the largest global insurance companies or their subsidiaries to predominantly national or local insurers that serve specific states and/or regions. Our customer engagement is led by our direct sales team and supported by our system integrator (“SI”) partners. We maintain and continue to grow our sales and marketing efforts globally, and maintain regional sales centers throughout the world.

Because our platform is critical to our new and existing customers’ businesses, their decision-making and product evaluation process is thorough, which often results in an extended sales cycle. These evaluation periods can extend further if a customer purchases multiple services and products or is considering a move to a cloud-based subscription for the first time. Sales to new customers also involve extensive customer due diligence and reference checks. The success of our sales efforts relies on continued improvements and enhancements to our current services and products, the introduction of new services and products, efficient operation of our cloud infrastructure, continued development of relevant local content and automated tools for updating content, and successful implementations and migrations.

We sell our cloud -delivered offerings through subscription services and our self-managed products through term licenses. We generally price our services and products based on the amount of Direct Written Premium (“DWP”) that will be managed by our platform. Our subscription, term license, and support fees are typically invoiced annually in advance. Subscription services are generally sold with an initial term of between three and five years with optional annual renewals commencing after the initial term. Subscription revenue is recognized on a ratable basis over the committed term, once all revenue recognition criteria are met including providing access to the service. Term licenses are primarily sold with an initial two-year committed term with optional annual renewals commencing after the initial term. We may enter into term license arrangements with our customers that have an initial term of more than two years or may renew license arrangements for longer than one year. A small portion of our revenue is derived from perpetual licenses. Term and perpetual license revenue are typically recognized when software is made available to the customer, provided that all other revenue recognition criteria have been met. 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 license fees. We also offer professional services, both directly and through SI partners, to help our customers deploy, migrate, and utilize our platform, services, and products. A majority of our services revenue is billed monthly on a time and materials basis.

25

Table of Contents

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 be a majority of annual new sales going forward. As this sales model matures, we may decide to change certain contract terms in new arrangements to remain competitive or otherwise meet market demands.

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 services and products, introduce new services and 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, industry, 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 third-party SI partners to facilitate new sales and implementations of both our subscription services and self-managed 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 and migrating our services and 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 risks related to expanding to new markets, managing lengthy sales cycles, competing effectively in the global market, relying on sales to a relatively small number of large customers, developing new or acquiring existing services and products successfully, migrating our business towards a subscription model with ratable revenue recognition, increasing the overall adoption of our services and products, 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, implementation and migration services, and sales and marketing.

Seasonality

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. We generally see significantly increased orders in our fourth fiscal quarter, which is the quarter ending July 31, due to efforts by our sales team to achieve annual incentives. Because we recognize revenue upfront for new term licenses and multi-year term license renewals compared to over time for subscription services, changes in the mix between term license and subscription services may impact our quarterly results. Additionally, any quarter in which a significant multi-year term license or multi-year term license renewal or non-renewal occurs could be impacted. Additionally, as subscriptions increase as a percentage of total sales, the revenue we can recognize in the initial fiscal year of an order will be reduced, deferred revenue will increase, and our reported revenue growth will be adversely affected in the near term due to the ratable nature of these arrangements. The concentration of our sales in our fourth fiscal quarter increases this impact as the revenue impact of most fourth fiscal quarter subscription sales will not be realized until the following fiscal year.

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 the Thanksgiving, Christmas, and New Year’s holidays. The fiscal quarter ending July 31 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.

Recent Global Events

Recent global events have adversely affected and are continuing to adversely affect workforces, organizations, economies, and financial markets globally, leading to economic downturns, inflation, and increased market volatility. For instance, the ongoing conflict between Russia and Ukraine, escalating tensions in the South China Sea, inflation higher than we have seen in decades, the

26

Table of Contents

recent bank failures in the United States and Switzerland and the related impact on financial markets and institutions, and supply chain issues have contributed to global economic and market volatility. 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 since the third quarter of fiscal year 2020 have been impacted due to these disruptions, which has affected our ARR growth rates, services revenue and margins, operating cash flow and expenses, potentially higher employee attrition, challenges in hiring and onboarding necessary personnel, and the change in fair value of strategic investments. Our sales cycles, ARR growth rates and revenue, especially services revenue, continued to be impacted as a result of these disruptions and challenges. Additionally, in recent quarters, inflation has reached levels that have not been seen for decades, which is impacting the global economy and magnifying 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 revenues 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 services and products based on the amount of DWP that will be managed by our platform. Additionally, we may be required to record impairment related to our operating lease assets, investments, long-lived assets, intangible assets, or goodwill.

We will continue to evaluate the nature and extent of these global events on our business.

Key Business Metrics

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 Quarterly Report on Form 10-Q.

Annual Recurring Revenue (“ARR”)

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 contracts, which may not be the same as the timing and amount of revenue recognized. All components of the licensing and other arrangements that are not expected to recur (primarily perpetual licenses and professional services) are excluded. 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 only impacts the initial term of the contract. This means that as we increase arrangements with multiple performance obligations that include services at discounted rates, more of the total contract value will be recognized as services revenue, but our reported ARR amount will not be impacted. During the nine months ended April 30, 2023, the recurring license and support or subscription contract value recognized as services revenue was $22.4 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 April 30, 2023, ARR was $722 million, compared to $664 million as of July 31, 2022. We measure ARR results on a constant currency basis during the fiscal year and revalue ARR at year end to current currency rates.

Free Cash Flow

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 services and 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 and tax payments. Our capital expenditures consist of purchases of property and equipment, primarily computer hardware, software, and leasehold improvements, and capitalized software development costs. Free cash flow in the nine months ended April 30, 2023, was impacted by severance payments of $2.9 million. Free cash flow in the nine months ended April 30, 2022 was impacted by

27

Table of Contents

payments of $18.1 million related to settling accrued vacation balances in countries in which we adopted a non-accrual vacation policy. For a further discussion of our operating cash flows, see “Liquidity and Capital Resources – Cash Flows.”

	Nine Months Ended April 30,		
	2023			2022		
Net cash provided by (used in) operating activities	$	(134,842)	$	(121,532)	
Purchases of property and equipment		(2,614)			(7,976)	
Capitalized software development costs		(8,877)			(9,187)	
Free cash flow	$	(146,333)	$	(138,695)	

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. Accounting policies, methods, and estimates are an integral part of the preparation of condensed 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 the condensed 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 condensed 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 our Annual Report on Form 10-K for the fiscal year ended July 31, 2022, our revenue recognition policies are critical to the periods presented.

There have been no material changes to our critical accounting policies as described in “Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022.

Recent Accounting Pronouncements

See Note 1 “The Company and Summary of Significant Accounting Policies and Estimates” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements adopted, including the dates of adoption, and recent account pronouncements not yet adopted.

Results of Operations

The following table sets forth our results of operations for the periods presented. The data has been derived from the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q which, in the opinion of our management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly present the financial position and results of operations for the interim periods presented. The results of operations for any period should not be considered indicative of results for any future period. This information should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022.

28

	Table of Contents																
							Three Months Ended April 30,					
					2023		As a % of total			2022			As a % of total			
							revenue							revenue				
							(in thousands, except percentages)					
Revenue:																
	Subscription and support	$	107,499	52	%	$	86,851			44	%			
	License			50,602	24				53,894			27				
	Services			49,389		24				56,703			29				
	Total revenue			207,490	100				197,448			100				
Cost of revenue:																
	Subscription and support			52,281	25				51,831			26				
	License			1,243	1				1,951			1				
	Services			55,048		27				59,742			30				
	Total cost of revenue			108,572	53				113,524			57				
Gross profit:																
	Subscription and support			55,218	27				35,020			18				
	License			49,359	23				51,943			26				
	Services			(5,659)		(3)				(3,039)			(1)				
	Total gross profit			98,918	47				83,924			43				
Operating expenses:																
	Research and development			63,055	30				58,440			30				
	Sales and marketing			46,864	23				44,615			23				
	General and administrative			46,815		23				43,273			22				
	Total operating expenses			156,734		76				146,328			75				
Income (loss) from operations			(57,816)	(29)				(62,404)			(32)				
	Interest income			6,627	3				1,000			1				
	Interest expense			(1,683)	(1)				(4,885)			(2)				
	Other income (expense), net			(3,356)		(2)				(6,932)			(4)				
Income (loss) before provision for (benefit from) income taxes			(56,228)	(29)				(73,221)			(37)				
	Provision for (benefit from) income taxes			(10,660)		(5)				(15,777)			(8)				
Net income (loss)	$	(45,568)	(24) %	$	(57,444)			(29) %			
			29															

	Table of Contents														
						Nine Months Ended April 30,				
				2023		As a % of total			2022			As a % of total		
						revenue							revenue			
						(in thousands, except percentages)				
Revenue:														
	Subscription and support	$	312,321	49	%	$	250,138			44	%		
	License		164,669	26				163,845			29			
	Services		158,393		25				154,032			27			
	Total revenue		635,383	100				568,015			100			
Cost of revenue:														
	Subscription and support		156,896	25				148,157			26			
	License		4,961	1				6,544			1			
	Services		178,993		28				158,805			27			
	Total cost of revenue		340,850	54				313,506			54			
Gross profit:														
	Subscription and support		155,425	24				101,981			18			
	License		159,708	25				157,301			28			
	Services		(20,600)		(3)				(4,773)			—			
	Total gross profit		294,533	46				254,509			46			
Operating expenses:														
	Research and development		182,927	29				169,368			30			
	Sales and marketing		138,113	22				134,127			23			
	General and administrative		129,078		20				118,252			21			
	Total operating expenses		450,118		71				421,747			74			
Income (loss) from operations		(155,585)	(25)				(167,238)			(28)			
	Interest income		16,657	3				2,373			—			
	Interest expense		(5,034)	(1)				(14,512)			(3)			
	Other income (expense), net		(5,889)		(1)				(13,794)			(2)			
Income (loss) before provision for (benefit from) income taxes		(149,851)	(24)				(193,171)			(33)			
	Provision for (benefit from) income taxes		(25,776)		(4)				(43,770)			(8)			
Net income (loss)	$	(124,075)	(20) %	$	(149,401)			(25) %		

Revenue

We derive our revenue primarily from delivering cloud-based services, licensing our software applications, providing support, and delivering professional services.

Subscription and Support

A growing portion 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 from three to five years. 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

30

Table of Contents

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.

License

A substantial 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 have generally been sold under a two -year initial term with optional annual renewals after the initial term. However, we do enter into license arrangements that have an initial term of more than two years and renewal terms of more than one year. 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.

In a limited number of cases, we license our software on a perpetual basis. Perpetual license revenue is generally recognized upon delivery. We invoice our perpetual license customers either in full at contract signing or on an installment basis.

