Well, good afternoon. Welcome to Las Vegas Connections and Guidewire Analyst Day. I got here Sunday, and when I woke up Monday, one of the things I discovered is that as good as this hotel is, they don't provide any coffee in the bedroom. I said to Mike, "Wouldn't it be funny if we invited our analysts and our investors to Las Vegas and made them think that the day would start at 4:30, and then surprise them with a business update call early in the morning so they can discover the same fact, but at 5:00 A.M.?" I'm sorry. Colin Jost even thought it was cruel. But it is a lesson that life is filled with uncertainties and risks, and today we will be making forward-looking statements, so please keep that in mind. They're not immune to that. We do have a great agenda today.
We're going to move very fast. Normally, we have a break on these days, but today we're not going to do that, just given the amount of news and things to talk about. Mike is going to kick it off, talking about delivering intelligent insurance. Then John's going to talk about driving platform expansion and growth. Then my favorite section, we're going to move over and hear from the perspective of some of our customers, led by Christina Colby. Then Jeff's going to bring it home, talking about building on our cloud model, and then we'll finish with Q and A and a couple drinks after that. That's the agenda, and we're going to plow through it. With that, I'm going to hand it over to Mike.
Hello, everybody. Hello. Yeah, I couldn't tell it was on. It's on now, yeah? We're good. Okay, great. Okay, so apologies a little bit if some of this stuff is repetitive to those of you who were able to join us for the keynote this morning, but I wanted to make sure that whenever we do this event and whenever we do this presentation, I just want to make sure that we cover some standard ground about Guidewire. First of all, 25 years serving P&C insurance industry. I said this morning, I don't think that's going to change for at least the next decade. We see a very significant opportunity continuing to serve the P&C industry. It's an industry that's over $1 trillion in direct written premium, which is the really important driver of our business model. And we exist to provide a technology platform for that industry.
Technology in P&C insurance is interesting. You think sometimes, in my previous life, we would talk about back office systems, and somehow that was disconnected from the core mission of a company. But in P&C insurance, these core systems directly relate to the products that these companies can provide, the customer interactions that these customers can support, and also claims management, which is a critical function of an industry. We like to think that Guidewire acts as the heart and lungs of an insurance company, and without our core systems, they really can't operate. In the 25 years we've been in existence, we've managed to earn the trust of nine of the top insurers in the world by direct written premium, 500 customers worldwide across 44 countries, and very proud to say, at this point, $1.6 billion in fully ramped ARR.
The other thing about our company that's very important to understand, and certainly this has evolved quite a lot in the last seven years that I've been a part of Guidewire, is that we seek to provide these applications as a cloud service, a constantly evolving cloud service, which creates this mechanism for us to deliver innovation to our customers much more effectively than they have traditionally been able to operate. The real thing holding the industry back, or one of the things holding the industry back for a very significant amount of time, is just how slow it is to update these core applications. With what we've built now, we can keep these applications current, we can continue to deliver innovation to the industry, and we continue to make a very positive impact on our customers' competitiveness.
I want to talk a bit about our perspective on artificial intelligence and its impact on insurance. Number one, I'll start at the bottom of this slide. A lot of what governs how effective an insurance company can be is driven by development. These are technology systems. There's 20,000-some developers in our community. These things are incredibly complicated and somewhat these are real fintech operations. AI is going to and has now accelerated the work that these developers do. The IT programs, the SI programs that underlie Guidewire implementations are speeding up with AI. We've worked incredibly hard over the past year or so to make sure that our platform was AI-ready, and this is a critical accelerator of what I think is a real driver behind the future of the company.
The other two sides of the triangle, the way that I want you to think about this, is not so much products, but functions at an insurance company. What makes an insurance company special is that they understand risk and they underwrite that risk, and then when a loss occurs, they pay the claim. The processes that you need to follow in order to do this effectively, in order to do this profitably, are very, very unique to P&C insurance, and both of these things are going to be dramatically impacted, I think in a positive way, by artificial intelligence. A lot of people say P&C insurance is generally less efficient than maybe other industries, but it's because the nature of what these companies do just resists the traditional business process workflow automation.
It just requires a very deep understanding of what oftentimes is unstructured information, both on the underwriting side and on the claims side. And what artificial intelligence does is it provides this incredible unlock to that unstructured information. These things together we think create a very, very significant market opportunity for Guidewire. I am going to go top to bottom on this slide, in thinking about what I think is, call it the total addressable market that we face right now, the opportunity that we see going forward. So number one is the business that we are in. There is a legacy tech debt in the industry, is very significant. Consumer expectations continue to increase, and technology is really the key driver behind the efficiency of the industry.
We serve this demand with, we think, the leading core system platform in the world, and we think that that creates a $30 billion TAM, and you can think of that as 1% of direct written premium. This is the business that we are in. This is a business that I think we are winning. This is a business that I am very proud of leading. Basically, I would say from an investment perspective, this is how you should generally think about Guidewire, at least over the last seven years of my tenure at the company. These next two bars are incremental and are unlocked in a very significant way by artificial intelligence. The next one is about controlling indemnity. It is about creating better customer experiences when losses occur. It is about operational efficiency. You could call it agentic claims.
If you were watching the presentation this morning, you saw a demo that I thought was genuinely profound. It was like two years ago, we were at Connections, and at the last minute, somebody, I think it was OpenAI, launched a real-time API voice channel, and we said, "Hey, can somebody slap together a demo and see if this works?" I remember it was like, we stayed up all night before the keynote, and we made a demo of how you could talk to an AI and save the result back into ClaimCenter. Two years later, we have a product in production doing this. I still watch that demo, and I am like, "I do not believe that that really works." I am the CEO of the company that is running that in production. It is amazing.
You very clearly see this moment when artificial intelligence is the layer around which people and companies will interact with the insurance industry, and we will be able to create better customer experiences, better outcomes. The industry will be able to control loss more effectively, and we think that also creates a $30 billion total addressable market. Again, rough math, 1% of direct written premium. Now, I want to caveat this is less of a software market that exists today. In order for us to arrive at that number, you have to start to think about the vast amounts of expense that are spent on claims adjusters and operations in these companies. These are the things that these artificial intelligence systems will displace, which creates an economic opportunity for us to address. Last bar on this slide is the underwriting opportunity.
You can describe this in a way sort of focusing on operational efficiency. I think the more interesting way to think about it is that what differentiates an insurance company is how effectively can they price risk. How quickly and effectively can they price and estimate loss associated with the potential risk that they would underwrite. Artificial intelligence creates now this potential for us to address something that up until this point, just resisted automation. If you start to think about the labor associated with underwriting in the market today, if you start to think about making better, more profitable decisions, we think that also creates another $30 billion market potential.
The underwriting opportunity gets to what I think is maybe obviously the most strategic thing we're going to talk about today, maybe the most strategic thing that I've done as CEO of Guidewire, which is to announce the intention to acquire hyperexponential. I want to just give you a little bit of perspective on how we got here. We recognized that there was the potential for underwriting in the industry to change. We also knew about this amazing company operating in the London market, serving commercial lines with this incredible pricing engine. We had worked very hard to build a relationship with this company to sort of figure out what was their DNA, how did they act? Might they someday potentially fit into Guidewire?
This is something that you work on over years and years as you sort of partner a little bit with a company, get to know them a little bit. Then along the way, you kind of realize, wait a minute, this company sees this same potential for underwriting and what I'll call agentic underwriting. Then you realize this is a company that based on their experience, based on their expertise, based on their customer base, there's really nobody else in the world that's better positioned to be able to help us execute on this opportunity in agentic underwriting. I'd like to welcome Amrit, the CEO of hyperexponential, up and talk to me for a little bit about the vision for agentic underwriting and what he's thinking about in terms of joining Guidewire. Amrit, how you doing? Eventful day?
Little bit.
Yeah. So what I'd like you to do is just tell everybody your founding story. How did you start the company? What were you thinking? And give me a little bit about the history of maybe up till a year ago.
Sure. So I'm a software engineer by training, and I became a pricing actuary. So hx's story kind of intersects those two things. I worked in the Lloyd's and London markets and actually in North America and Canada for 12 years and spent a lot of time actually doing the work of the kind of customers that we now serve. So actually, I got a very deep appreciation and respect for the job of underwriting. You learn this very quickly if you're sitting next to an underwriter, either in a Lloyd's market or actually if they're trying to insure some planes in Canada and they're shouting at you about the prices that need to calculate, and you're learning very quickly the job to be done.
I saw very clearly in that work and as I approached the end of my time working in the markets and technology was advancing, and there's a really nice resonance with the story you're talking about today about AI with the cloud era. And actually, as the cloud era came upon us in insurance, I saw an opportunity to build a rating engine that would supercharge the pricing and rating process in insurance. And that's the founding story with respect to hx in pricing and rating.
All right. Then, we're all here a year ago today, before Claude Code—
Yeah.
—before agentic AI really worked. Tell us a little bit about your perspective on how these agentic systems might be and will be applied to underwriting.
Yeah. So you can imagine the level of kind of nerdiness in me if I'm an actuary and software engineer, right? I spent a lot of time exactly in that Claude Christmas point, actually spending time with this technology. And the biggest realization I had, and we were talking to some of the Guidewire customer base today, is that the agentic era is shifting the work from being done by humans to actually the agents driving and reaching back to the humans for help. And the analogy you gave today on stage about Cursor is something that resonated very deeply with me. I could see when I was playing with Cursor at the start of this year, it's astonishing that it was just the start of this year, right?
That Opus 4.5 came out, and we're like, "Okay, this agentic stuff is going to work autonomously." I could see the analogy for insurance. And what I saw at that point was very clearly that exactly as you say, these tools are going to need a grounding. They're going to need a framework to do this work, right? And so what is the analogy for a system like Cursor, actually, if it's going to do underwriting? And that was what motivated the hyperoperator, and that's what motivated some of the kind of opportunities that I think we've been both talking about in parallel.
Tell us a little bit about, and I didn't prep you for this, but tell us a little bit about the culture. I think it's lost sometimes on people when they think about two companies combining how important it is that we gel as an organization, right? And I don't want to put words in your mouth, but we've talked a lot over the past some number of months about the way that you run the company and the way that you think about serving the industry, but I'd love to hear you say it yourself.
Yeah. This is really important to me. You had the slide up where it said 25 years serving the industry. I always wanted to build a company, and hopefully I still can within Guidewire, that lasted as long as our customers do. If you are going to do that, the residue that is left or the foundation is the culture. I have always obsessed very deeply about our culture. I wrote our values myself. I do every final round interview for every employee at hx. I am very hands-on about managing our culture. I still do that today. We have a values interview process at the company that we take very seriously and is very sacred to us.