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.

						Three Months Ended April 30,							
			2023					2022				Change			
		Amount			As a % of total			Amount			As a % of total			($)		(%)		
					revenue							revenue								
Revenue:						(in thousands, except percentages)					
																				
Subscription and support:																				
Subscription	$	89,091	43	%	$	66,419	34	%	$	22,672		34 %		
Support		18,408	9				20,432	10				(2,024)		(10)%		
License:																				
Term license		50,556	24				53,848	27				(3,292)		(6)%		
Perpetual license		46			—				46			—				—	— %		
Services		49,389			24				56,703			29				(7,314)		(13)%		
Total revenue	$	207,490			100	%		$	197,448			100	%		$	10,042		5 %		
																				
			31															

	Table of Contents																					
									Nine Months Ended April 30,							
					2023						2022				Change			
				Amount			As a % of total				Amount			As a % of total			($)		(%)		
							revenue								revenue								
Revenue:						(in thousands, except percentages)					
																					
Subscription and support:																					
	Subscription	$	254,083	40	%	$	186,419	33	%	$	67,664		36 %		
	Support		58,238	9					63,719	11				(5,481)		(9)%		
License:																					
	Term license		164,512	26					163,703	29				809		— %		
	Perpetual license		157			—					142			—				15		11 %		
Services		158,393			25					154,032			27				4,361		3 %		
Total revenue	$	635,383	100	%	$	568,015	100	%	$	67,368		12 %		

Subscription and Support

We anticipate subscriptions will continue to represent a 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 in 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 the fourth fiscal quarter, our historically largest quarter for new orders, is not fully reflected in revenues until the following fiscal year.

Subscription revenue increased by $22.7 million and $ 67.7 million during the three and nine months ended April 30, 2023, respectively, compared to the same periods a year ago, primarily due to the impact of cloud transition agreements, the renewal or extension of subscription services at the fully ramped annual fees after the initial committed term, and new subscription agreements entered into and provisioned since April 30, 2022.

Support revenue decreased by $2.0 million and $ 5.5 million during the three and nine months ended April 30, 2023, respectively, compared to the same periods a year ago, 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 continue to reduce the growth in, or result in lower, support revenue in the future.

License

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.

32

Table of Contents

Term license revenue decreased by $3.3 million during the three months ended April 30, 2023, compared to the same period a year ago. This is primarily driven by decreases due to the impact of agreements that migrated from a term license to a subscription service in the prior year period of $1.7 million, the impact of multi-year renewals in the prior year period, and less revenue from new deals. There was no 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 during the three months ended April 30, 2023 compared with $1.2 million in the prior year period.

Term license revenue increased by $0.8 million during the nine months ended April 30, 2023, compared to the same period a year ago. This is primarily driven by an increase in new deals and the impact of renewals of $9.6 million, which was partially offset by decreases due to agreements that migrated from a term license to a subscription service in the prior year period of $ 8.7 million. 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 $3.7 million during the nine months ended April 30, 2023 compared with $2.3 million in the prior year period.

Perpetual license revenue accounted for less than 1% of total revenue during the three and nine months ended April 30, 2023 and 2022. We expect perpetual license revenue to continue to represent a small percentage of our total license revenue. We also expect perpetual license revenue to potentially be volatile across quarters due to the large amount of perpetual revenue that may be generated from a single customer order.

Services

Services revenue decreased by $ 7.3 million during the three months ended April 30, 2023, compared to the same period a year ago. The decrease is primarily driven by the completion of implementations, and contracts with lower average services billing rates and increased investments in customer implementations, including fixed fee or capped arrangements, to accelerate customer transition to the cloud.

Services revenue increased by $4.4 million during the nine months ended April 30, 2023, compared to the same period a year ago. The increase is primarily driven by an increase in the number and size of subscription implementation and migration projects, but services revenue overall continues to be impacted by contracts with lower average services billing rates and increased 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.

We expect some level of variability in our services revenue in future periods. As we successfully leverage our SI partners to lead more implementations and migrations, our services revenue could decrease. We expect challenges related to global events including inflation and our ability to hire additional services professionals will also continue to negatively impact services revenue. As we continue to expand into new markets and develop new services and 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, which may impact services revenue and services margins.

Cost of Revenue and Gross Profit

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 services 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.

33

	Table of Contents												
	Cost of Revenue:											
					Three Months Ended April 30,		
				2023			2022			Change		
				Amount			Amount			($)		(%)	
				(in thousands, except percentages)		
Cost of revenue:											
Subscription and support	$	52,281	$	51,831	$	450		1 %	
License		1,243			1,951			(708)		(36)%	
Services		55,048			59,742			(4,694)		(8)%	
Total cost of revenue	$	108,572	$	113,524	$	(4,952)		(4)%	

Includes stock-based compensation of:											
	Cost of subscription and support revenue	$	3,580	$	3,450	$	130			
	Cost of license revenue		93			170			(77)			
	Cost of services revenue		4,631			5,025			(394)			
	Total	$	8,304		$	8,645		$	(341)			
											
					Nine Months Ended April 30,		
				2023			2022			Change		
				Amount			Amount			($)		(%)	
				(in thousands, except percentages)		
Cost of revenue:											
Subscription and support	$	156,896	$	148,157	$	8,739		6 %	
License		4,961			6,544			(1,583)		(24)	
Services		178,993			158,805			20,188		13	
Total cost of revenue	$	340,850	$	313,506	$	27,344		9	

Includes stock-based compensation of:											
	Cost of subscription and support revenue	$	10,488	$	9,886	$	602			
	Cost of license revenue		359			541			(182)			
	Cost of services revenue		14,377			15,766			(1,389)			
	Total	$	25,224	$	26,193	$	(969)			

Cost of subscription and support revenue during the three months ended April 30, 2023, increased by $0.5 million, compared to the same period a year ago, primarily due to increases in cloud infrastructure expense of $1.8 million for our growing cloud usage and customer base, internal-use software amortization of $0.9 million, and royalties of $0.5 million. These increases were partially offset by decreases in amortization of intangibles of $1.4 million due to certain acquired intangible assets being fully amortized, personnel costs of $0.8 million due to lower headcount, and professional services of $0.4 million.

Cost of subscription and support revenue during the nine months ended April 30, 2023, increased by $8.7 million, compared to the same period a year ago, primarily due to increases in cloud infrastructure expense of $11.0 million for our growing cloud usage and customer base, internal -use software amortization of $2.5 million, and royalties of $0.7 million. These increases were partially offset by decreases in amortization of intangibles of $2.7 million due to certain acquired intangible assets being fully amortized, professional services of $2.0 million, and personnel costs of $0.7 million due to lower headcount. As a result of efficiencies that we are seeing from our previous investments in cloud operations and development efforts along with the challenges presented by the macroeconomic environment, we have slowed hiring and are critically evaluating professional services contracts and third-party software costs.

Due to our continued investment in cloud-based operations, increase in new cloud-based customers, and increased usage from existing cloud-based customers, the costs to provide our subscription and support services increased. We expect our cost of subscription and support revenue to decrease as a percentage of revenue, but increase in absolute dollars, due to inflation, platform and product investments, and more customers utilizing our cloud product. To address cloud infrastructure costs, we entered into a five-year amendment with our cloud infrastructure provider. However, we believe that the cost of subscription and support revenue will grow at

34

Table of Contents

a slower rate than subscription and support revenue in future years as we achieve economies of scale and other efficiencies. The short-term impact of these trends along with mix within subscription and support revenue may result in a decline in subscription and support gross margin even though subscription and support gross profit increases in absolute dollars.

The $0.7 million decrease in our cost of license revenue during the three months ended April 30, 2023, compared to the same period a year ago, was due to lower personnel costs associated with the development of online training curriculum included with the latest releases of InsuranceSuite of $0.5 million and a decrease in royalties of $0.2 million.

The $1.6 million decrease in our cost of license revenue during the nine months ended April 30, 2023, compared to the same period a year ago, was primarily due to decreases in personnel costs associated with the development of online training curriculum included with the latest releases of InsuranceSuite of $1.1 million, royalties of $0.3 million, and amortization of intangibles of $0.1 million due to certain acquired intangible assets being fully amortized.

We continue to anticipate lower cost of license revenue over time as our term license customers transition to cloud subscription agreements.

The $4.7 million decrease in cost of services revenue during the three months ended April 30, 2023, compared to the same period a year ago, was primarily due to decreases in subcontractor expenses of $5.9 million due to replacing some contractors with employees and completion of certain fixed fee engagements and professional services of $0.5 million. These decreases were partially offset by increases in personnel expenses of $1.2 million associated with an increase in headcount and software subscriptions of $0.6 million.

The $20.2 million increase in cost of services revenue during the nine months ended April 30, 2023, compared to the same period a year ago, was primarily due to increases in subcontractor expenses of $12.7 million to staff cloud migration and implementation projects, personnel expenses of $8.0 million associated with an increase in headcount, and software subscriptions of $0.8 million. These increases were partially offset by decreases in professional services of $1.0 million and web hosting costs of $0.1 million.

We had 645 cloud operations and technical support employees and 779 professional services employees at April 30, 2023, compared to 689 cloud operations and technical support employees and 699 professional services employees at April 30, 2022.

Gross Profit:																	
						Three Months Ended April 30,						
		2023				2022				Change		
		Amount		Margin %				Amount		Margin %				($)		(%)	
					(in thousands, except percentages)				
Gross profit:																	
Subscription and support	$	55,218	51	%	$	35,020	40	%	$	20,198		58 %	
License		49,359	98				51,943	96				(2,584)		(5)%	
Services		(5,659)		(11)			(3,039)		(5)				(2,620)		(86)%	
Total gross profit	$	98,918	48	%	$	83,924	43	%	$	14,994		18 %	

Our gross profit increased $15.0 million during the three months ended April 30, 2023, compared to the same period a year ago. Gross profit was impacted by an increase in subscription and support gross profit due to the increase in subscription revenue and cloud operations efficiencies, partially offset by decreases in license gross profit due to customer migrations to subscription services and services gross profit due to the investments that we are making in our customers' transition to subscription services.

Our gross margin increased to 48% during the three months ended April 30, 2023 from 43% during the same period a year ago. Gross margin was primarily impacted by the increase in subscription and support revenue at a higher margin due to cloud operations efficiencies, partially offset by lower services margin due to the investments that we are making in our customers' transition to subscription services.

						Nine Months Ended April 30,						
		2023				2022				Change		
		Amount		Margin %				Amount		Margin %				($)		(%)	
					(in thousands, except percentages)				
Gross profit:																	
Subscription and support	$	155,425	50	%	$	101,981	41	%	$	53,444		52 %	
License		159,708	97				157,301	96				2,407		2	
Services		(20,600)		(13)			(4,773)		(3)				(15,827)		(332)	
Total gross profit	$	294,533		46	%		$	254,509		45	%		$	40,024		16	
																	
			35													

Table of Contents

Our gross profit increased $40.0 million during the nine months ended April 30, 2023, compared to the same period a year ago. Gross profit was impacted by an increase in subscription and support gross profit due to the increase in subscription revenue and cloud operations efficiencies, partially offset by a decrease in services gross profit due to the investments that we are making in our customers' transition to subscription services.

Our gross margin increased to 46% during the nine months ended April 30, 2023, from 45% during the same period a year ago. Gross margin was primarily impacted by the increase in subscription and support revenue at a higher margin due to cloud operations efficiencies, partially offset by lower services margin due to the investments that we are making in our customers' transition to subscription services.

We expect subscription and support gross margin to improve over the next several years as we gain efficiencies and increase the number of cloud customers. We expect services gross margin will improve as we lower our reliance on subcontractors and enter into fewer fixed fee arrangements. We expect license gross margin to fluctuate based on changes in revenue due to the timing of delivery of new multi-year term licenses and the execution of multi-year term license renewals, as cost of license revenue is expected to be relatively consistent from period to period in the future. Overall, we expect gross margins to improve 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.

Operating Expenses

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 a result, these general overhead expenses are reflected in cost of revenue and each functional operating expense.

					Three Months Ended April 30,							
			2023				2022			Change			
		Amount			As a % of total			Amount			As a % of total			($)		(%)		
					revenue						revenue							
					(in thousands, except percentages)					
Operating expenses:																		
Research and development	$	63,055	30%	$	58,440	30%	$	4,615		8 %		
Sales and marketing		46,864	23			44,615	23			2,249		5 %		
General and administrative		46,815			23			43,273			22			3,542		8 %		
Total operating expenses	$	156,734	76	$	146,328	75	$	10,406		7 %		

Includes stock-based compensation of:																		
Research and development	$	10,084				$	8,124				$	1,960				
Sales and marketing		7,432						6,787						645				
General and administrative		9,199						9,372						(173)				
Total	$	26,715					$	24,283					$	2,432				
																	
			36													

	Table of Contents																					
									Nine Months Ended April 30,							
					2023						2022				Change			
				Amount			As a % of total				Amount			As a % of total			($)		(%)		
							revenue								revenue								
Operating expenses:						(in thousands, except percentages)					
																					
Research and development	$	182,927	29	%	$	169,368	30	%	$	13,559		8 %		
Sales and marketing		138,113	22					134,127	23				3,986		3		
General and administrative		129,078			20					118,252			21				10,826		9		
Total operating expenses	$	450,118	71		$	421,747	74		$	28,371		7		

Includes stock-based compensation of:																					
Research and development	$	29,676					$	24,840					$	4,836				
Sales and marketing		22,343								24,279							(1,936)				
General and administrative		29,051								27,721							1,330				
Total	$	81,070					$	76,840					$	4,230				

Research and Development

Our research and development expenses primarily consist of personnel costs for our technical staff and consultants providing professional services.

The $4.6 million increase in research and development expenses during the three months ended April 30, 2023, compared to the same period a year ago, was primarily due to increases in personnel costs of $6.9 million associated with higher headcount and software subscription costs of $0.1 million. These increases are partially offset by decreases in cloud hosting costs of $1.4 million, professional services of $0.5 million, travel costs of $0.4 million, and acquisition consideration holdback costs of $0.1 million recognized over a service period relating to the Hazard Hub acquisition.

The $13.6 million increase in research and development expenses during the nine months ended April 30, 2023, compared to the same period a year ago, was primarily due to increases in personnel costs of $17.0 million associated with higher headcount and software subscription costs of $0.4 million. These increases were partially offset by decreases in cloud hosting costs of $2.2 million, professional services of $ 1.5 million, and acquisition consideration holdback costs of $0.1 million recognized over a service period relating to the Hazard Hub acquisition. Cloud hosting costs are benefiting from the efficiencies that we are achieving with GWCP and the five-year agreement with a cloud infrastructure services provider that was entered into in the first quarter of this fiscal year.

Our research and development headcount was 1,019 at April 30, 2023, compared with 888 at April 30, 2022.

We expect our research and development expenses to increase in absolute dollars due to inflation and investments to support our growing customer base, but decrease as a percentage of revenue as overall hiring slows after a period of investment in cloud platform capabilities.

Sales and Marketing

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 $2.2 million increase in sales and marketing expenses during the three months ended April 30, 2023, compared to the same period a year ago, was primarily due to increases in personnel costs of $ 2.4 million including $0.8 million related to contract acquisition costs, travel costs of $0.9 million due to more in-person client interactions, and marketing and advertising expenses of $0.2 million. These increases were partially offset by decreases in amortization of intangibles of $1.0 million due to certain acquired intangible assets being fully amortized and professional services of $0.2 million.

37

Table of Contents

The $4.0 million increase in sales and marketing expenses during the nine months ended April 30, 2023, compared to the same period a year ago, was primarily due to increases in personnel costs of $4.0 million, including $ 2.8 million related to contract acquisition costs and $1.5 million of severance expenses incurred in the first quarter of fiscal year 2023, and travel costs of $ 3.3 million due to more in-person client interactions. These increases were partially offset by decreases in amortization of intangibles of $2.9 million due to certain acquired intangible assets being fully amortized, marketing and advertising costs of $0.3 million, and cloud hosting costs of $0.2 million.

Our sales and marketing headcount was 471 at April 30, 2023, compared with 474 at April 30, 2022.

We expect our sales and marketing expenses 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 a period of investment in building out our customer success team and adding analytics and cloud sales capabilities.

General and Administrative

Our general and administrative expenses include executive, finance, human resources, legal, information technology and security, 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 $3.5 million increase in general and administrative expenses during the three months ended April 30, 2023, compared to the same period a year ago, was primarily due to accelerated depreciation expense related to property and equipment at the previous headquarters of $26.9 million, partially offset by the gain related to the lease assignment of the previous headquarters of $18.4 million, and, to a lesser extent, an increase in professional services of $1.1 million. These increases were partially offset by decreases in facilities costs of $3.7 million, personnel costs of $2.0 million, and software subscriptions of $0.3 million.

The $10.8 million increase in general and administrative expenses during the nine months ended April 30, 2023, compared to the same period a year ago, was primarily due to accelerated depreciation expense related to property and equipment at the previous headquarters of $26.9 million, partially offset by the gain related to the lease assignment of the previous headquarters of $18.4 million, and to a lesser extent, increases in software subscriptions and cloud hosting costs of $2.7 million, personnel costs of $2.9 million, which includes $1.0 million of severance expense incurred in the first quarter of fiscal year 2023, and professional services of $1.2 million. These increases were partially offset by a decrease in facilities costs of $4.7 million.

Our general and administrative headcount was 431 at April 30, 2023, compared with 458 at April 30, 2022. General and administrative headcount includes facilities personnel whose expenses are allocated across all functional departments.

We expect our general and administrative expenses to increase in absolute dollars due to inflation and investments required to support our strategic initiatives, grow our business, and meet our security, compliance and reporting obligations, but decrease as a percentage of revenue as overall hiring and investments slow.

Other Income (Expense)					Three Months Ended April 30,			
								
		2023			2022				Change			
		Amount			Amount			($)	(%)			
				(in thousands, except percentages)			
Interest income	$	6,627	$	1,000	$	5,627	563	%		
Interest expense	$	(1,683)	$	(4,885)	$	3,202	(66)	%		
Other income (expense), net	$	(3,356)	$	(6,932)	$	3,576	52	%		

				Nine Months Ended April 30,		
		2023			2022			Change		
		Amount			Amount			($)	(%)	
		(in thousands, except percentages)		
Interest income	$	16,657	$	2,373	$	14,284	602 %	
Interest expense	$	(5,034)	$	(14,512)	$	9,478	(65)%	
Other income (expense), net	$	(5,889)	$	(13,794)	$	7,905	(57)%	

Interest Income

38

Table of Contents

Interest income represents interest earned on our cash, cash equivalents, and investments.

Interest income increased $ 5.6 million and $14.3 million during the three and nine months ended April 30, 2023, compared to the same periods a year ago, primarily due to higher interest rates, even though we had lower funds available for investment.

Interest Expense

Prior to August 1, 2022 and adoption of ASU 2020-06, interest expense included both stated interest and the amortization of debt discount and issuance costs associated with our Convertible Senior Notes. Previously, the amortization of debt discount and issuance costs were recognized on an effective interest basis. For periods after August 1, 2022, there is no longer a debt discount component related to the Convertible Senior Notes as it was eliminated upon adoption. Stated interest expense is consistent in the comparative periods as the outstanding principal and stated interest rate have not changed.

Interest expense for the three months ended April 30, 2023 consists of stated interest of $1.3 million and non-cash interest expense of $0.4 million related to amortization of debt issuance costs. Interest expense for the three months ended April 30, 2022 consists of stated interest of $1.3 million and non-cash interest expense of $3.6 million related to the amortization of debt discount and issuance costs.

Interest expense for the nine months ended April 30, 2023 consists of stated interest of $3.8 million and non-cash interest expense of $1.3 million related to amortization of debt issuance costs. Interest expense for the nine months ended April 30, 2022 consists of stated interest of $3.8 million and non-cash interest expense of $10.7 million related to the amortization of debt discount and issuance costs.

Other Income (Expense), Net

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, Malaysian Ringgit, and Polish Zloty.

Other income (expense), net during the three and nine months ended April 30, 2023 was expense of $3.4 million and $5.9 million, respectively, as compared to expense of $6.9 million and $13.8 million during the respective periods a year ago, due to fluctuations in foreign currency exchange rates.

Provision for (benefit from) Income Taxes

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.

				Three Months Ended April 30,		
			2023			2022			Change		
			Amount			Amount			($)	(%)	
			(in thousands, except percentages)		
Provision for (benefit from) income taxes	$	(10,660)	$	(15,777)	$	5,117	(32)%	
Effective tax rate			19 %			22 %					
				Nine Months Ended April 30,		
			2023			2022			Change		
			Amount			Amount			($)	(%)	
			(in thousands, except percentages)		
Provision for (benefit from) income taxes	$	(25,776)	$	(43,770)	$	17,994	(41)%	
Effective tax rate			17 %			23 %					
	39										

Table of Contents

We recognized an income tax benefit of $10.7 million and $15.8 million for the three months ended April 30, 2023 and 2022, respectively; and an income tax benefit of $25.8 million and $43.8 million for the nine months ended April 30, 2023 and 2022, respectively. The decrease in the amount of income tax benefit recorded for the three and nine months ended April 30, 2023, compared to the same periods a year ago was primarily due to a decrease in the loss before taxes and a decrease in tax deductions from stock-based compensation, offset by an increase in research and development credits.