I think the point that I think I realized when I was talking to you is that there is just a huge amount of overlap in the value system that we have and the value system that Guidewire has. That was very important to me because I never wanted to build a company, kind of reverse it into another organization and sail off into the sunset. There is just a lot of work for us to do. I think if there was not a cultural resonance, I think then there would be a lot of friction and a lot of waste and a lot of risk. Much more risk than I feel today from the work we have been doing together so far.
Well, look, congratulations. I look forward to working with you and attacking this opportunity. I think it is going to be a real profound journey, so welcome to Guidewire.
Thank you so much. I cannot wait to get started. Thank you.
Okay. Before I turn it over to John, I just want to cover a couple things that I think I try to do and remind myself and remind my audience every single time I talk about this company. Guidewire, I think very uniquely, provides a complete suite of applications that cover a complete life cycle for a P&C insurance company. I think this is very, very important to understand. These are systems that every single insurance company in the world needs, and we provide best-in-class versions of each of them. They all run on a common cloud platform. We've worked really hard over the past seven years to establish this, to roll this out, to make sure that it's trustworthy, secure, and reliable and working.
The thing I said this morning, and I'll repeat right now, is the thing we've done now is that we've recognized that these agents are first-class citizens with respect to interacting with this platform. Just like developers use this platform, just like people or users use this platform, agents will use this platform from a development perspective. Agents will use these platforms to facilitate the user interactions, and agents will use this platform directly, maybe through Muse or Dots or whatever you want to call it. It's like this system, regardless of how the world changes with respect to creating software, agents are going to interact with Guidewire. The last part of this that I think is very, very important to understand, and maybe today doing Analyst Day at Connections is just a great reminder of this, is that we don't do this alone. Okay.
Guidewire's success is based on the fact that we have created, I think, probably the best ecosystem of partners in enterprise software. It's not the largest, certainly we're not the largest, but we have this core group of professionals that have defined their lives and defined their careers around the expertise necessary to make these programs successful. You should not misunderstand this. Deploying Guidewire, deploying PolicyCenter, deploying ClaimCenter, deploying BillingCenter, deploying InsuranceNow, it's an incredibly difficult, challenging thing to do. Okay? Guidewire, with this ecosystem, does it better than any other company in the world, and ultimately, that is what our customers buy. Okay? So, with that is it, and I'm going to turn the stage over to John Mullen, our President, to talk about platform and expansion and growth. Here you go, John.
All right. Thank you, Mike. Thank you, Amrit. Really excited to get started on that journey. Okay. So, I'll take you through some of the reflection of the year and set up where we are as far as growth levers go coming into this year, not the least of which is amplified by what Amrit and Mike just talked about. I think there's a tremendous opportunity in the underwriting space. We talked about it through the keynote, is that as we think about this journey through this year and on the platform that we've been working so hard to get to where it is now, it just gets us closer to the things that matter most in the insurance C-suite and in the boardroom. That's the business results and the capital adequacy, and then ultimately the return on equity for the overall insurance industry.
Because if we can improve that, then we can improve access to capital and deployment. The one thing this industry is really efficient at is deploying capital to risk in the market. There is a lot that we can solve for together. You have all seen this slide before. We serve a very large and global, but also very durable market. I often get questions about where is this market going from a premium perspective. The answer more and more every day, I am more convinced that the world is not getting simpler nor less complex. The world that we serve is going to have to dynamically understand risk as it evolves, price for that risk, manage that risk. So I do not see any macro trends that are going to put this at risk. And we sit in a really strong position to continue to pursue that.
We continue to achieve high win rates. If you look at it on a systems decision basis, still very strong win rates. If you look on a premium basis, still really winning those big markets. We will talk about that a little bit more in a second, those big carriers, those big markets. When we think about durable capture across carrier size, this is one of the things I was most pleased with last year. We put a team together to really think more dynamically about the tier four and MGA carrier, MGAs and tier four carrier market. And we saw nice progress last year in penetrating that market. It is a different competitive speed, it is a different competitive dynamic. But if we think about how the market is moving and the distribution of risk, that really continues to be an increasingly important space for us.
Tier ones and tier twos still progressing very nicely. No real new news there from a last year/this year perspective. Continuing to build for global expansion. The platform is now We talked a little bit about this last year. The platform has reached a point where when we talk about agentic development, we talk about partnering with customers, where we are now leveraging the extension layer to be much more line of business specific and much more country specific. And we are seeing nice progress in the content that we are building out for Japan and for Germany and for France. And those three will carry a tremendous amount of focus for us as we go through this year. So how is that manifesting itself? Three data points for you. 21% is the three-year CAGR growth for our top 10 customers on a premium and scope basis.
What that says is the largest customers in the world who are going to win the scale game and the leverage game in insurance, which is becoming more important as we go forward, are betting bigger on Guidewire. 21% in that arena for those top 10, 13% overall for Guidewire. So a materially faster growth rate in premium under coverage. More importantly, for those top 10 customers, we have got a 28% increase in fully ramped ARR. You are all very familiar with that bottom number, which is 21% over that three-year period. So it is a material increase in those top 10s over that same period. And that sits at the far end of our customer cohort group. The one that I think I am most excited about is the 30% increase in the number of customers that represent a $5 million fully ramped ARR number.
Because those are also the customers that for the agentic capabilities that we build, these are the customers that say to us, "Guidewire, if you're building it, we'll wait. Guidewire, if you're building it, we'll replace what we have with that." Because the continuity and context of the platform to be able to be delivered through the agentic capabilities to all points in their enterprise is fundamental to them. So that wallet share expansion in that cohort group is a tremendous opportunity for us. Before I leave this slide, what I'll tell you is every one of these dimensions has a tremendous amount of runway ahead for us. We can still expand tremendously inside the top 10 customers on a premium coverage basis. We still have a lot of estate by either product or line of business or geography within those top 10 customers to expand wallet share.
More and more, we're finding that customers are ready to bet big on what Guidewire's bringing to market. Today is no exception. The conversations I've had today about the potential of hyperexponential and Guidewire coming together create so much momentum in not just replacing IT costs or creating capacity for better insurance decisions to be made, but to really get into the heart of how those decisions are made, why those decisions are made, and how they can be improved, value compounding over time through the relationship with Guidewire and hyperexponential. Okay, so let's look at this then from a TAM perspective a little bit. Mike talked about the macro numbers, but let's stack from some of the history we've talked about before. Okay. When I joined Guidewire, this actual little box here, it represented the whole slide. Okay.
Expanding DWP, what our current fully ramped ARR is in expanding DWP. The new customer wins. To be fair, this was on the slide, too. Okay. New customer wins still represents a tremendous opportunity for us. If you look at global expansion and even line of business expansion, I'm still very excited about that opportunity. Then we get into the next most definitive space, which is really enterprise rating and pricing. Okay? hyperexponential, the hx Renew product, very much focused on the London market and especially lines of business. PricingCenter, we've talked about a lot through all of our calls over the last quarter. Couldn't be happier with the progress on PricingCenter. So that opens up that space for us, which is fairly definitive. Analytics and data services.
One of the things that we glossed over a bit maybe in the pace of the keynote today was Kaleidoscope. I will learn how to say it in Italian. But Kaleidoscope, to me, is one of those things that is a potentially hidden jewel that we need to unlock. All the focus we've put into the platform and all the work we've been doing on agentic, had we not experienced that Claude Christmas, I'm quite certain what we'd be talking about is our investments in data science and in things like Kaleidoscope. Because what Kaleidoscope does, it allows us to anonymize the data asset, over $320 billion in premium running through our systems that we have the rights to do analysis on. That is a massive data set, and it's not just an outcome point-in-time data set.
It is a streaming transactional data set where we can unpick cause and effect at all points in the transaction flow. Giving carriers the opportunity to model against that and train models against that without them actually seeing the data is a little bit of magic, data science magic, that I am not the right person to explain to you. Certainly, it has a tremendous amount of interest, particularly in those tier one carriers. You might say, "But they have so much data and so much data science themselves." They are all trying to figure out, they are all using the data that they have. But if they want to enter new markets or enter new product lines or even test new pricing models, the best way to do that is against the data set that we can provide to them in this context.
I am really excited to see where that goes. Leo and his team, Leo Tenenblat and his team, I think have a tremendous amount of armaments ready to take to market this year, and I am excited to mobilize that. Agentic automation of claims and underwriting. Mike said this. This is not as clearly a defined software market, of course. There is an operational component to this. There is an agentic component to this. There is a growth element to this, and there is a profitability element to this. How we position for one of the things when we were talking with Amrit and team at hyperexponential, one of the things that really struck me was how differently they look at the business case, how they are selling to the business users in their customer base, how they are partnering.
You could say we both have very similar outputs on the business case, but we come at it from very complementary perspectives. As you combine those two things together, unlocking this capability, I think, is absolutely critical for us. What will that show up as? That will not show up as necessarily the business case that says we are achieving cost avoidance or cost displacement or even savings. It is going to be the ability to drive better insurance outcomes. Can we help a customer grow their premium? How can we participate in that? Can we help them with their profitability? I will be very specific because Amrit says it every time, and I agree with him 100%. Where it is warranted. An adequate amount of premium for a very fair price, and that is important. That is the responsibility of the underwriter.
It is not to charge the highest price. It is to charge the most appropriate price. If we think about balancing off our ability to capture that really business domain business case and that IT and operations domain business case, we start to go after the larger numbers in a carrier's expense budget, in their underwriting ratio, and also driving overall improvement in the industry. I think this really brings to life that context of what we are going after. It is materially larger than it has been. What are some things that need to be true for us to go after that?
The community of SIs who I hope you all spend time with, I am sure you do, I think they will tell you that where we are right now from a foundational platform perspective and an agentic capability perspective and a business transformation perspective, puts us collectively in a position to drive much better business transformation than we ever have before. They will also tell you the battle for oxygen is real. They are fighting hard to have all the conversations they need to with carriers to talk about business transformation, not just IT implementation. To talk about the fact that we spent, I think, six hours yesterday with the vast majority of them, walking them through the agentic platform, how this should work, what good looks like, what good partnership looks like.
Every conversation I had with them last night was, look, the industry, carriers, our customers, our prospects, they just do not know enough yet about all the things that are coming out, all the things that are in play. We just have to work harder. We have to work harder to fight for that oxygen in the C-suite and continue to drive that conversation. We also have to continue to work harder to make these implementations more affordable and faster. We have got the use cases out in the world. I refrain from putting the percentage on the table today in front of the main audience at the keynote. We have got the use cases out in the world that are proving out in the cases of on-prem to cloud migrations, 40%-50% improvement in speed.