The effective tax rate of 19% and 17% for the three and nine months ended April 30, 2023, respectively, differs from the statutory U.S. federal income tax rate of 21% mainly due to state taxes, tax deficiencies related to stock-based compensation, research and development credits, foreign earnings taxed in the United States, and certain non-deductible expenses, including the limitation on executive compensation.

During the three and nine months ended April 30, 2023, unrecognized tax benefits increased by $1.1 million and $2.3 million, respectively. As of April 30, 2023, we had unrecognized tax benefits of $13.5 million that, if recognized, would affect our effective tax rate.

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) amended Internal Revenue Code Section 174 to require that specific research and experimental (“R&E”) expenditures be capitalized and amortized over five years (U.S. R&E) or fifteen years (non-U.S. R&E) beginning in the Company’s fiscal year 2023. Although Congress has considered legislation that would defer, modify, or repeal the capitalization and amortization requirement, there is no assurance that the provision will be deferred, modified, or otherwise repealed.

If the requirement is not modified, the Company may be required to utilize some of its federal and state tax attributes and there may be increases to state cash taxes or tax expense.

Non-GAAP Financial Measures

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 the Company’s business.

The following table reconciles the specific items excluded from GAAP in the calculation of non-GAAP financial measures for the periods indicated below.

		Three Months Ended			Nine Months Ended		
		April 30,				April 30,			
Gross profit reconciliation:		2023			2022			2023			2022		
													
GAAP gross profit	$	98,918	$	83,924	$	294,533	$	254,509		
Non-GAAP adjustments:													
Stock-based compensation		8,304			8,645			25,224			26,193		
Amortization of intangibles		485			1,905			2,875			5,754		
Non-GAAP gross profit	$	107,707	$	94,474	$	322,632	$	286,456		

Income (loss) from operations reconciliation:

40

Table of Contents

GAAP income (loss) from operations	$	(57,816)	$	(62,404)	$	(155,585)	$	(167,238)		
Non-GAAP adjustments:													
Stock-based compensation		35,019			32,928			106,294			103,033		
Amortization of intangibles		1,367			3,770			5,521			11,294		
Acquisition consideration holdback		706			809			2,209			2,318		
Net impact of assignment of lease agreement (1)	$	8,502		$	—		$	8,502		$	—		
Non-GAAP income (loss) from operations	$	(12,222)	$	(24,897)	$	(33,059)	$	(50,593)		

Net income (loss) reconciliation:													
GAAP net income (loss)	$	(45,568)	$	(57,444)	$	(124,075)	$	(149,401)		
Non-GAAP adjustments:													
Stock-based compensation		35,019			32,928			106,294			103,033		
Amortization of intangibles		1,367			3,770			5,521			11,294		
Acquisition consideration holdback		706			809			2,209			2,318		
Amortization of debt discount and issuance costs		426			3,623			1,274			10,719		
Net impact of assignment of lease agreement (1)		8,502			—			8,502			—		
Tax impact of non-GAAP adjustments		(6,824)			(5,510)			(33,309)			(22,641)		
Non-GAAP net income (loss)	$	(6,372)	$	(21,824)	$	(33,584)	$	(44,678)		

Tax provision (benefit) reconciliation:													
GAAP tax provision (benefit)	$	(10,660)	$	(15,777)	$	(25,776)	$	(43,770)		
Non-GAAP adjustments:													
Stock-based compensation		13,163			10,534			97,554			27,429		
Amortization of intangibles		514			1,206			4,853			3,083		
Acquisition consideration holdback		265			259			2,018			618		
Amortization of debt discount and issuance costs		160			1,159			1,160			2,925		
Net impact of assignment of lease agreement (1)		3,196			—			3,196			—		
Tax impact of non-GAAP adjustments		(10,474)			(7,648)			(75,472)			(11,414)		
Non-GAAP tax provision (benefit)	$	(3,836)	$	(10,267)	$	7,533	$	(21,129)		

Net income (loss) per share reconciliation:													
GAAP net income (loss) per share — diluted	$	(0.56)	$	(0.69)	$	(1.50)	$	(1.79)		
Non-GAAP adjustments:													
Stock-based compensation		0.43			0.39			1.29			1.23		
Amortization of intangibles		0.02			0.05			0.07			0.15		
Acquisition consideration holdback		0.01			0.01			0.03			0.03		
Amortization of debt discount and issuance costs		0.01			0.04			0.03			0.12		
Net impact of assignment of lease agreement (1)		0.10			—			0.10			—		
Tax impact of non-GAAP adjustments		(0.09)			(0.06)			(0.43)			(0.27)		
Non-GAAP dilutive shares excluded from GAAP net income (loss) per share		—			—			—			—		
calculation													
Non-GAAP net income (loss) per share — diluted	$	(0.08)	$	(0.26)	$	(0.41)	$	(0.53)		

Shares used in computing Non-GAAP net income (loss) per share amounts:													
GAAP and pro forma weighted average shares — diluted		81,832,244			83,689,429			82,407,950			83,440,231		

(1)	During the third quarter of fiscal year 2023, the Company recorded in general and administrative expenses a net loss of $8.5 million related to the assignment of the lease agreement for the remaining lease term of the Company’s previous headquarters. 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. Prior to the third quarter of fiscal year 2023, there were no transactions similar to the lease assignment in any periods presented.

41

	Table of Contents								
Liquidity and Capital Resources							
Our principal sources of liquidity are as follows (in thousands)							
Cash, cash equivalents, and investments		April 30, 2023			July 31, 2022		
	$	806,915	$	1,163,675		
Working capital	$	731,077	$	915,185		

Cash, Cash Equivalents, and Investments

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 April 30, 2023, approximately $53.2 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.

Share Repurchase Program

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. We entered into an accelerated share repurchase (“ASR”) agreement with a large financial institution whereupon we provided them with a prepayment of $200.0 million and received an initial delivery of 2,581,478 shares of our common stock. As of April 30, 2023, the ASR was settled in full with the delivery of an additional 648,001 shares of common stock 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.

In addition to the shares received upon settlement of the ASR, we repurchased 207,191 shares at an average price of $77.19 per share under the approved share repurchase program during the three months ended April 30, 2023.

During the nine months ended April 30, 2023, we repurchased a total of 3,436,670 shares at an average price of $62.85 per share. As of April 30, 2023, $184.0 million remained available for future share repurchases.

During the three months ended April 30, 2022, we did not repurchase any shares of common stock. During the nine months ended April 30, 2022, we repurchased 322,545 shares of common stock at an average price of $116.11 per share under a previously completed share repurchase program.

Cash Flows

Our cash flows from operations are significantly impacted by 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 the first fiscal quarter, which ends 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. Additionally, our capital expenditures may fluctuate depending on future office build outs and development activities subject to capitalization.

We believe that our existing cash and cash equivalents and 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 efforts, investments in cloud infrastructure, cybersecurity, cloud operations, operating costs, and expansion into other markets. We also may invest in or acquire complementary businesses, applications or technologies, or may execute on the board-authorized share repurchase program, which may require the use of significant cash resources and/or additional financing.

The following summary of cash flows for the periods indicated has been derived from our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q (in thousands):

42

	Table of Contents						
				Nine Months Ended April 30,	
				2023			2022	
Net cash provided by (used in) operating activities	$	(134,842)	$	(121,532)	
Net cash provided by (used in) investing activities	$	3,854	$	114,753	
Net cash provided by (used in) financing activities	$	(213,766)	$	(37,335)	

Cash Flows from Operating Activities

Net cash used in operating activities was $ 134.8 million for the nine months ended April 30, 2023 compared to net cash used in operating activities of $121.5 million during the nine months ended April 30, 2022. This $13.3 million increase in operating cash used was attributable to a $44.2 million increase in cash used by working capital activities offset by a $30.9 million decrease in net loss after excluding the impact of non -cash charges such as deferred taxes, stock-based compensation expense, depreciation and amortization expense, loss from lease assignment, and other non-cash items. During the first quarter of fiscal year 2023, changes in working capital included severance payments of $2.9 million. During the first quarter of fiscal year 2022, changes in working capital included payments of $18.1 million related to the settlement of accrued vacation balances in countries in which we adopted a non-accrual vacation policy.

Cash Flows from Investing Activities

Net cash provided by investing activities was $3.9 million for the nine months ended April 30, 2023 compared to net cash provided by investing activities of $114.8 million during the nine months ended April 30, 2022. The $110.9 million decrease in cash provided by investing activities was primarily due to increased net purchases of available-for-sale securities of $ 162.9 million. This increase was offset by decreases of $43.8 million related to the acquisition of HazardHub during the first quarter of fiscal year 2022, a $2.5 million decrease in amounts paid for strategic investments, and lower capital expenditures and capitalized software development costs of $5.7 million.

Cash Flows from Financing Activities

Net cash used in financing activities for the nine months ended April 30, 2023 was $213.8 million, compared to $37.3 million for the nine months ended April 30, 2022. This $176.4 million increase in cash used was primarily because of shares repurchased under the authorized and approved share repurchase program, including the accelerated share repurchase agreement, that resulted in $176.5 million more of our common stock being repurchased during the nine months ended April 30, 2023, compared to the same period a year ago.

Commitments and Contractual Obligations

Except as discussed below, there has been no material change in our contractual obligations and commitments other than in the ordinary course of business since our fiscal year ended July 31, 2022.

Effective during the nine months ended April 30, 2023, we terminated our existing agreement and entered into a new agreement with a cloud infrastructure services provider for a total obligation of $600 million over a five-year period.

Effective during the nine months ended April 30, 2023, we assigned the remaining lease term of our previous headquarters and concurrently entered into a sublease for office space in San Mateo, California with the same third party for our new worldwide headquarters.

See our Annual Report on Form 10-K for the fiscal year ended July 31, 2022 for additional information regarding our contractual obligations.

Off-Balance Sheet Arrangements

Through April 30, 2023, 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.

43

Table of Contents

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk

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.

Interest Rate Sensitivity

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 April 30, 2023 and July 31, 2022 were $806.9 million and $1,163.7 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 100 basis point increase in interest rates is estimated to result in a decrease of $2.9 million and $3.6 million in the market value of our available -for-sale securities as of April 30, 2023 and July 31, 2022, respectively. Any realized gains or losses resulting from such interest rate changes would only occur if we sold the investments prior to maturity.