We are seeing in the net new implementations 35%, 40%, 45% improvement in speed to market. We are seeing even greater improvements in product releases for those customers that are already operating on cloud when they want to enter a new market with a new product or a new line of business. The value of being there is proving out. We now have to turn from use cases of that kind of speed to it becoming large portfolios of that kind of speed, and that will probably look regional for a while. The adoption of the AI tooling in these program contexts is going to take some time to burn in. Then what we have to do is make sure that that becomes the standard operating procedure. There is a natural tension here.
The capture and the exchange of value in this equation is something that we value our SI partner's perspective on, we value our customer's perspective on, but I want to make no mistake about it. The ultimate objective is to make these programs as affordable as possible so we can get our customers running and creating compounding value on the platform as fast as possible. What are the growth pillars driving us through next year? Migration and modernizations. Reference ability continues to be number one in this space. I talked about those large carriers who are betting bigger on Guidewire. It is because of the reference ability across lines of business and across geographies that allows for that. Program speed continues to become more and more important. It is becoming fundamental to the commitment we make to the market. Segment and line of business focus.
You saw Work Comp today, hopefully at the keynote. This is one of those product releases that I'm so pleased with because the team that was working on it just got about the business of solving business problems. Worked very closely with Work Comp carriers and with Work Comp boards, and right now we're at a point where that pipeline in this space is growing even faster than I thought it would. Work Comp is a critical one. Winning in commercial lines, all lines of business everywhere in the world. That was true in what we were going after before. It is an absolute accelerant to focus on it the way we're focusing on it now with hyperexponential.
A number of years ago, one of the most trusted people in commercial insurance, I don't have the right to quote him and we're recorded here, but in an ITC conference said, "I really need somebody to partner and focus with us on risk selection and pricing. The amplification of risk selection and pricing creates more value in commercial insurance than any other IT solution we can bring to the table." With where we are right now, we can answer that bell. Agentic portfolio expansion, ProNavigators on the move, agentic underwriting and claims. Mike mentioned the Concierge demo. Concierge is a product that went from concept to product as fast as anything in the history of Guidewire, and it's not just about the claims component that you saw today.
I think that the billing agent, when we talk about billing inquiry, I think we'll prove out over the course of this year that policy inquiry and billing inquiry will prove to be extremely valuable in driving the economics of mass market carriers long into the future. Continuing to drive that solution set and the agentic portfolio deeper into our customers, which is hard because the pace at which these things are coming out, we need to have five to seven times more strategic road mapping conversations with our customers than we did three or four years ago. That puts a lot of strain on our team. Christina Colby, our Chief Customer Officer, is building the team to continue to build the muscle to go after this and leverage agentic tooling to make sure that what we bring to customers is in their context. Japan, Germany, and France.
I've often talked about geographic expansion. This year, Japan, Germany, France, and London market, but that continues to expand for us. These are the focus for us. Finally, analytics, which I talked about Kaleidoscope and Industry Intel. These are the elements that are going to drive our growth for this year. Let's be honest, at this time next year, I'm going to be talking to you about a very similar set of growth patterns going forward because this starts to cover the entire estate of what's driving business value for our customers. Okay, so with that, I'm sure you all want to hear from our customers a nd bring this story to life. Dan Wuest, Paige Vincent, Nitin Jain, and Christina Colby, please come on up and Christina will take us through a panel conversation on bringing this to life.
I feel like we, I do not know, cracked a secret that we get walk-on music, but not everyone did. Thanks for that. I am Christina Colby. Great to see so many of you again. And I am thrilled to be joined here by an absolutely phenomenal panel of leaders, both across business and technology from our customer base. Let me take a moment to give you an opportunity to get to know them, and then we will dive in with some questions. Nitin, if you would like to introduce yourself first.
Sure. Thanks, Christina, and thanks for having me here. My name is Nitin Jain, and I am the VP of Digital Transformation for Donegal Insurance Group. My responsibility is to make sure that all of our transformation projects get executed on time, on budget, on schedule. In addition to that, I also lead the Gen AI initiative for Donegal. Just a little bit more about Donegal. Donegal is a regional P&C carrier. We have been in existence for more than 130 years, so we have a long history. We write both personal and commercial lines in 21 states with a DWP of $1 billion-plus. Again, because we are an independent agency model, what is really important for us is to have in-depth and very deep relationships with our agency plant.
What is really relevant to them is that we can reduce the friction in terms of ease of use of our systems. We want to make sure that we have consistent and predictable underwriting standards. At the same time, from a servicing standpoint, we want to make sure that we can service claims as well as policy. What is informing all of our, in terms of the system capabilities, is the Guidewire core system. We are a full-suite Guidewire customer on-prem right now. We have PolicyCenter, BillingCenter, ClaimCenter, as well as we also have DataHub and InfoCenter. We are in the process of migrating to Guidewire Cloud right now. Also along with that, we are implementing ProNavigator for ClaimCenter as part of our migration journey. I know we are going to touch about these topics later during the conversation today, but happy to be here, yeah.
Perfect. Thank you so much. Really appreciate it. You may recollect, Paige Vincent joined us on this panel last year, so it is fantastic to have her back. Paige, would you mind re-introducing yourself for folks who may not have met you last year?
Paige Vincent, Chief Operating Officer at Hollard. We are a baby in comparison to Donegal, so we have been around for about 27 years, and we are a fully partnered business. We do not sell insurance direct under our own brand. We do it through some of Australia's biggest retailers. We have CBA insurance, we have Woolworths insurance, and also Greenstone Financial Services, as well as an agency business. I have the privilege of looking after all of our customer-facing parts of our business for those partners, so sales, service, claims, complaints, customer advocacy, and for sins from a previous life, first-line risk on behalf of the enterprise. We have all of our claims now on ClaimCenter, and we have done that over the last couple of years. We came from three, four different claims platforms, and we have gone direct into ClaimCenter in the cloud.
We are about to get ready to launch to our frontline, a combination of ProNavigator and Claim Summarization, which we will talk about a little bit later.
Perfect. Thank you so much. Dan, if you would like to introduce yourself.
Absolutely. Good afternoon, everyone. Dan Wuest. I am SVP of Products Engineering and Architecture at CNA Insurance. We are a top 10 commercial lines carrier headquartered in Chicago, and actually became Guidewire's first production customer after going live on ClaimCenter way back in 2003. In my current role, I am accountable for all business systems development, support, all data delivery, all transformation, including Guidewire. CNA is the third insurance carrier I have worked for. All have been early adopters of Guidewire, so I have personally been working with Guidewire for over 20 years. As a small indication of my commitment here today, I live in Milwaukee, and I am currently missing game four to be here. But happy to be on the stage and joining the panel.
I am not certain that you are being honest about how happy you are about that. But it shows the degree of support that you have to join us, so thank you for that. I will also add that the first implementation of ClaimCenter that Dan was talking about at CNA, I was actually part of all of those years ago, but I am glad that obviously I have not aged at all. So I guess that is a good thing. Let us see, Paige, if you do not mind, let us go back to you in terms of the question that I will ask first. But I do just want to orient the audience, if you remember this.
I will ask just a handful of questions to hopefully give you a little bit more context, but I imagine the part that you want most is to be able to ask them questions directly.
We'll spend just a little bit of time setting more context, and please, of course, start to think about questions that you might want to ask, and we'll have some mic runners who are coming around, too. Okay. Paige, as I mentioned and as you shared, you were on this panel last year, which was terrific. You have been live on ClaimCenter for a while now with some very successful results across the claims team. You worked on really one of the most nascent versions I think we had of Claim Summarization, because your company is so innovative in the way that you're eager to always take on some of the earliest solutions. Now you actually have Claim Summarization at a later stage, properly under ProNavigator, and that's in beta format really before rolling it out to the claims organization.
That's definitely a highlight from my perspective over the past year, but perhaps, what are some of the other things that you'd like to talk about in terms of progression and benefits that you've seen in the past year?
Yeah. I think in the last 12 months, we have learnt a lot in terms of how to use it in the right way and the outcomes that we're trying to get. But it has also almost opened our minds to thinking differently about how we actually wanted our people to interact with the customers and the experience that we could create, and the ways that we could tackle some of the challenges that the industry are facing, in a non-traditional way. For example, for those that might not be aware, in Australia, highly regulated industry. We've had a couple of government reviews that have been quite critical of the industry, and there is a strong focus around vulnerable customers and how you can create bespoke experiences based on the needs that they might have during the claims journey.
The way that we were originally thinking about tackling that was from a structural point of view, from specialization, the way you would normally start to think about that. But then as we started to experience Claim Summarization, and then when we started bringing Pro Navigator, it has completely changed the way that we're thinking about solving for those problems. All of a sudden, it's moved away from having to have individuals, highly specialized, experienced, and trained, which is very hard to get in the industry en masse, to actually having technology that supports anyone, any level, being able to respond in a very bespoke, discreet way and have that level of competency. Which is normally a 6-12-month piece of work to get that speed up, and all of a sudden, it's at their fingertips.
It just really helps you to think differently about how you tackle some of those really big problems that you either rely on FTE, you rely on heavy investment, those types of things, and how you can use that in a completely different way. More pleasingly, we did a demonstration for our frontline a couple of weeks ago labeled AIming for the Stars with a capital A, I. A little bit lame, but the team loved it. We demonstrated what the first functionality is going to look like in January when they get it. We were interested to see how they respond, because it's the first time they've seen it in detail en masse, and whether it was going to be a good outcome or not so good outcome.
Pleasingly, they were so excited. The number that said, "Can we just have it tomorrow? Even if it's not fully functional yet, can we just start playing with it?" Because they can see how it's going to fundamentally shift what they're doing and also create more enjoyment in their day as well because they're fully supported. They've got the information. They can have confidence in having that right conversation, which at the moment, depending on how long they've been with us, that level of confidence can go from nothing to quite high. Even our poor sales and service folk, they're a little bit of the poor cousins because they're not getting the technology in January. We even had a couple of them asking how they can move into claims just to access the functionality.
Wow, that's fantastic. Having people drawn to claims is definitely great in terms of a career path. I love that. Dan Dearsley, he shared some anecdotes in the keynote this morning and talked about really the positive experience, I think, that the users have had. I love the idea that they're so excited about the notion. Even if they don't see perhaps all of the features or capabilities that they're looking for, they're ready to try it and build the trust, hopefully, that will help them to be very successful. Thank you so much. That's incredibly helpful, truly from an end user perspective. We wanted to emphasize, I think, a lot of the benefits that users are seeing in terms of consumption of AI. Thank you so much.
Dan, if you don't mind, I'll pivot over to you, maybe to talk a little bit more about Guidewire Cloud and some of the capabilities once you've gone live, but perhaps more from a technical lens, given your background. Of course, we've shared that you have been a fantastic supporter of us, thank you, through a few different implementations of InsuranceSuite. Most recently, though, with your experience at CNA on InsuranceSuite Cloud, how has that compared to some of the other implementations and platforms, I guess, delivered platforms that you've worked on in the past?
Yeah, the difference has been tremendous. I mentioned the three different carriers I have worked for, and every one of them, we had implemented Guidewire's self-managed software, which you implement it, you run it is in your data center. It was the best thing in the market by far, even then, and yet it was a lot of work. Initial product implementations took a long time. They were very expensive. Major software upgrades could take a year and cost millions, and we avoided them like the plague, which meant we were always a version or two behind. As we have shifted now over to the cloud side, we made the decision to go cloud about four years ago.
When I joined the company six years ago, we actually had a moratorium on no more product development on Guidewire because people were like, "It is too expensive." We made the decision to go cloud. We started with our specialty lines business, and as we gained some momentum, we started seeing our dev costs come down rapidly, our speed to market increase rapidly, just through the automation, through the configuration, through all of the tooling that came with the platform. It was a substantial change, and really the speed that we can now deliver new product, new digital, new interoperability. We would have never even imagined where we are two years ago. That is only multiplying. This year, as we have really started leveraging the new Guidewire AI tooling and harnesses that are available with Claude Code, it is fascinating how fast we are able to deliver.
The delivery bottleneck, there was a lot of discussion throughout the conference on the development process and everything, and the bottlenecks are completely shifting out of engineering up into the product management teams and things like that. It is a whole new series of problems to solve to go faster, but they are very interesting and challenging. The experience has been tremendous and, as we saw in the keynote today, it just keeps getting better as we see more and more automation and tooling come through the platform.
That is fantastic. Thank you. I love the fact that you emphasize it changes the paradigm between the way that business and technology work together and capitalize on market opportunity. Right? Really changing a lot of the ways of working of the team, and it is probably quite nice not to be the long pole in the tent as the technology group all the time, right?
Well, I own product management too, so it's still my—
Okay. Well, two sides of the same coin, I guess. Perfect. Nitin, if you don't mind sharing perhaps a little bit more of a perspective of what the capabilities, especially around cloud and AI, look like in the phases of implementation. You mentioned that you're still in the process of going through your policy transformation.
Right.
You're also taking on the migration to the cloud. How is the cloud experience in that transformation different, and what are some of the benefits that you're starting to see?
Sure. Just for the context, we have been on our policy transformation journey for the past eight years. Last year, around mid of last year, we said, "Okay, what's next?" We have been kind of relegating billing and claims to the sidelines and just focusing on policy transformation. Last year was a time when there was a lot of innovation around Gen AI. We really took a hard look, where do we go from here? Do we go to these vendors who are kind of selling us new Gen AI capabilities, or we align ourselves with Guidewire? We had a deliberate conversation with the Guidewire leadership. Mike was there visiting Donegal there. We kind of looked at the Guidewire roadmap, and we felt there was a lot more alignment between where Guidewire was headed and where we wanted to be.
Also, we felt that the Guidewire platform is going to offer us capabilities that we do not have to build by ourselves, while the Guidewire AI platform lets us allow to innovate on our own accord. Where we decided is we basically signed up with the Guidewire Cloud migration project, and one thing that we wanted to do is that we wanted to make sure that it's not a lift and shift to the cloud. What we want to do is migrate and transform. We believe that by leveraging and tapping into the Guidewire Cloud capabilities, we could actually give a unique and differential experience to our claims and billing customers. Now when we talk about getting to cloud, there are a few areas that I just want to touch upon.
One of them being that we are actually working closely with Guidewire as part of their FE engagement, which is a field or the forward deployed engineering version of Guidewire, to be honest. We are developing capabilities that our claims leadership is actually working alongside the Guidewire technical folks to develop solutions that are purpose-built and fit for the industry. I think this is a unique proposition where Guidewire is developing these products in such a close partnership with our business force. In fact, there was a lack of IT involvement from Donegal's side. It was more the business value that we're providing there, and Guidewire was bringing their engineering chops there. We're really excited for that. That's something that's going to go live when we go live with ClaimCenter in the cloud.
The second thing is, I think both Mike and John talked about the marketplace. We are modernizing our cloud footprint by making sure that we are tapping into the marketplace capabilities. We are upgrading and modernizing our document production system and also our incoming and outbound payments. The third thing is about leveraging the agentic capabilities in terms of development. Again, we've been using the Guidewire Dev Assist for both configuration and for integration, alongside using Claude for our own development acceleration. The idea is that reduce the technical debt, deliver transformation for our business, and still be able to do that in a compressed timeline.
We feel that we maybe hit a jackpot by leveraging the capabilities that others have built before us and by kind of informing our decision to get to cloud by evaluating what Guidewire has to offer in the cloud. We are very fortunate like that.
Thank you. We really appreciate the way that you have rethought the program, the transformation as you described in terms of changing some of the sequencing and taking advantage of a lot of the newer tools and capabilities.
Absolutely.
Because I imagine for most people in the room thinking eight years for a policy transformation feels like an incredible amount of time.
Yeah.
But the complexity truly to run through products and deployments, actually going live with products across all the different states, typically done on renewal, there is a certain sort of duration that that takes naturally.
Absolutely. Yeah.
Before we even look at potentially perhaps different ways to tackle that, you have discovered ways to uncover value throughout the process, so that it is not simply waiting, again, for the long pole to complete.
Absolutely. Yeah. As I said, there are a lot of capabilities that we are implementing alongside cloud migration, which is kind of unique, I guess, in the industry. Yeah.
I think that's fantastic. Yeah, looking for opportunities to prove value quickly.
Exactly.
I figured that I would probably ask one more question that maybe takes the place of a number of the questions that you're going to ask. I know each of you have highlighted where Guidewire is playing a role in some part in your AI strategy. Of course, from our standpoint, we would like to be significant contributors and an integral part of your overall enterprise AI strategy. Just before we open it to the group, is there anything else that you'd like to note about how Guidewire is considered to be situated within your broader enterprise AI strategy?
Maybe I can take a first stab at it. One of the reasons why we went to Guidewire Cloud and the AI platform is because the question that we wanted to answer from business standpoint is, which system do our adjusters log in when they come in the morning? Which system do our underwriters log in? We felt that by leveraging the Guidewire AI capabilities, they would still be logging into ClaimCenter and PolicyCenter, which is a challenge that we felt that it would be a hard sell to create AI capabilities outside of the core systems. I felt that having the data there, having the workflows there, it would be natural for any user to absorb and adopt.
Change management would be far more easier for us to deliver on, instead of trying to have disparate system that we will always have to worry about integrating with each other. That's something that drew us close.
I love you're going to the place where they do their work.
Exactly, yeah. Bring the technology to them instead of having them seek the technology or the solution or the capability in a different system. Yeah.
That's great. Thank you so much.
We were similar thinking in terms of we didn't want our frontline having to use multiple systems, so we wanted them to stay in the core platform. Also from a risk and governance perspective, using Guidewire's AI, you can't use it for any other purpose than what it was intended. So when you're thinking about giving access to the frontline, and particularly in a regulated industry where you need to be able to demonstrate how you're controlling the use of that AI, by using it within the Guidewire platform, even if our people did want to use it for something different, they physically can't. So it gives a lot more control, governance.
The auditability of it is fantastic, and very great when you're trying to or very helpful, rather, when you're trying to demonstrate the risk and controls that you've put around it from a regulator's point of view to give them confidence that you're using it in an appropriate way and that it will benefit customers, not inadvertently harm them.
That's fantastic because it gives you the governance and controls, access levels, really, in the same way that that would be mimicked of an employee. From an operational standpoint, it is also serving up the content that that employee would see. So it's really well-suited then to the kind of work that takes the place perhaps of individuals to do that higher order of work that you were describing. Dan, anything you want to add?
I would just say that we're obviously getting a ton of lift from the AI tooling in the dev space, so that's kind of a given. One of the biggest drivers in my decision to really push forward with cloud four years ago was I knew that once Guidewire got over the big hump of getting customers to cloud and solving that problem of how to migrate customers to cloud quickly, there was going to be a ton of innovation coming on the cloud platform. But you have to be there to take advantage of it. So the beauty is we're seeing it now. In the last couple of years, the amount of new stuff that's hitting the market and coming out from Guidewire has been truly encouraging, and I think we all would just say we want you to go faster.
We know you're going fast, but a lot of really great stuff that we're actively evaluating and a bunch of new stuff that was announced today in keynote that we're eager to take a look at.
Yeah, I think it's really exciting to see both the volume and the pace that we're delivering at. I don't think that I would believe that you would ever tell us that we finally went fast enough, so we'll have to see if that's a possible test at some point in time. But it's definitely a good goal for us to continue to focus on always going faster and providing more and more. Okay, we have quite a few minutes left if we'd like to open the floor to any questions. I'm certain that you may have questions for the panel here, and we've got some microphone runners around. Yeah.
Dan, I wanted to circle on that last point you mentioned about moving faster. How are you guys, or maybe the whole panel as a group, how are you guys balancing the need to move faster? And obviously there's AI platforms out there that maybe are at the very bleeding edge of innovation versus Guidewire as your preferred vendor, as your trusted vendor. Where do you draw the line in terms of which direction you guys want to invest?
It's a great question, and the build versus buy is a huge question on everyone's mind. Obviously, AI is allowing us to build software faster. We're at an insurance conference. If you walked around and you talked to other guys with white beards, they would tell you about a lot of the horror stories of trying to write their own core system-type systems and the value that I think we're all getting from this collective Guidewire platform. We're continuing to evaluate. But for me, it's not just can I write it, but I've got to operationalize it, I've got to secure it's got to be performant, and then I've got to innovate on it.
If I write it myself, I'm paying dollar for dollar for every feature of innovation that I'm going to provide my users, versus the collective investment of all of Guidewire's customers that are contributing to their innovation that hits the market. So I'm still very much interested in staying with the Guidewire track and continuing to leverage what's coming down the pipe from Guidewire versus completely going off on our own in terms of a lot of these new core capabilities.
Anything else that the other panelists might want to add?
I think in terms of speed, I must admit from a Hollard perspective, we are probably comfortable with the pace. Purely from a perspective of particularly when it comes to AI, we really want to prove out Claim Summarization, ProNavigator, fully embed it, get the benefit, the scale, before we move on to the next evolution. We come here, we see Concierge this morning. Already had a peer of mine ring me and say, "Paige, we need to do this." I am like, "We do not have capacity. Let us just stick with the current roadmap, prove that out, demonstrate confidence to the regulator, and then we can move to the next thing." So I think we are probably more on the cautious side of AI than others would be.
But we want to make sure that when we make the investment, we get the benefit, and get that at scale. We are okay if you kind of slow down a little bit.