Foreign Currency Exchange Risk

Our 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, Malaysian Ringgit, and Polish Zloty, the currency of the locations within which we currently 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, 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. 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 nine months ended April 30, 2023 and 2022, we recorded a foreign currency loss of $6.0 million and $13.8 million, respectively, in other income (expense) in our condensed consolidated statement 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 $29.2 million. As our international operations grow, we will continue to assess our approach to managing our risk relating to fluctuations in currency rates.

Fair Value of Financial Instruments

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.

44

Table of Contents

ITEM 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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 Quarterly Report on Form 10-Q. 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.

Inherent Limitations of Internal Controls

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.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended April 30, 2023 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.

45

Table of Contents

PART II – OTHER INFORMATION

ITEM 1.	Legal Proceedings

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 8 “Commitments and Contingencies,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, which are incorporated by reference herein, we are not party to any material pending legal proceedings.

ITEM 1A.	Risk Factors

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 Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q 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.

Risks Related to our Business and Industry

We may experience significant quarterly and annual fluctuations in our results of operations due to a number of factors.

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.

Factors that may affect our results of operations include:

•	the impact of economic downturns and related market volatility caused by economic volatility, inflation, bank failures and associated financial instability and crises, or other national and worldwide events on our business and the businesses of our customers, partners, and vendors;

•	our ability to attract new domestic and international customers and renew existing customers;

•	seasonal buying patterns of our potential customers and our ability to sell additional software and services to existing customers;

•	the proportion and timing of subscription sales as opposed to term or perpetual software licenses, and the variations in revenue recognition between these contract types;

•	changes in contract durations of term software licenses and renewals;

•	increases in costs related to cloud operations, product development, and services;

•	our ability to develop and achieve market adoption of cloud-based services, including the impact of our customers transitioning from term software licenses to subscription services;

•	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, 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;

46

Table of Contents

•	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;

•	security and privacy concerns related to employee data, customer data, and systems that are accessed or otherwise used by our hybrid workforce and customers;

•	employee retention, the ability to hire and onboard appropriate personnel, and the timing of hiring personnel and employee related expenses;

•	our ability to realize expected benefits from our acquisitions and other strategic business transactions;

•	reductions in our customers’ budgets for information technology purchases and delays in their purchasing decisions;

•	the impact of a recession or any other adverse global economic condition on our business, including pandemics, geographic and political conflicts, trade tariffs, trade agreements, and other uncertainties that may cause a delay in entering into, a failure to enter into, or cancel significant customer agreements or the fulfillment of professional service arrangements;

•	adverse litigation judgments, dispute-related settlement payments, or litigation-related costs;

•	future accounting pronouncements or changes in accounting rules and our related accounting policies, interpretations, and controls;

•	fluctuations in foreign currency exchange rates; and

•	the effects of inflation or deflation in the economies in which we operate and its impact on interest rates and our revenues 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 changes to 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 very 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.

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 ended 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 has 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. Generally, accounting under ASC 606 has and may continue to heighten or change the seasonal impact due to license revenue for the entire committed term of our new term licenses and multi-year term license renewals being recognized at the beginning of the agreement. 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 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, 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:

•	our subscription arrangements are recognized ratably and only a portion, if any, of the revenue from an order is recognized in the same fiscal period of the order;

•	subscription arrangements generally have ramped invoicing schedules over the initial term, which affects ARR, but revenue is recognized ratably over the initial term;

47

Table of Contents

•	our term license agreements and multi-year term license renewals generally have annual billing arrangements even though revenue is recognized upfront for the entire committed term;

•	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 large number of renewals that occur in the first fiscal quarter. Seasonal and other variations may cause significant fluctuations in our revenues, 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.

If we fail to successfully manage our transition to a business model focused on delivering cloud- based offerings on a subscription basis or fail to meet stipulated service levels with our subscription services, our results of operations could be harmed.

To address demand trends in the P&C insurance industry, we now offer customers the use of our software products through a cloud-based offering sold on a subscription basis in addition to our self- managed offering. This change to our business model requires 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 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 transition to 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, especially in light of our limited experience with the costs of delivering cloud-based versions of our applications. 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, 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, which represent new risks we are not accustomed to managing. 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 will generally be recognized ratably over the term of the contract. The transition to ratable revenue recognition will result in lower revenue than we otherwise would have recognized in the initial period of the customer agreement under term license agreements. This effect on recognized revenue may be magnified in any fiscal year due to the concentration of our orders in the fourth fiscal quarter. A combination of increased costs and delayed recognition of revenue would adversely impact our gross and operating margins compared to prior periods. Additionally, the change in our business model and 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 revenues in any period.

In addition, market acceptance of our cloud-based offerings may be affected by a variety of factors, including, but not limited to, price, security, reliability, performance, customer preference, public concerns regarding privacy, and the enactment of restrictive laws or regulations. We are in the early stages of re-architecting our existing services and products and developing new services and 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 transition 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 gauge the status of our business model transition may evolve over the course of the transition as significant trends emerge. It may be difficult, therefore, to accurately determine the impact of this transition on our

48

Table of Contents

business on a contemporaneous basis, or to clearly communicate the appropriate metrics to our investors. If we are unable to successfully establish these new cloud offerings and navigate our business model transition 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.

We have relied and expect to continue to rely on orders from a relatively small number of customers in the P&C insurance industry for a substantial portion of our revenue and ARR, and the loss of any of these customers would significantly harm 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 and will vary from year to year. In fiscal year 2021 our ten largest customers accounted for 28%, and in fiscal year 2022 they accounted for 23%. Additionally, our ten largest customers based on ARR accounted for 26% of total ARR at July 31, 2022. 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 grows, we expect that we will continue to depend upon a relatively small number of customers for a significant portion of our revenue for the foreseeable future. As a result, if we fail to successfully sell our services and products to one or more of these anticipated customers in any particular period or fail to identify additional potential customers or such customers purchase fewer of our services or products, 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.

Failure of any of our established services or products to satisfy customer demands or to maintain market acceptance could harm our business, results of operations, financial condition, and growth prospects.

We derive a significant majority of our revenue and cash flows from our established product offerings, including Guidewire InsuranceSuite Cloud, Guidewire InsuranceNow, Guidewire InsuranceSuite for self-managed installations, and our digital and data services and products. We expect to continue to derive a substantial portion of our revenue from these sources. As such, continued market acceptance of these services and products is critical to our growth and success. Demand for our services and products is affected by a number of factors, some of which are beyond our control, including the successful implementation of our services and 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 services and 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 services and products, our business, results of operations, financial condition and growth prospects may be adversely affected.

Recent global events have adversely affected, and may continue to adversely affect, our business, results of operations, and financial condition.

49

Table of Contents

Recent global events have adversely affected and are continuing to adversely affect workforces, organizations, economies, and financial markets globally, leading to economic downturns, inflation, and increased market volatility. The ongoing conflict between Russia and Ukraine, escalating tensions in the South China Sea, inflation higher than we have seen in decades, bank failures and associated financial instability and crises, and supply chain issues have added to global economic and market volatility. Our business and financial results during fiscal year 2022, including our ARR growth rates, services revenue, and margins, were adversely impacted due to the disruptions resulting from these events. These global events have also disrupted the normal operations of our customers’ businesses and our SI partners’ businesses. The related impacts of recent 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 have increased and could continue to increase, which has resulted in and 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 these global events and related implementation delays. In the third quarter of our fiscal year 2022, the ongoing conflict between Russia and Ukraine resulted in our ceasing operations in Russia, which resulted in our recording $3.0 million of bad debt expense and removing $3.1 million of ARR due to our cancellation of contracts with customers in Russia. 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, or goodwill. We may experience further operational challenges, including increased costs, as a portion of our workforce returns to working in person and gradually shifts to assisting customers in person, difficulty in hiring necessary personnel, and higher employee attrition. Due to the continuing and evolving nature of these 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 recent global events adversely affects 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.

We are in the process of transitioning to a hybrid in-person and remote workforce, which will subject us to certain operational challenges and risks and potential harm to our business.

We have announced our intention to transition to a hybrid work environment in which a significant portion of our workforce will work either in -person on a part-time basis or remotely on a permanent basis. As a result, we expect to continue to be subject to the challenges and risks of having a remote workforce, as well as new challenges and risks from operating with a 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, 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. The transition to hybrid in-person as well as remote working may also subject us to other operational challenges and risks. For example, our shift to hybrid working 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 the transition to a hybrid workforce to, among other things, facilitate permanent remote work for a portion of our workforce and update our offices to offer more collaborative workspaces. If we are unable to effectively transition to 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.

We face intense competition in our market, which could negatively impact our business, results of operations, and financial condition and cause our market share to decline.

The market for our software and services 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.

50

Table of Contents

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 services and 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.

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.

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 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 services and products, to initiate or withstand substantial price competition, or to take advantage of emerging opportunities by developing and expanding their product and service 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.

Our sales and implementation cycles are lengthy and variable, depend upon factors outside our control, and could cause us to expend significant time and resources prior to generating revenue.

The typical sales cycle for our services and 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 services and products, including the technical capabilities of our services and products and the potential cost savings achievable by organizations deploying our services and products. Customers typically undertake a significant evaluation process, which frequently involves not only our services and 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, we sometimes commit to include specific functions in our base service and product offering at the request of a customer or group of customers and are unable to recognize revenue until the specific functions have been added to our services and products. 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 services and products will be operational or that once implemented our services and 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

51

Table of Contents

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 services and products by our customers typically lasts six to 24 months or longer and unexpected implementation delays and difficulties can occur. Implementing our services and 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 services and products. Failing to meet the expectations of our customers during the implementation of our services and products could result in a loss of customers and negative publicity about us and our services and 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 services or products sales or upon renewals of existing services and products, potential reversals of previously recognized revenue, renegotiating existing customer’s contractual terms, and a customer’s refusal to pay their contractually-obligated license, 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.

Furthermore, our sales and implementation cycles could be interrupted or affected by other factors outside of our control. We have had, and may in the future have, restrictions on travel, which are in accordance with recommendations by the U.S. government, The Centers for Disease Control and Prevention, and other equivalent agencies in the locations in which we operate, and our customers, SI partners, and prospects have likewise enacted their own preventative policies and travel restrictions. Widespread restrictions on travel and in -person meetings have affected and could continue to affect services delivery, delay implementations, and interrupt sales activity. We cannot predict the duration or the extent of adverse impacts from pandemics and other global events on our business, results of operations, and financial condition.

Failure to manage our expanding operations effectively could harm our business.