I appreciate the pattern that you have there because there are so many carriers who end up getting stuck in pilot mode and never take something operationalized to scale. The fact that you really have an emphasis on getting the full value, I think, is incredibly strong. Let us see. Are there perhaps other questions? I was going to say, I think this is the most quiet this group has ever been. [audio distortion]
Hey, thanks for the question. Aaron Kimson from Citizens. Many of you guys mentioned Pricing or UnderwritingCenter. I guess the questions I have, what do you think about the combination with hx and Guidewire, and if it's too early for that because it was just announced this morning. Are you interested in Pricing and UnderwritingCenter more broadly? Any color on what you use for those today?
I can address the broader question here. Absolutely. There is no product in the marketplace which is anywhere close to UnderwritingCenter or Underwriting Workbench. If you ask 10 carriers, what is their definition of an underwriting workbench, nobody can come up with a unified definition. I guess there is definitely a demand in the marketplace. I don't think there is a solution there. One thing that we do like about Guidewire's approach with UnderwritingCenter is they're building it slowly. They're not just trying to launch everything all in one fell swoop. I think we just talked to Mike Quintal, who's the product manager, the product owner for UnderwritingCenter, and there are a lot of capabilities that we would love to pilot with them. There is no other product, so definitely something that is needed in the marketplace. Absolutely.
I can say we are actively looking at both PricingCenter and UnderwritingCenter, and there's a lot of interest. We need to build something or buy something like that. So, very much monitoring both of those products. What's kind of interesting and ironic is a few months ago, we also started talking with hx and are looking at how we would leverage them, starting with our Canada business. So we are very intrigued by the announcement here. One of the things on my mind was, how is this all going to work together? Now you guys can help me figure that out. So, I'm very intrigued by it.
I can at least share that I think I've had four different customer conversations already today asking for a joint roadmap. Obviously, it's not prepared yet, but it's good to see that degree of interest. I should qualify that that was out of five customer conversations in total. So, pretty high return rate on that one. Any other questions? Okay. Well, I want to say thank you so much for allowing us to have the time, but most importantly, huge thanks to the three panelists, I think, who gave a terrifically varied perspective. Also definitely some common themes in terms of, hopefully, how we can help to continue to make you as successful as possible on your Guidewire journey. So thank you all so much. Really appreciate it.
Next we have Jeff Cooper, who is going to come to the stage and share a little bit more about our financial model. Thank you all so much again.
Thank you.
All right. That was not the music I picked out. But I like it. We all have a lot of faith in our financial model, so I will take it. Thank you to the customers for participating. Thank you, Christina, for hosting that. It is always great to hear from our customers at this event. I am Jeff Cooper. I am the CFO of Guidewire. I am thrilled to be here and walk you through our financial model. A lot of this content you will have seen before, obviously updated. I did want to just make sure that we closed a major acquisition this morning. Many of us have not slept very much. The numbers of that acquisition largely are not included in these slides. So set that as context. There will be areas where I can opine and expand, but just wanted to make sure that that is clear.
I do not have the clicker. There is the clicker. Okay. Key financial highlights. We continue to have an incredibly durable business, and our growth rates have been supported by this part of this migration and modernization cycle that we are in for core processing in our insurance industry. We have decade-long customer relationships, you have heard some of those today, with best-in-class retention rates. We talked on the last earnings call that last year we had the best ARR retention since we started measuring that particular metric. That demonstrates just how durable the business is. A strong new product momentum. You have heard a lot about some of the new product areas that we are investing in. That showed up last year, specifically with 28 deals for ProNavigator and 13 deals for PricingCenter. Really excited to see that part of the model start to kick in gear.
That is something that we have been talking about for a long period of time. Really needed to deliver on the cloud platform first before we were able to unlock that. That is very exciting to see. Gross margins continuing to expand. I think we are already above our FY 2028 targets. Obviously ahead of plan with respect to the gross margin expansion story. We are continuing to drive a very profitable growth engine here at Guidewire. The growth dynamic, as you look over, as we started this cloud transition, we took Guidewire from what was a consistent and durable mid-teens grower, and we have seen that step up to this upper teens growth dynamic driven by the success in the cloud.
We have been thrilled to see that growth rate tick up, and as I mentioned before, this is before hx, so all of this is organic Guidewire, especially as you look to FY 2027. This is the midpoint of our guidance from the Q4 call. The key drivers of that growth engine has been the success in the cloud with overall cloud ARR growing 37% over the last six years. That is being driven by the InsuranceSuite Cloud cohort. Those are our most important customers, and that cohort has been growing at a very rapid clip as we have invested in and delivered on the cloud transition. This is a slide that many of you have seen. We are very proud of this slide. It also plays into a key part of our business model, which is we sell long-durated ramping contracts.
This is a visualization of different InsuranceSuite Cloud cohorts by year, where they started their ramping journey and where that ramp journey ends in those customer contracts. I think when you look at this, if you look at the most recent cohort in particular, it did not start all that different than the FY 2025 cohort, but it is ending in a very different spot. If you have seen over the last two years, that year one ARR contribution of these cohorts, it is helpful, but what really drives the value is the fully ramped outcomes that we see across these customer cohorts. That model provides us a lot of predictability and visibility into our ARR growth engine. We have really three areas that drive ARR. We have the deals that we sell in a particular fiscal year and how that translates into year one ARR.
As you saw on the ramp page, sometimes that translates at a relatively small rate vis-a-vis the relationship for that customer. Then we have the ARR that is coming off of the backlog, and that is the ARR from deals that were sold in prior periods that are ramping. You always have to factor in any sort of ARR attrition. As you can see last year, that was a tremendous result for us as we managed this overall ARR growth engine. As we look ahead to next year, a couple of dynamics that we noted on the Q4 call. The ARR backlog is at a very healthy place. ARR backlog grew over 40% last year.
Overall ARR backlog to inform these numbers into the future is in a very healthy place, and that provides us with a lot of visibility as we look ahead to the future. Okay, so this slide is new. We decided to update our definition of fully ramped ARR, and I want to walk you through the rationale and why we are doing this. So when we started the fully ramped ARR metric journey, it was back in 2019. We were very early in the cloud transition, but we recognized that these ramped contracts were going to be quite meaningful for us. Sometimes the sales activity associated with driving these big outcomes didn't necessarily show up fully in year one. We were very early in the journey. Most of our contracts at that point in time were between three and five years.
We had little visibility into how this cloud journey would go. So five years felt like a very long time. At that time, we said, "Hey, we are going to cap fully ramped outcomes at five years from a metric perspective." We didn't have any contracts ramping beyond five years really at that point in time anyway. That is how we set up this definition. That is how we set up our internal view of fully ramped ARR and most of our InsuranceSuite Cloud contracts at that point in time were structured around five years, and sometimes they got negotiated to slightly shorter durated contracts. As we look now, we are seeing more longer durated contracts. We are seeing ramping events beyond five years in some cases. We have a lot of history with these contracts and realizing these ramps.
For that reason, in addition to we are rolling out some new systems and other things just to make this process more efficient for us, we felt it was the right time to make that fully ramped. So finally, what is really fully ramped, visible to investors, and give you a glimpse into the full economic arrangement that it was negotiated into, embedded into these contracts. Now, that results in a little bit more fully ramped ARR, but it doesn't really change the growth dynamic. Right? So it is not a massive shift, but this is a slight shift in terms of how we are thinking about this particular metric. Wanted to make that very clear here in the room and happy to answer any questions on that when we get into Q and A. Okay. So here is the same slide, but just extrapolated out to 10 years.
You can see that the ramping dynamic in the first cohorts really did not impact after year five, but we are starting to see a little bit of that impact in some of these longer-durated contracts now. This slide is a repeat from last year. We introduced this slide last year because there was a seasonality dynamic that existed last year, where Q3 was a headwind vis-a-vis the prior year. This year we repeated this slide, but just to say that there is not that same seasonality dynamic. This is a more typical seasonal pattern that we see year in and year out. Nothing to call out here other than that seasonal blip that we saw last year in Q3 is not a problem that we expect to see this year.
Then this is a slide that we've now been doing for a number of years. I love this slide. It's a beautiful slide. But as we've invested in this cloud transition, we've now really started to see the benefits of the cloud platform, the scalability of that platform. I know you all focus on incremental margins that we're driving consistently into the subscription and support line, and the model has very much played out as we had hoped it would, as we've continued to scale our business. It's showing up in cash flow, right? Cash flow, as a software guy, is what matters most. So seeing the cash flow really start to hit its stride. Okay, so for this slide, I wanted to talk briefly around where we are with respect to the FY 2028 targets. We've had these FY 2028 targets out there for a little bit.
What I'm going to do is comment on these targets in a more qualitative manner, help you understand where we are vis-a-vis these targets without giving fully explicit two years of guidance. Okay, so that's the goal for this slide. You all have been tracking us. You know that we're ahead on many of these targets. So when you look at overall ARR growth, and you look at how we thought about these FY 2028 targets and the CAGR to get to FY 2028, we are clearly tracking ahead of that. So if you think about where we expect to be over a three-year CAGR through FY 2028, we're now closer to 18%-19% vis-a-vis when we set this up, 17%-18%. Cloud ARR as a percentage of total, it's very much on track.
Revenue growth, again, above where we thought it would be when we established these goals and these targets. Then on the subscription and support gross margin, last year we were at the top end of the range. This year we're above the range that we had, so clearly above those particular targets. Then we remain very much on track on the profitability lines, but at a higher revenue number than what we'd expected when we set these targets. Okay? So this is how we are thinking about the FY 2028 targets that we talked about historically, how those parlay to the FY 2027 targets, and wanted to provide some of this commentary, and I'm sure you'll have lots of questions as we go in through this. Okay.
As we think about the longer-term growth dynamic and how we think about our business, you have heard us talk for years and years about driving a durable mid-teens grower. We have ticked that up to driving an upper teens grower, and we wanted to give some insight into how durable that we think this is, right? With all the growth drivers that we have in front of us with respect to migrations, modernizations, new product motions. Agentic is a huge opportunity that is expanding our TAM in meaningful ways. Then, we also have some M&A out there in terms of hyperexponential. But how that it drives our growth algorithm and gives us the confidence in terms of how we can take how we have built this growth algorithm internally to $3 billion of ARR and growing at an upper teens clip. This is really organic.
This is before the acquisition of hyperexponential. So we believe that where we sit today, vis-a-vis the TAM, vis-a-vis the products that we have, vis-a-vis what we have built, driving this upper teens growth algorithm for a long period of time to $3 billion of ARR. Now let me comment just very briefly on hyperexponential. Obviously thrilled to get this acquisition over the finish line. Very excited about the potential here. I will walk through quickly the transaction details. $1.7 billion up front with a $400 million earn-out over a three-year period. Initial financing was a $1 billion term loan, and then we will be funded the rest from cash off of the balance sheet. Structured it as a term loan because we felt like that gives us the most flexibility, and we are very sensitive to share dilution. So we felt like that was the most appropriate structure.