We have experienced consistent growth and expect to continue to expand our operations, including the number of employees and the locations and scope of our international operations. Additionally, we have announced our intention to transition to a hybrid work environment in which a large portion of our workforce will work either in-person on a part- time basis or remotely on a permanent basis, which brings new challenges to managing our business and workforce. This expansion and changing work environment has placed, and will continue to place, a significant strain on our operational and financial resources and our personnel. 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 services and products or investments in cloud operations. If we increase the size of our organization without experiencing an increase in sales of our services and 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.

Revenue mix, as well as declines in our subscription and support gross margin or our services gross margin, could adversely affect our overall gross margin and profitability.

Our subscription and support revenue was 42% and 34% of total revenue for fiscal years 2022 and 2021, respectively. Our subscription and support revenue produces lower gross margins than our license revenue. The gross margin of our subscription and support revenue was 41% and 38% for fiscal years 2022 and 2021, respectively, while the gross margin for license revenue was 97% and 97% for fiscal years 2022 and 2021, respectively. As our cloud transition continues, 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 significant expenses to develop our cloud services and scale 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 pandemics, inflation, or other global events and disasters.

Further, our services revenue was 26% and 25% of total revenue for fiscal years 2022 and 2021, respectively. Our services revenue produces lower gross margin than either our license revenue or our subscription and support revenue. The gross margin of our

52

Table of Contents

services revenue was less than 1% in both fiscal years 2022 and 2021. If we experience an increase in the percentage of total revenue represented by services revenue, due to acquisitions and 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 the pace of our customers’ migration from term license to subscription services as we continue our cloud transition, change in customer demand for our services team’s involvement in the implementation of new services and 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, and the impact on the global economy as a result of economic volatility, inflation, 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 clients to accelerate their cloud transition 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, or if we require additional personnel on unexpectedly difficult projects to ensure customer success, perhaps without receiving commensurate compensation.

Our large customers have substantial negotiating leverage, which may require that we agree to terms and conditions that result in increased cost of sales, decreased revenue, and lower average selling prices and gross margins, all of which could harm our results of operations.

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 services and 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 services and products we sell to them or add complexity to our customer agreements. These customers may also delay making payments under existing agreements or at renewal in an attempt to obtain more favorable terms from us. We have been required to, and may continue to be required to, reduce the average selling price and ARR of our services and products 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.

Our business depends on customers renewing and expanding their license, support, and subscription contracts for our services and 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. In addition, our perpetual license customers have no obligation to renew their support arrangements after the expiration of the initial contractual period. Our customers’ renewal rates may fluctuate or decline because of several factors, including their satisfaction or dissatisfaction with our services and products, the prices of our services and products, the prices of services and 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.

Also, in some 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.

If we are unable to develop, introduce, and market new and enhanced versions of our services and products, we may be put at a competitive disadvantage.

Our success depends on our continued ability to develop, introduce, and market new and enhanced versions of our services and products to meet evolving customer requirements. Because some of our services and products are complex and require rigorous testing, new features, new functionality,
and updates to our existing products and services can take significant time and resources to develop and bring to market. As we expand internationally, our services and 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 services and products or the technology platform underlying our existing services and products or that new services and 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 experience delays between the time we incur expenses associated with research and development and the time we generate revenue, if any, from such expenses.

53

Table of Contents

If we fail to develop new services and products, enhance our existing services and products, or migrate our products to the cloud, our business could be adversely affected, especially if our competitors are able to introduce services and 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 services and 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 services and products in a timely manner that are competitive in technology and price or develop services and products that fail to meet customer demands, our market share will decline and our business

and results of operations could be harmed. If our development efforts do not develop services, products or features that our customers find valuable, then we might incur impairment charges related to our capitalized software development costs.

Real or perceived errors or failures in our services and products, including implementation 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 services and products, undetected errors or failures may exist or occur, especially when services and products are first introduced or when new versions or updates are released. Our services and products are often installed and used in large-scale computing environments with different operating systems, system management software, and equipment and networking configurations, which may cause errors or failures in our services and products or may expose undetected errors, failures, or bugs in our services and products. Despite testing by us, we may not identify all errors, failures, or bugs in new services and products or releases until after commencement of commercial sales or installation. In the past, we have discovered software errors, failures, and bugs in some of our offerings after their introduction. Additionally, our Guidewire Cloud offerings rely on third-

party hosting services, primarily Amazon Web Services (“AWS”). Any material disruption or slowdown in these services or the systems of third parties who we depend upon could cause outages or delays in our services, which could harm our reputation and adversely affect our results of operations.

We provide our customers with upfront estimates regarding the duration, resources, and costs associated with the migration and implementation of our services and products. Failure to meet these upfront estimates and the expectations of our customers could result from our product capabilities or 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 services or product sales or upon renewals of existing licenses or services, 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 services and 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 services and 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 services and products to new customers and renew agreements with our existing customers.

54

Table of Contents

If we or our SI partners do not effectively assist our customers in deploying our services and 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 services and products to existing customers would be adversely affected and our reputation with potential customers could be damaged. Once our services and 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 services and products. High-quality support is critical for the continued successful marketing and sale of our services and 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 services and 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 services and 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 SIs 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 of our services and 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.

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, or businesses complementary to ours. Our strategy also includes alliances with such companies. For example, we have made several acquisitions in the past, including most recently in August 2021, we acquired HazardHub, Inc., a leading insurtech provider of API-driven property risk insights. Acquisitions and alliances, such as our strategic partnership with One Inc., may result in unforeseen operating difficulties and expenditures, be dilutive to earnings, and may not result in the benefits anticipated by such corporate activity. 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, or retain existing customers or sell acquired services and products to new customers. 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 services and products, the timing of revenue from the sale of services and products that we acquired or that result from the alliance, or from the sale of a bundle of services and products that includes such new services and products, may be different than the timing of revenue from existing services and products. In addition, our ability to maintain favorable pricing of new services and products may be challenging if we bundle such services and products with existing services and products. A delay in the recognition of revenue from sales of acquired or alliance services and 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. 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.

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 services and 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 services and products will suffer and our growth will be impeded.

55

Table of Contents

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 services and 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 services and products may compete directly against services and 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 services and products, the quality or timeliness of such migrations and implementations, or the effects of pandemics and other 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 services and products, would have an adverse effect on our business and our results of operations could fail to grow in line with our projections.

Our international sales and operations subject us to additional risks that can adversely affect our business, results of operations, and financial condition.

We sell our services and 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 2022, 2021, and 2020, $296.2 million, $271.1 million, and $279.8 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:

•	increased management, travel, infrastructure, legal, and compliance costs associated with having multiple international operations;

•	unique terms and conditions in contract negotiations imposed by customers in foreign countries;

•	longer payment cycles and difficulties in enforcing contracts and collecting accounts receivable;

•	the need to localize our contracts and our services and products for international customers;

•	lack of familiarity with and unexpected changes in foreign regulatory requirements;

•	increased exposure to fluctuations in currency exchange rates, especially on revenue and ARR;

•	highly inflationary international economies, such as Argentina;

•	geographic and political conflicts, such as that between Russia and Ukraine and the escalating tensions in the South China Sea;

•	the burdens and costs of complying with a wide variety of foreign laws and legal standards, including the General Data Protection Regulation in the European Union (“EU”) and the U.K.;

•	compliance with the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act of 2010 and other anti-corruption regulations, particularly in emerging market countries;

•	compliance by international staff with accounting practices generally accepted in the United States, including adherence to our accounting policies and internal controls;

•	import and export license requirements, tariffs, taxes and other trade barriers;

•	increased financial accounting, tax and reporting burdens and complexities;

•	weaker protection of intellectual property rights in some countries;

•	multiple and possibly overlapping tax regimes;

•	government sanctions that may interfere with our ability to sell into particular countries, such as Russia;

•	disruption to our operations caused by epidemics or pandemics; and

•	political, social, and economic instability abroad, terrorist attacks, and security concerns in general.

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.

Incorrect or improper use of our services and products or our failure to properly train customers on how to utilize our services and products could result in customer dissatisfaction and negatively affect our business, results of operations, financial condition, and growth prospects.

56

Table of Contents

Our services and products are complex and are deployed in a wide variety of environments. The proper use of our services and products requires training of the customer. If our services and products are not used correctly or as intended, inadequate performance may result. Our services and products may also be intentionally misused or abused by customers or their employees or third parties who are able to access or use our services and 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 services and products, our failure to properly train customers on how to efficiently and effectively use our services and 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 services and products.

In addition, if there is substantial turnover of customer personnel responsible, especially at the executive level, for the use and support of our services and products, or if customer personnel are not well trained in the use and support of our services and products, customers may defer the deployment of our services and 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 services and 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 services and products, acquire businesses and technologies, 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 services and products, or otherwise respond to competitive pressures would be significantly limited. Any of these factors could harm our results of operations.

Risks Related to Data Security and Privacy, Intellectual Property, and Information Technology

If our products or cloud-based services experience data security breaches or there is unauthorized access to our customers’ data, we may lose current or future customers and our reputation and business may be harmed.

If our security measures are breached or unauthorized access to customer data is otherwise obtained, our cloud services may be perceived as not being secure, customers may reduce the use of or stop using our services, we may incur significant liabilities, and our reputation could be harmed. Our software and cloud services involve the storage and transmission of customer data, including in some cases, personal data, and security breaches could result in the loss of this information, which in turn could result in litigation, breach of contract claims, indemnity obligations, and other liabilities for our

Company. While we have taken, and are continually updating and enhancing, steps to protect the confidential information and customer data to which we have access, 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, such as AWS, could be breached. We rely on third-party technology and systems for a variety of services, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, back- office support, and other functions, and our ability to control or prevent breaches of any of these systems may be beyond our control. Because techniques used to obtain unauthorized access or infiltrate 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. Although we have developed systems and processes that are designed to protect customer data and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach at a third-party vendor, such measures cannot provide absolute security. Any or all of these issues 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, regulatory fines or other action or liability, thereby adversely affecting our results of operations and reputation.

Privacy concerns could result in regulatory changes and impose additional costs and liabilities on us, limit our use of information, and adversely affect our business.

57

Table of Contents

As adoption of our cloud-based services occurs, the amount of customer data, including customer personal information, that we manage, hold, and/or collect continues to increase. In addition, our services and products may collect, process, store, and use transaction-level data aggregated across insurers using our common data model. We anticipate that over time we will continue to expand the use and collection of personal information as greater amounts of such personal information may be transferred from our customers to us and 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.