We will consistently evaluate our long-term capital needs and what the right capital structure is to support those needs. But that is the approach from the transaction details. This will close in Q2. There is no financing contingency, so we are expecting to close this before the end of our Q2. Let me talk a little bit about how we thought about the financial impact. So this is going to add 650 basis points, maybe a little bit more, to our growth rate in FY 2027 on an ARR basis. That is inorganic growth that we will see. Then on top of that, we said this will add 150 basis points to the internal organic growth plan of Guidewire. I realize that there may have been some confusion over what this means. Let me just make sure you all understand that.
If you model Guidewire standalone and you think about the growth rates that Guidewire was set to deliver standalone, then you take hx, you bump that up at FY 2027, and then you model that higher growth rate off of that larger base. That is how we did this math to inform this calculation. That implies in FY 2028 that hx is growing over 40%. So I just wanted to make sure that that was clear, because I did get some questions on that particular issue. I am sure there will be lots of questions on this when we go to Q and A. So that takes me to this slide that we talked about last year. We call this our 80/40 plan. We are still very committed to our 80/40 plan.
As we thought about building to the 80/40 plan on an organic basis pre-hx, we felt like by the time we get to $3 billion, growing upper teens through $3 billion, that is the right timeframe to think about us hitting this plan. We are always going to monitor what are the right growth vectors, what are the right levers to continue to drive growth. As long as we keep marching with as our true north, as this is our long-term model that we hope to unlock over time, this is how we think about the potential of the business. I have the GAAP to non-GAAP reconciliations, which we will skip through. I will invite the rest of the management team up for Q and A.
Okay, for those who are on the webcast, I will just mention we have plenty of people in the room, so there will be plenty of questions here. If you do want to ask a question from online, just submit it in the Zoom Q and A. We will take a look at that. At some point turn it over to you.
[audio distortion]
Could've passed. Sorry. Thank you.
Okay, we ready? Who's the quarterback? Alex is the quarterback.
Oh, yeah, go ahead.
Whoever has the mic, yeah. If you own the mic, you get to ask the question.
Free-for-all.
Hey, thanks very much. I actually picked "Mr. Jones" as my walk-up music, so that was great. Michael Turrin with Wells Fargo. Appreciate the time. I guess I want to ask, naturally, you're going to get questions on hyperexponential, but the question I have is kind of the couple of questions we've gotten today are, what does it say about where you are and where the industry is in terms of cloud migration? Where is the industry in terms of willingness to adopt agentic technology? This kind of sits in the center of a lot of that discussion, so I was just hoping you could kind of marry all of that together, explain why now is the right time, and just kind of walk through those different sides of what's happening in the market right now. Thanks.
I will give you a perspective. Maybe John and Jeff can comment. We feel great about the core business and the cloud migration opportunity at the company right now. We are obviously not done, but the momentum is very clear. The fact that this works, the fact that this has worked, is just very clear. The last bit is going to be hard, and one of the things I like to say is we remain committed to every single customer, every single place in the world, and we really do want to get to this point where 100% of that customer base moves to cloud. Lots of things impact that, but we just feel very good about that business. John leaned over to me and was like, "The performance and the profitability, it just feels great," and it creates this space for us to do something more strategic.
I never want the company to get distracted by that core mission because that's the real future of the company. With that space, you get an opportunity to put more of our focus and more of our capital into something that unlocks a much bigger potential market. I will pivot your question to receptivity. I think everybody gets this now. These systems are so powerful. They are so accessible also. Everybody is just basically saying, "How do we make sure that the guardrails are there? How do we make sure that we trust it?" It is no longer about, does it really work? Is this really going to work? I think everybody recognizes that underwriting is going to change, and that gives me the confidence to say, have we found some company here that's really going to enable us to lead in this category?
I think the answer is yes. That's my take. I feel very lucky to have had the opportunity to earn the trust of this company and make this acquisition. Just one thing to add. You all know that we've talked for years about the investment we had to make in the platform, and I might invite Diego to answer this because there's a market receptivity question, but there's also a platform readiness question. I do not know, Diego, if you want to comment on the work you've done to get the platform to where it is to be ready for this moment.
Yeah, sure. On the receptivity, the results, there are two parts. There are things that you can do with an AI that were not possible before. The receptivity for this is bigger than the receptivity for things into which you can still debate if human can do it and so on. Specifically on underwriting, it's something that was not possible before. There is an aspect of dealing with unstructured data. All our business has been, for many years, structure the data, then write some code to deal with structured data. There was not an option to deal with a humongous amount of unstructured data and make decision based on unstructured information.
This technology enables you to do this for the first time. The customer that was on stage a second ago that said, "There is not a winner solution. There is not a solution that has all the capability, and so on, because this technology was not there." Now, there is a technology that is opening up a door, and this is the door that on top of our platform and with our ecosystem, we think we are the best equipped to play with.
Yeah. This moment in time is different. To Diego's point, it is not that the underwriting space has not been important forever. It is just that it has been underserved. It has been under-architected. Even you look at Amrit. Amrit left the career in the industry to go build this, but he built it focused on pricing first. At that moment in time, he talked about Claude Christmas, where he really said, "Okay, this is the time to build hyperoperator." It is not that underwriting is this. We are not talking about underwriting being the new agentic capability because it is the first time the industry has been paying attention to transforming underwriting. It is because, to Diego's point, every dollar spent in underwriting enablement in the past has been coming at it from a just a core processing type environment.
When the industry just getting too deep into the weeds, or when the industry has gone after that, they start writing policy admin logic, and they have lost the plot on underwriting. This point in time is the time to solve this problem because it is the combination of cloud, data accessibility, and agentic capabilities that allows us to say, "Yeah, there is actually a consumable solution here."
Okay. Let me hand you.
Oh, great. Hey, it's Tyler Radke from Citi. Busy day for you, especially with the early start, and hosting Colin on stage.
Are we going to get some of those words on the recorded line here?
Yeah. A couple questions just as we think about the strategy in pricing for some of the agentic offerings you talked about. I think you sort of articulated a similar size TAM for agentic claims as we think about that agentic opportunity is underwriting. Do you need to do some M&A in that space to kind of achieve that vision, $30 billion TAM, or is that something you feel like you have the confidence and capabilities today in-house? Then just as you think about pricing, it seems like you're coming to those TAMs from a DWP take rate, which is how the core product's pricing. How much of that do you think evolves? Is it consumption? Is that the right way to price in sort of an agentic labor context?
I do think it's the right way to price. We'll see how the market evolves. Maybe the market evolves in a different way and it moves towards some sort of consumption model. But I think one of the most special things about Guidewire is the pricing structure and how aligned it is to successful customer outcomes. This just is a very clarifying way to package software products, and we think at this point that it will hold. Okay? I want to be clear. I think that the underwriting market's going to evolve in a different way than the claims market. Okay? I think that underwriting, think of it as maybe it's a little bit more concentrated in terms of creating a solution that's going to scale and work across lines of business.
I think that there is a moment in time for us to attack this. We are very uniquely positioned with hyperexponential to do this and to define it and to lead it. There is not 100 other companies that are out there in the world saying that they know anything about this. I found it like I am new to the industry, seven years into Guidewire. It is kind of funny. Everybody has worked here for 30 years. If you think back to the way that Amrit was talking about his career and basically saying, "Look, I am an actuary. I am a trained developer. I have done this myself, and I have built a company to focus on the pricing of these risks, and now I see the potential in AI."
That all exists in one person who has built a company around that idea. That is a very special thing. Claims, on the other hand, I think of it as a little bit more chaotic. We all can picture in our heads the chaotic workflow of managing a claim, because hundreds of things can happen in that workflow. I think that there is going to be a lot of companies that approach it in different ways. The special thing we bring to claims is just we are the control point for all of the customers running ClaimCenter running InsuranceNow.
That gives us this, we are in the first position to be able to build a system that enables them to evolve towards more fully agentic claims. I think you could hear that in some of the things that customers were talking about today. There is going to be different receptivity to how they use AI and how aggressive they are in terms of thinking about, "Hey, should we go fully agentic right out of the gate? Or let us just roll out Claim Summarization and get started there. Let us just roll out ProNavigator and help our claims adjusters be more efficient." I think you are going to have just a very different kind of solution set that we apply to the claims opportunity versus underwriting, which I think is going to be a lot more concentrated.
Thanks for taking the question. Billy Fitzsimmons from Piper Sandler. Jeff, I want to ask about margins, because we showed the slide, the FY 2028 targets were unchanged, and acknowledging that hyperexponential is still going to close and we will probably get more formal updates after it does. You guys have, as the slide showed, you are on track or running ahead of some of those targets. Can you just frame directionally how we should think about hyperexponential's impact to gross and operating margins relative to those targets?
Yeah. You should think about hyperexponential as largely breakeven. So slightly cash flow positive, slightly operating margin negative at the point of acquisition. Obviously, there is a lot of work that we are doing to understand and assess how we are going to integrate hyperexponential. So I do not have much more to communicate beyond that right now. We will give much more clarity on that at the upcoming Q1 call when we have a bit more time to digest what just happened this morning. But that is how you should think about their business as it is today.
Yeah. I am just curious about with AI on the carrier side, you have seen this movement to more MGUs, MGAs, binding authorities. It seems like AI would allow very entrepreneurial underwriters to be more a part of that distribution through the brokers and then the carriers just become more of capital. So I just wonder how you approach that and what that means to selling this suite that we have had and this approach and just how the industry is going to evolve over the next five years.
Yeah. It is a really good point. Access to capital is critical and you see MGA, the multiples that some of these businesses are getting for the acquisitions and that world is changing fast. Consolidation is happening fast. Capitalization of that business happening fast. So one of the things as we think about that, certainly if we think about the carrier out, there is a lot of friction in the distribution cycle and the capture of value in that is going to be really complex in the coming years, not just in the MGA space, but in the commercial, the thing about the retail brokerage space. So we have got some things that we are talking about on the right and where we should play in that space. But when we think about MGAs, there are two things that we are really going at the market.
Number one, we do not talk about it often enough, but InsuranceNow is a capability that fits the MGA space very nicely. Some of those MGAs, about 30% of our MGA customers are using InsuranceSuite. That mix and our ability to address that space is very real. They also very much need pricing and underwriting capabilities. I would be speculating too far, but I know that both the re-insurance space and the MGA space is a target market for hyperexponential. I think our ability to influence that space increases and is moving nicely, but it increases with hyperexponential. You are right, I think the distribution, the next wave of agentic disruption is going to be in the distribution of product. First we are going to see it in mass market commercial.
We have seen it with Muse, we have seen it with other things where the ability to compare rates and operate as a self-driven comparative rater is pretty interesting and that is real. That is here now. Then really the more high friction complexity is going to be commercial distribution, the growth of the MGA channel and the battle for the value chain between retail brokers and commercial carriers.
Great. Bryan Lawrence, Oakcliff Capital. We are all getting to know hyperexponential, doing more quickly, but it looks from their disclosures like about three quarters of the revenue comes from the U.K., which is a large concentration and for as well-respected a company I would have thought it would be broader than that. What drives that? The second part of the question is, as much as they fit your plans, how do you fit their plans? What was the attraction to them of combining with you other than the money? Mike. And Mike.
Yeah. I will let John comment on the revenue concentration. He has got a little bit more experience than me. I think that number one, they see Guidewire as a mechanism to very quickly reach a very wide scale. We offer access to a market very quickly that otherwise they are going to have to take growth capital and build that distribution army themselves. Obviously there is a trade-off that when a startup is at that phase of growth that they need to think about that. I think that t hey see how potentially this combination can very quickly establish something that is going to be the product that defines this space, okay? Then we can go win it.
Like I said, you build trust with a company, and they feel like the mission that they have is going to be fostered as part of Guidewire. You can build that trust, and you can make this argument that this is a good thing to do for the culture and for the employees of that company, and that we're going to be able to create something very special together. I think those are the things that characterize what's in it for them, besides obviously, as you said, money. John will comment about the concentration of revenue, which just relates to the history of the company serving London market.
Yeah. Part of it is the location of the company, but the other part of it is if you follow the risk that is underwritten, if you go one degree separated from the revenue paid to hyperexponential and think about the risk that's underwritten by the companies that are paying hyperexponential, it's far more distributed. The vast majority of the large U.S. property risk, like the largest market in London market, is U.S. So large property risk in the U.S. lands on ocean marine cargo, lands on the London market's syndicated business. That's why that concentration, it's a big part of the reason why the concentration of revenue is there. As about 14 months ago, they started to move and build sales force in the U.S..
Over the last six months, I've seen them gain real traction in the specialty space, and really in the mid-market commercial space. You heard Dan talk about the fact that he disclosed that they're looking at them for the Canadian business and some specialty business. So they are starting to penetrate the U.S.. We should really think more about the risks that they're underwriting than where the revenue comes from, because it's going to be U.K. and it's going to be Bermuda. But that risk is emanating from other parts of the world and landing on London market.
Let's do one more in here. One more in here and then online, okay? Go ahead.
Hi. Thanks for taking the question. This is Tamjid Chowdhury from Guggenheim Securities. I guess a question for Diego on the product philosophy. There has been a lot of focus from your customers on the cost associated with running agentic workflows. Can you maybe talk about the product philosophy of what gives your customers comfort when it comes to running these agentic products that you talked about in the keynote today, and making sure that the cost does not go above where they see it given their budgets?
Yeah. First of all, as Mike said at the beginning, we are selling in a mechanism that we are selling DWP-based based on result. They basically are entitled to a portion of usage. Right now we are experimenting a lot, and we are seeing that that is within a curve, that is a curve that we can sustain. We are also monitoring closely. We reserve the right to adjust a little bit of pricing depending on the usage. At this moment in time, we are very confident on the aspect of when we sell Claim Summarization, for example, as a capability, as part of claims. They are using a lot of agentic capability, and that agentic capability is incorporated in our pricing philosophy. That is the direction in which we are going.
You want to do one online?
We have a question from Allan Verkhovski from BTIG. First question is, how does agentic show up in the $3 billion ARR target, unlocking agentic? Also the feedback we have gotten from some of our larger carriers regarding agentic, who have been also evaluating the large LLMs, and how the acquisition of hyperexponential sort of changes that discussion with them.
Yeah.
I can start on the $3 billion target. I think on the $3 billion, kind of the pathway to the $3 billion, kind of driving upper teens growth all the way through $3 billion, I would not say that we have called out specific products within agentic that kind of drive that. But as we look at market evolution, as we look at some of the investments we are making in agentic claims, as we look at PricingCenter, ProNavigator, new product areas, I think what we see is the TAM is expanding in front of us, and that is giving us increased confidence in that trajectory for a longer duration than what maybe we thought two or three years ago.
Just that kind of cadence and that long-term confidence in our ability to sustain these growth rates for the TAM that we are operating in is higher today than it was a couple of years ago.
Expansion in other country, as you were listing before, that is a gigantic opportunity that by and large is still fairly untapped.
I think I understood the second part of the question with respect to budgets and allocating dollars towards relationships with, say these frontier model companies or buying solutions from Guidewire. I think it is very, very early, and I will just speak from the perspective I have as how do we run Guidewire and how do we allocate dollars to AI and how do we allocate dollars to headcount? I think the same thing is going to occur in every industry, and insurance will be no exception. It is going to be a ratio that we think about establishing that is correct for a function about how much we spend for people and human beings and how much we spend to augment that function with AI. The second part of that equation, I think that is changing very quickly, right?
If you look at what do I need to spend in order to accomplish X with, say, just Claim Summarization, and how much is that going to cost in a year? Were we doing a good enough job and applying enough intelligence to do a great job on Claim Summarization? Should we apply more now that the inference is cheaper? This is changing very quickly. The way I think about it is, and I tried to point this out when I was talking about these two other bars on that TAM slide, you have to start to think about the labor expense in these functions in the insurance industry as a mechanism for paying for what's effectively inference and whether or not that inference comes through Guidewire and the solutions we provide and the models that are running underneath that maybe we're paying for.
All of that is going to evolve as these solutions become more kind of normal. We are just far, much earlier in the development of these markets than we are with, say, the first bar and how we attack the IT budgets and sell core systems.
I would just simply add that even though I think the question was very much oriented around tier one customers, I think that there's a trend that we see across all customers that's given so much opportunity to be able to use agentic capabilities to address a lot of the unstructured data that Diego spoke about, but our industry is deluged with. I think carriers are realizing the more opportunity that they have to be able to borrow solutions or buy solutions to address some of the use cases, allows them to have a more concerted focus on the things that are truly their secret sauce. I think that's obviously still going to continue to play out over time. Trying to figure out how to orchestrate those capabilities together are the things that will really help carriers to stand apart over time.
Back there.
Hi, Bella Camaj from Alexei Gogolev's team at JP Morgan. Thanks for taking the question. hyperexponential is meaningfully larger than Guidewire's prior acquisitions and comes relatively soon after investments in UnderwritingCenter, PricingCenter, and other AI capabilities. My question is, what did you learn from building these products internally that convinced you that acquiring hyperexponential was the right way to accelerate the underwriting opportunity, rather than just continuing organically?
Yeah, great question. I would love for the team to give their perspective on this. We did these other acquisitions and after a period of time where I would say we were very focused, right? We talked a lot about this as a management team. It's like executing cloud at Guidewire, and maybe now it seems, I don't know, weird, but I totally meant it when we said executing that effectively is an existential issue for the company. We can't get distracted. We have to ensure that this succeeds. We have to ensure that the customers are successful. We have to ensure that we're able to run it efficiently in order to create a profitable company. These were things that required just a huge amount of focus from the entire company.
At the point you start to feel comfortable, you say, "Okay, maybe we should do an acquisition. Maybe there's a company that we could find that would fit into this, and is that going to distract us? Are we going to be able to unlock value? Are we going to be able to merge it into the company and sell it effectively?" I couldn't be more happy with how successful the Quantee acquisition that became PricingCenter has gone and the ProNavigator acquisition and how we've been able to execute that last year. That gave me a tremendous amount of confidence that we could take a technology and plug it into Guidewire and not break it, number one, but number two, accelerate it, see whether the customers would receive it effectively and be able to implement it successfully. So that gave us a lot of confidence.
Then, this is evolving quickly, but you look at what hyperexponential was doing with respect to their vision and product execution around underwriting, and you look at the customer base and the experience set that they have with 300 people. I just look at that and I say, "If I combine that with the work and the expertise that we've built with UnderwritingCenter, and I combine that with the confidence that we have in plugging that into our distribution engine, plugging that into our ecosystem, our customer success model," it just made me feel like this was a risk that was absolutely worth taking and was going to give us an opportunity, like I said, to define the market. I think once this closes, we're going to be in the position to really be the immediate leader and execute on this.
I think it's, I don't want to say exaggerate, but there's a very significant market opportunity that we're going to be able to go after.
In the question, I don't want to read too much into the question, but in the question is then therefore what happens with the UnderwritingCenter roadmap? I would just say, let's not take lightly the all underwritten lines in all parts of the world. Because there are heavy flow-based underwritten lines, and then there are specialty underwritten lines. Both of the If we think about, to Mike's point, what Mike Quintal and team have been building in UnderwritingCenter and what Amrit and hyperexponential bring to the table, we exist in many places in the exact same customer, or we're serving a very different use case and a very complementary use case and a very complementary persona. I think persona is probably the best way to think about it.
If we combine those two things together, the ability to say to somebody asked earlier, the tier ones, the AIGs of the world, the Avivas of the world. For all lines of business, in all geographies, Guidewire on the platform will be the answer. All that context will be served out no matter what the dynamic is of the line of business we're talking about. That's the piece that I just don't want us to gloss over here is, it's the combination of these elements that's really going to drive the maximum amount of value.
Let me just add one more thing, I think it will help people understand how I'm thinking about this, and maybe you can give me feedback afterwards about whether or not it makes sense, resonates. Software is becoming less and less expensive to build. I think this is just a fact, right? In the world that all of us grew up in, Diego especially, I know this resonates with him. It's like you should build something super effectively that you can run at scale for a long period of time, and you should think very deeply about how you build that thing. I'm not saying that that changes. But in this new world we're in, equally, or let's say more and more important, is just getting in the game and with a team that's learning and establishing a flywheel around a domain. Okay?
Getting that experience and getting those implementations going and getting that feedback loop back into the product as fast as possible is what's going to enable us to create a lead and use that lead to go win this market. Executing at speed is critically important. You're collecting data, you're collecting experience, you're starting with a customer base that is very, very significant, where the use case that we're after is almost perfectly tuned to the experience that they already have. I feel like this is going to enable us to get that flywheel spinning much, much faster than if we tried to do this on our own.