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 information. Changes to laws or regulations affecting privacy could impose additional costs and liabilities, including fines, on us and could limit our use of such information to add value for customers, including for example, the California Consumer Privacy Act, the California Privacy Rights Act, which substantially went into effect on January 1, 2023, and the Court of Justice of the EU’s invalidation of the Privacy Shield framework in July 2020. On July 16, 2020, the Court of Justice of the EU issued a verdict that ruled that the EU-US Privacy Shield, on which many companies relied on to transfer their data between the EU and the U.S., was invalidated due to concerns around

surveillance by U.S. state and law enforcement agencies, known as the Schrems II decision. Schrems II now requires companies to conduct case-by-case assessments of each data transfer to a non-EU, or non-UK, country in order to ensure that such data is adequately protected. 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. In addition, we may be subject to fines, penalties, and potential litigation if we fail to comply with applicable privacy and/or data security laws, regulations, standards, and other requirements. The costs of compliance with and other burdens imposed by privacy-related laws, regulations, and standards may limit the use and adoption of our services and 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 services and products effectively. Even the perception that the privacy and/or security of personal information is not satisfactorily managed, or does not meet applicable legal, regulatory, and other requirements, could inhibit sales of our services or products, and could limit adoption of our solutions, resulting in a negative impact on our sales, reputation, and results from operations.

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.

On April 27, 2016, the EU adopted the General Data Protection Regulation 2016/679 (“GDPR”), that took effect on May 25, 2018. The GDPR applies to any company established in the European Economic Area (“EEA”) as well as to those outside the EEA if they 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, including, for example, expanded disclosures about how personal data is to be used, limitations on retention of personal data, enhanced data subject rights, mandatory data breach notification requirements, and onerous new obligations on data processors. Non- compliance with the GDPR can trigger fines of up to €20 million, or 4% of total worldwide annual revenues, whichever is higher. Given the breadth and depth of changes in data protection obligations, complying with GDPR requirements has caused us to expend significant resources and such expenditures are likely to continue into the near future as we respond to new interpretations, regulatory guidance, and enforcement decisions and as we continue to negotiate data processing agreements with our customers and business partners.

In addition, the GDPR restricts transfers of personal data outside of the EEA to countries deemed to lack adequate privacy protections, including the U.S., unless an appropriate safeguard specified by the GDPR is implemented, such as the Standard Contractual Clauses (“SCCs”) approved by the European Commission and, until July 16, 2020, the Privacy Shield for EU–U.S. data transfers. On July 16, 2020, the European Court of Justice (“ECJ”) invalidated the EU-U.S. Privacy Shield, but it deemed that SCCs are valid, provided additional safeguards are in place. However, the ECJ ruled that transfers made pursuant to SCCs and other alternative transfer mechanisms need to be analyzed on a case-by-case basis to ensure EU standards of data protection are met in the jurisdiction where the data importer is based, and there continue to be concerns about whether SCCs will face additional

challenges. Moreover, on September 8, 2020, the Swiss Federal Data Protection and Information Commissioner announced that it no longer considers the Swiss-U.S. Privacy Shield to provide adequate protections for transfers of Swiss personal data to the U.S., following the invalidation of the EU -U.S. Privacy Shield by the ECJ. Further, on June 4, 2021, the European Commission published revised standard contractual clauses for data transfers from the EEA. We are required to implement the revised standard contractual clauses in relation to our customer arrangements within the relevant time frames, which could increase our compliance costs and adversely affect our business. We (and many other companies) may 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 further guidance and orders on personal data export mechanisms and/or continue taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer

58

Table of Contents

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.

We may experience hesitancy, reluctance, or refusal by European or multi-national customers to continue to use our services 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 our current transition to more cloud -based services 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 need 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.

Starting on January 1, 2021, as a result of Brexit, the U.K. has brought the GDPR into domestic U.K. law with the Data Protection Act 2018 (“U.K. GDPR”), which will remain in force. The U.K. GDPR mirrors the data protection obligations and fines under the GDPR, but there may be further developments about the regulation of particular issues such as U.K. data exports. The United Kingdom’s Information Commissioner’s Office has published new data transfer standard contracts for transfers from the U.K. under the U.K. GDPR. This new documentation will be mandatory for relevant data transfers from September 21, 2022; existing standard contractual clauses arrangements must be migrated to the new documentation by March 21, 2024. We will be required to implement the latest U.K. data transfer documentation for data transfers subject to the U.K. GDPR, in relation to relevant existing contracts and certain additional contracts and customer arrangements, within the relevant time frames. On June 28, 2021, the European Commission adopted an adequacy decision in favor of the U.K., enabling data transfers from EEA member states to the U.K. without additional safeguards. However, the U.K. adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews/extends that decision, and it remains under review by the Commission during this period. In September 2021, the U.K. government launched a consultation on its proposals for wide-ranging reform of U.K. data protection laws following Brexit. There is a risk that any material changes which are made to the U.K. data protection regime could result in the Commission reviewing the U.K. adequacy decision, and the U.K. losing its adequacy decision

if the Commission deems the U.K. to no longer provide adequate protection for personal data. These changes may lead to additional costs and increase our overall risk exposure.

Anticipated 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 increase substantially 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 services and 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 services or 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.

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 services or products that are alleged to infringe or misappropriate the intellectual property of others; expend additional development

59

Table of Contents

resources to redesign our services or 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.

Failure to protect our intellectual property could substantially harm our business and results of operations.

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 services and products that have enabled us to be successful to date.

We and our customers rely on technology and intellectual property of third parties, the loss of which could limit the functionality of our services and products and disrupt our business.

We use technology and intellectual property licensed from unaffiliated third parties in certain of our services and products, and we may license additional third-party technology and intellectual property in the future. Any errors or defects in this third-party technology and intellectual property or the integration of third-party technology and intellectual property with our services and products could result in errors that could harm our brand and business. In addition, licensed technology and intellectual property may not continue to be available on commercially reasonable terms, or at all. The loss of the right to license and distribute this third-party technology could limit the functionality of our services and products and might require us to redesign our services and products.

In addition, our Guidewire Cloud offerings rely on third- party hosting and infrastructure services provided by AWS, for the continuous, reliable, and secure operation of servers, related hardware and software, and network infrastructure. A prolonged AWS service disruption or slowdown for any reason could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, or otherwise harm our business.

60

Table of Contents

Some of our services 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 services and products subject to those licenses.

Some of our services 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.

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 services and 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.

We may be obligated to disclose our proprietary source code to our customers, which may limit our ability to protect our intellectual property and could reduce the renewals of our support services.

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 services and 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 services and 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 services and 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.

Risks Related to Legal, Regulatory, Accounting, and Tax Matters

The nature of our business requires the application of accounting guidance that requires management to make estimates and assumptions. Reported results under GAAP may vary from key metrics used to measure our business. Additionally, changes in accounting
guidance may cause us to experience greater volatility in our quarterly and annual results. If we are unsuccessful in adapting to and interpreting the requirements of new guidance, or in clearly explaining to stockholders how new guidance affects reporting of our results of operations, our stock price may decline.

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, such as ASC 606 - Revenue from Contracts with Customers or ASC 842 - Leases, 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. In addition, 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. If we are unsuccessful in adapting to the requirements of any new standard, or if changes

61

Table of Contents

to our go-to-market strategy 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. 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 the ARR 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 as we increase arrangements with multiple performance obligations that include services at discounted rates, more of the total contract value will be recognized as services revenue, but our reported ARR amount will 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 of 2002 (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.

If tax laws change or we experience adverse outcomes resulting from examination of our income tax returns, it could adversely affect our results of operations.

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 “Tax Act”), the Coronavirus Aid, Relief, Economic Security Act of 2020, and the Inflation Reduction Act of 2022.

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, financial condition and results of operations.

Risks Related to Ownership of Our Common Stock

Our stock price may be volatile, which could result in securities class action litigation against us.

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.

62

Table of Contents

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, or international currency fluctuations, have and may continue to affect the market price of our common stock.

In the past, we and many companies 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 intend to pay dividends on our common stock and, consequently, the only opportunity to achieve a return on investment is if the price of our common stock appreciates.

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.

Certain provisions of our certificate of incorporation and bylaws and of Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

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:

•	not providing for cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

•	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;

•	prohibiting stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

•	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:

•	any derivative action or proceeding brought on our behalf;

63

Table of Contents

•	any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders;

•	any action asserting a claim arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or

•	any action asserting a claim that is governed by the internal affairs doctrine (the “Delaware Forum Provision”).

The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act or the Exchange Act. 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; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder.

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, 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.

We cannot guarantee that any share repurchase program will be fully consummated or it will enhance stockholder value, and share repurchases could affect the price of our common stock

In September 2022, our board of directors authorized and approved a share repurchase program of up to $400 million of our outstanding common stock and entered into an ASR agreement to repurchase an aggregate $200 million of our common stock. As of April 30, 2023, $184.0 million of the share repurchase program remains 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.

Risks Related to Our Indebtedness

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 Convertible Senior Notes or to repurchase the Convertible Senior Notes upon a fundamental change, which could adversely affect our business and results of operations.

64

Table of Contents

As of April 30, 2023, we had outstanding an aggregate principal amount of $400.0 million of our 1.25% Convertible Senior Notes due 2025 (the “Convertible Senior Notes”). 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.

Pursuant to their terms, holders may convert their Convertible Senior Notes at their option prior to the scheduled maturities of their Convertible Senior Notes under certain circumstances. Upon conversion of the Convertible Senior Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be obligated to make cash payments. In addition, holders of our Convertible Senior Notes will have the right to require us to repurchase their Convertible Senior Notes upon the occurrence of a fundamental change (as defined in the Indenture, dated as of March 13, 2018, between the Company and U.S. Bank National Association, as trustee (the “Trustee”) (the “Base Indenture”), as amended and supplemented by the First Supplemental Indenture, dated as of March 13, 2018, between the Company and the Trustee (together with the Base Indenture, the “Indenture”)) at a repurchase price equal to 100% of the principal amount of the Convertible Senior Notes to be repurchased, plus accrued and unpaid interest, if any, to, but not including, the fundamental change purchase date. Although it is our intention and we currently expect to have the ability to settle the Convertible Senior Notes in cash, there is a risk that we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Convertible Senior Notes surrendered therefor or Convertible Senior Notes being converted. In addition, our ability to make payments may be limited by law, by regulatory authority, or by agreements governing our future indebtedness. Our failure to repurchase Convertible Senior Notes at a time when the repurchase is required by the Indenture or to pay any cash payable on future conversions of the Convertible Senior Notes as required by such Indenture would constitute a default under such Indenture. A default under the Indenture or the fundamental change itself could also lead to a default under agreements governing our 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 repurchase the 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 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.

The conditional conversion feature of the Convertible Senior Notes, if triggered, may adversely affect our financial condition and results of operations.

In the event the conditional conversion feature of the notes is triggered, holders of our Convertible Senior Notes will be entitled to convert the Convertible Senior Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Senior Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), 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, even if holders do not elect to convert their Convertible Senior Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Transactions relating to our Convertible Senior Notes may affect the value of our common stock.