Yeah, I will just add one thing, just to add a little bit on John, maybe a different word, but same concept. Don't think about underwriting as one type of solution for all the lines and so on. Even PolicyCenter. PolicyCenter is being engineered for some lines, and we have better capability for some type of line than for some others. Here, the complementarity is that where we were coming from an underwriting perspective, and the way from which hx is coming in underwriting, yes, there is a commonality in between, but their strengths on some type of line were different than the strengths that we come together. So now you combine these two things on top of a platform. You combine these two things with, as Mike said, with an expertise coming from different angle on top of the infrastructure that we put together.
I think that is the unique opportunity.
Ken Wong from Oppenheimer. Two questions from me. John, you put up that slide, I think last year or this year, where the opportunities for growth are coming, modernization, segment, AI, et cetera. Based on the momentum you guys have seen the last few years, the things you announced today, hyperexponential, do you feel one of those buckets could potentially move up in the tiering in terms of contribution?
Commercial lines. I think the one that the momentum, both on what we've seen, the competitive nature, what's happening in the MGA space, what's happening in the brokerage space, what's happening in complex commercial competition. I think we've had good win rates in commercial lines. Our ability to take this combined and really demonstrate the ability to own the future of where commercial lines goes for the largest brands in the world, that to me is the one that I think has the greatest amount of acceleration right now.
Got it. Then one consistent theme I heard on the floor from customers and integration partners is that they probably need to beef up their actuarial talent, more the partners to kind of get some of the pricing products out there. Do you feel that you're getting the leverage from your partners for that product line? Where do you guys have to invest to potentially shore that up?
I'll start there.
Yeah.
Our consulting partner program is obviously incredibly rich, but it was built around what InsuranceSuite always was with the original three X Centers. To appropriately implement PricingCenter, you need true depth and expertise as pricing actuaries. Some of our larger partners are really well-equipped to have those practices and access to them. They're outside of what they would traditionally consider to be their Guidewire team, though, right? So there has been, I think, a huge lift from those groups, but it also allows us now to explore very different partners than we would have before, who have that depth of expertise.
I think that's something that's going to continue to evolve within our partner program, is really trying to understand. We had defined what partners looked like for Guidewire three years ago, five years ago, even in terms of the patterns of implementation that we saw, and now it's our opportunity. We've even shifted the partner program over the course of this year so that we can focus more on the very types of specializations that will really represent what our product set looks like going forward.
Great. My question has a bunch of assumptions in it. I'm happy to be corrected. When you guys made the transition to the cloud, I really thought you were actually doing two things. One is you were moving to the cloud, but you were also productizing a whole bunch of highly customized implementations that could now be standardized but configurable, which was a big, heavy lift. When I look at what limited amount I know about hyperexponential, it looks to me like a bunch of custom implementations that haven't yet been productized, which seems like a big lift. Can it be productized in the way you've done ClaimCenter and PolicyCenter and BillingCenter? How big a lift is that? Secondly, it looks to me like PricingCenter and hyperexponential are actually complementary.
It looks like PricingCenter is a personal lines tool bench, whereas hyperexponential is more of a specialty in commercial, and I'm wondering if that's correct. Then lastly, to the extent that so much in this, I'm sorry, but to the extent that hyperexponential is a bunch of capabilities, it seems to me like retention's going to be critical to the success of this thing. I'm wondering how much you've thought that through, because I've seen too many acquisitions where everybody gets on stage and says they're going to stay, and then they vest and leave. Secondly, I'm assuming from the comments that we're looking at 40 to get the retention bonus. I'm wondering if you can comment on that. Sorry for the long question.
No, it's a great question. I'm seeing if my memory is sufficient to answer it all. I'm going to do the middle one first. The middle one's easy. The answer is yes, absolutely. Personal lines is a perfect fit for PricingCenter. Commercial lines, perfect fit for Renew from hyperexponential. That's an exaggeration. As Diego said, there's potentially overlap in the middle, but that's a good way to think about it. The third part of your question is, retention is always a critical factor in this. That's my job, right? My job is to make sure that we embrace this company, and we create the right circumstances for everybody to be successful. Guidewire's a crazy place, and we fight with each other all the time, but I got to create a culture that Amrit and team are going to love to be a part of.
If we do that effectively, this is going to go great. Who knows how it's really going to go? Just know that a priority of mine is to make sure, a lot before the acquisition, that this is going to work, that we have to feel comfortable that this culture is going to gel. Then it's a focus of ours to make sure that it works. Certainly, there's economic incentives that are kind of structured into the deal that make this happen. But I've been a part of a lot of these. I've seen some of them that have worked out great. I've seen some of them that haven't. Hopefully, I've learned enough to be able to give everybody a sense of confidence that this is going to work. The first part of your question, I think, is the hardest to answer.
I think the answer, and Diego, I'll certainly allow to chime in here, it sort of depends. The biggest problem with Guidewire when we joined and started this exercise was, can we upgrade? Dan said this. He said, I don't know what he said, I'm paraphrasing it. It's like, "We stopped developing on Guidewire because we couldn't upgrade it anymore. It was too expensive to upgrade." So this is the reason that we had to basically create extensible extension points or extensible packaging of the functionality that people were customizing in the Guidewire implementations. We needed to do that in order to be able to create upgrades, to make upgrades work. So that's the way I would think about answering your question as it relates to what you perceive hyperexponential to be. If it becomes a blocker to upgrade, then yes, we'll have to fix that.
If it isn't, we won't. What they're doing is creating pricing models. They're not creating scalable workflow. You know what I mean? We will dig into this. It hasn't been an issue for the company to this point. We will dig into this, and if it's a problem, we'll solve it. But it's not apples to apples, and I really want to stress that. It's a different use case that's tailored to the domain that they want to attack and win. I think that gives us a lot of confidence that it's going to continue to scale and continue to be applicable to the underwriting use case. I wouldn't jump to the conclusion that, hey, we needed to do that for APD and product definition. We needed to do that for integration packaging. We needed to do that for international country content.
That doesn't necessarily mean that we need to do it for complex commercial lines pricing engines. Does that make sense? Did I do a good job?
Yeah.
Okay.
I can also add the other angle. There are two parts of that story. Your assumption, more or less, were all spot on. The question was great. The other angle is we did a lot of work on evolving Guidewire platform across the year to get to cloud. As part of this transformation, don't think in term of we fix some of the existing problem for existing customer and that's it. We also learn a ton, and we have create a level of flexibility to the platform that didn't have before. Now you look at this problem coming from two direction. There is a direction Mike said that what they were doing was applying to a slightly different use case, and most likely the way that they were solving it can continue to exist.
There is also the other angle that a lot of the things that we're capable to do on the platform now could become solution to solve some of the problem that they had. And the belief and the bet right now is that we're going to meet in the middle, and that we're going to Things of the learning and what we bring on the table on the level of the platform and knowledge that they have in the vertical on those special line is going to enable us to evolve into a direction in which we can do that in an efficient way and in a way that was never done before. As one customer mentioned today, building a solution that is not there yet full circle on the market.
I haven't forgot your last question. We're not going to comment in detail on the earn-out structure, but your assumption is correct. The way we thought about how we talked about this to you all is very consistent with how that earn-out will be paid out.
Anybody else?
There you go.
Thanks for taking my question. I'm Jessica from Raymond James. I really do want to commend how much work you've done in migrating your customers to the cloud. You still had a segment you still need to migrate over. How should we think about the general pace of those customers? Also, considering how much you've built out recently with agentic solutions, we know what you acquired and what you've developed, how is that affecting the pace of migrations? This is a lot of steps. Just thinking about talking about, since last time our Connections, how much it's developed in agentic AI capabilities, how is that also affecting your conversation with customers or how they're thinking about moving forward?
Thanks. I personally love the question because, obviously, as Mike was describing, our goal is to be certain that every one of our customers gets to cloud. I think what you'll continue to see, obviously, we have great momentum, that the largest constraint that we end up having is internally competing initiatives for customers. That's probably one of the biggest hurdles in terms of what helps them to either move faster or slower. So I think we're going to see a continued pace. There will probably be a very small remaining tail of customers that we have to figure out how to get them through, but I'm confident that we can get there.
As you pointed out, specifically about how agentic tooling is making that dramatically different, I love the example that Nitin gave because that shows a difference in sequencing, a difference in their perception on a value capture, and something that helps them to actually structure and create the funding to do the migration that they wanted to, because they were able to unlock value along the way. That has to be coupled, though, with the increased pace that we are able to see in terms of what we are doing with migration.
Our own professional services team has built a really phenomenal set of tools, basically with an inherent goal to be able to get the technical migration itself almost basically down to zero, and then the remaining work to integrate into the rest of the customer's overall ecosystem and environment, to be able to help to reduce the cost of that. I would say coupled with the work that we are doing there, the work that our consulting partners are contributing to significantly, it is really important to ensure that the migration happens faster. We have also moved away very much from the idea of simply a lift and shift, which is what we had done for a long time. Basically, with the notion that a customer would start to be able to take advantage of features of Guidewire Cloud only once they made it to the destination.
We have the ability now to unlock that along the way. I would say more so than ever, our customers aren't focused on the idea of getting to Guidewire Cloud as the destination. But really thinking about what the pace of updates, the richness of the roadmap means for them to continue to have basically more and more opportunity to capture value.
We have time for one more. Chance.
Mike, you mentioned the acquisition of hx is maybe the most strategic thing you have done in your seven-plus years as CEO of Guidewire this morning. Obviously, the scale dwarfs anything you and the current management team have done here and prior management teams at Guidewire before you. If we go back to your days at Salesforce running product there, to whatever extent you were involved with the acquisitions of MuleSoft, Demandware, or maybe Tableau right before you came to Guidewire, are there any lessons, good or bad, that you will apply to hx?
Yeah, for sure. I am not going to list them all because then all of my friends at Salesforce will be really mad. I think MuleSoft, there was another acquisition prior to that, a company called SteelBrick. MuleSoft is a great example of this. It is like the power of plugging a great product into a very solid distribution organization and how quickly something can grow was a huge lesson I learned from that experience. I do not want to call out any of those specific acquisitions, but I will touch on what I just described in terms of cultural fit and ensuring that we embrace this company and we basically say, "What are they bringing to Guidewire that is net beneficial to us?" This is a company that's entire existence is based off of what I would describe for us as not exactly a sweet spot.
We need to treat them that way as a mechanism for us to expand our expertise into that area. I think if we do that and we give them enough space to basically be able to execute on the vision that they have while benefiting from the scale and the reach that we provide, support their culture, this is going to work out great. That is basically the gist of what I learned from seeing those acquisitions at Salesforce. I will tell you, we are all incredibly excited to have the opportunity to do this. It felt like a great time. The stars aligned, and I really do genuinely think that we are very, very lucky to have the opportunity to join forces with this team. Thanks for the question.
Great. That is a great note to finish on. We are done.
Okay. Well, thanks, everybody. Thank you all.