The conversion of some or all of the Convertible Senior Notes would 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 Convertible Senior Notes may become in the future convertible at the option of their holders under certain circumstances. If holders of our Convertible Senior Notes elect to convert their notes, we may settle our conversion obligation by delivering to them a significant number of shares of our common stock, which would cause dilution to our existing stockholders.

In connection with the issuance of the Convertible Senior Notes, we entered into capped call transactions with certain financial institutions (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.

65

Table of Contents

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 Convertible Senior Notes. This activity could cause a decrease in the market price of our common stock.

The accounting method for convertible debt securities that may be settled in cash, such as the Convertible Senior Notes, could have a material effect on our reported financial results.

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), which we adopted on August 1, 2022. The ASU simplifies the accounting for convertible instruments, and among other things, eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if -converted method. When calculating diluted EPS, the if-converted method requires us to assume that convertible debt instruments (and any applicable conversion premium) are converted to common stock as of the beginning of the period presented regardless of the price of our stock in periods that we have net income. Additionally, the if-converted method does not allow us to offset the impact of our capped call transactions on the calculation. We expect that such calculations will negatively affect our reported diluted EPS in the periods that we have net income irrespective of actual conversion of the Convertible Senior Notes.

We are subject to counterparty risk with respect to the capped call transactions.

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.

General Risks

Our customers may defer or forego purchases of our services or products in the event of weakened global economic conditions, political transitions, and industry consolidation.

General worldwide economic conditions remain unstable, and prolonged economic uncertainties or downturns could harm our business, results of operations, or financial condition. In particular, pursuant to a decision by referendum in June 2016, the U.K. voted to withdraw from the EU. A trade and cooperation agreement, which addresses trade, economic arrangements, law enforcement, judicial cooperation and a governance framework including procedures for dispute resolution, among other things, was recently ratified by the European Parliament and the Council of the EU to govern the U.K.’s future relationship with the EU. Because the agreement merely sets forth a framework in many respects and will require complex additional bilateral negotiations between the U.K. and the EU as both parties continue to work on the rules for implementation, significant political and economic uncertainty remains about how the precise terms of the relationship between the parties will differ from the terms before withdrawal. Brexit has caused significant volatility in global stock markets and fluctuations in currency exchange rates. Brexit has also caused, and may continue to cause, delays in purchasing decisions by our potential and current customers affected by this transition due to the considerable political and economic uncertainty created by Brexit and uncertainty as to the nature of the U.K.’s long-term relationship with the EU. Brexit may further result in new regulatory and cost challenges to our U.K. and global operations, particularly with respect to data protection. Depending on the market and regulatory effects of Brexit, it is possible that there may be adverse practical or operational implications on our business, and prolonged economic uncertainties or downturns caused by Brexit could harm our business and results of operations.

66

Table of Contents

Further, other global events such as global inflation concerns, the ongoing conflict between Russia and Ukraine and escalating tensions in the South China Sea, 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 services and 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 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 services and products. 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.

If we are unable to retain our personnel and hire and integrate additional skilled personnel, we may be unable to achieve our goals and our business will suffer.

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 as we transition to a business model focused on delivering cloud-based offerings. Additionally, our stakeholders increasingly expect us to have a culture that embraces diversity and inclusion. Our inability to attract and retain diverse and qualified personnel, or delays in hiring required personnel, may seriously harm our business, results of operations, and financial condition. If U.S. immigration policy related to skilled foreign workers were materially adjusted, such a change could hamper our efforts to hire highly skilled foreign employees, including highly specialized engineers, which would adversely impact our business.

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. Additionally, current global events and recent economic conditions have increased attrition and decreased the number of available candidates for open positions, which has increased the time to identify and hire new employees. 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.

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 clients, 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 clients, our reputation could suffer and our ability to attract new clients may be harmed.

67

Table of Contents

Because of the technical nature of our services and 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 services and products and enhancements of existing services and products.

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, preventing us from expanding or maintaining our existing customer base and increasing our revenue. Our business is subject to the risks of earthquakes, fire, floods, and other natural catastrophic events, and to interruption by man-made problems such as computer viruses.

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 can be caused by various events, including, without limitation, hurricanes, tsunamis, floods, windstorms, earthquakes, hail, tornadoes, explosions, severe weather, 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 or armed conflict or uncertainty in the geopolitical landscape, including as a result of escalation in the ongoing conflict between Russia and Ukraine 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. Recently, for example, various parts of the United States have suffered extensive damage due to hurricanes, droughts, floods, severe heat and cold events, fires, and other natural disasters, Turkey and Syria have experienced severe earthquakes, Germany, Pakistan, and other parts of Europe have experienced flooding, and Australia has experienced extensive damage due to fires and flooding. The combined and expected effect of those losses on P&C insurers is significant. Such losses and losses due to future 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 the majority of our operations are located in the San Francisco Bay Area, a region known for seismic activity and near an area subject to severe fire damage. A significant natural disaster, such as an earthquake, tsunami, fire, flood, epidemic, or pandemic could have a material adverse impact on our business, results of operations, and financial condition.

In addition, our information technology systems are vulnerable to computer viruses, break-ins, and similar disruptions from unauthorized tampering, such as the Log4j vulnerability. To the extent that such disruptions result in delays or cancellations of customer orders or collections, or the deployment or availability of our services and products, our business, results of operations, and financial condition would be adversely affected.

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. On March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver. 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 remains 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. Uncertainty remains over liquidity concerns in the broader financial services industry, and there may be additional impacts to our business and our industry that we cannot currently predict. 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 environment, 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, and Polish Zloty.

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 software 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 quarter. Our results of operations may also be impacted by transaction gains or losses related to revaluing certain current asset and liability

68

Table of Contents

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. While we have limited currency exchange exposure to the Russian Ruble, we expect global exchange rates for various currencies may be more volatile than normal as a result of the ongoing conflict between Russia and Ukraine and related events. We will continue to experience fluctuations in foreign currency exchange rates, which, if material, may harm our revenue or results of operations.

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases of equity securities by the Company during the three months ended April 30, 2023 were as follows:

			Total Number of Shares	Approximate Dollar Value (in		
	Total Number of	Average Price	Purchased as Part of Publicly	millions) of Shares That May		
Period			Announced Plans or Programs	Yet Be Purchased Under the		
	Shares Purchased	Paid per Share	(1)	Plans or Programs (1)		
February 1, 2023 - February 28, 2023 (2)	648,001	$61.93	648,001	$200		
March 1, 2022 - March 31, 2023	—	—	—	$200		
April 1, 2023 - April 30, 2023	207,191	77.19	207,191	$184		

(1)	On September 22, 2022, we announced that our board of directors authorized and approved a share repurchase program of up to $400.0 million of our outstanding stock. We began repurchasing shares under this program during the first quarter of fiscal year 2023. As of April 30, 2023, we had approximately $184.0 million remaining for future share repurchases under the share repurchase program. The share repurchase program does not obligate us to repurchase any dollar amount or number of shares, and the program may be modified, suspended or discontinued at any time. There is no stated expiration date for the program.

(2)	On September 28, 2022, we entered into an ASR agreement with a large financial institution whereupon we provided them with a prepayment of $200.0 million. As of April 30, 2023, the ASR was settled in full, which resulted in a total repurchase of 3.2 million shares at an average purchase price of $61.93.

69

Table of Contents

ITEM 6.	Exhibits

The exhibits listed below are filed or incorporated by reference as part of this Report.

Exhibit	Description		
Number			
3.1			Amended and Restated Certificate of		
			Incorporation		
									
3.2			Amended and Restated Bylaws		
							Form of Common Stock Certificate of		
4.1					
			the Registrant		
									
							Assignment of Lease, dated as of		
10.1		February 11, 2023, by and between		
		Guidewire Software, Inc. and Roblox		
									
							Corporation		
10.2		Sublease, dated as of February 11,		
		2023, by and between Roblox Corporation		
							and Guidewire Software, Inc.		
31.1		Certification of the Chief Executive		
		Officer pursuant to Section 302 of the		
							Sarbanes-Oxley Act		
31.2		Certification of the Chief Financial		
		Officer pursuant to Section 302 of the		
							Sarbanes-Oxley Act		
							Certification of the Chief Executive		
32.1*	Officer and the Chief Financial Officer		
	pursuant to Section 906 of the Sarbanes-		
									
							Oxley Act		
101.INS	Inline XBRL Instance Document		
101.SCH	Inline XBRL Taxonomy Extension		
							Schema Document		
101.CAL	Inline XBRL Taxonomy Extension		
							Calculation Linkbase Document		
101.DEF	Inline XBRL Taxonomy Extension		
							Definition Linkbase Document		
101.LAB	Inline XBRL Taxonomy Extension		
							Label Linkbase Document		
101.PRE	Inline XBRL Taxonomy Extension		
							Presentation Linkbase Document		

104	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

	Incorporated		
Incorporated by	by Reference		
	From		
Reference From	Exhibit		
Form	Number		
8-K	3.1		
8-K	3.2		
S-1/A	4.1		
8-K	10.1		
8-K	10.2		
Filed herewith			
Filed herewith			
Furnished herewith			
Filed herewith			
Filed herewith			
Filed herewith			
Filed herewith			
Filed herewith			
Filed herewith			
Filed herewith			

Date Filed

December 21,
2022
December 21,

2022

January 9, 2012

March 3, 2023

March 3, 2023

*	The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q 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.

70

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:	June 1, 2023	GUIDEWIRE SOFTWARE, INC.

By:	/s/ JEFF COOPER

Jeff Cooper

Chief Financial Officer
(Principal Financial and Accounting Officer)

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Mike Rosenbaum, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Guidewire Software, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

b)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	June 1, 2023	By:	/s/ MIKE ROSENBAUM

Mike Rosenbaum

Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Jeff Cooper, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Guidewire Software, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

b)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	June 1, 2023	By:	/s/ JEFF COOPER

Jeff Cooper

Chief Financial Officer

(Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10 -Q of Guidewire Software, Inc. for the quarterly period ended April 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Mike Rosenbaum, as Chief Executive Officer of Guidewire Software, Inc., hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Guidewire Software, Inc.

Date:	June 1, 2023	By:	/s/ MIKE ROSENBAUM

Mike Rosenbaum

Chief Executive Officer

(Principal Executive Officer)

In connection with the Quarterly Report on Form 10 -Q of Guidewire Software, Inc. for the quarterly period ended April 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jeff Cooper, as Chief Financial Officer of Guidewire Software, Inc., hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Guidewire Software, Inc.

Date:	June 1, 2023	By:	/s/ JEFF COOPER

Jeff Cooper

Chief Financial Officer

(Principal Financial and Accounting Officer)