Guidewire Software Inc

Previous wording

Recent global events have adversely affected and are continuing to adversely affect workforces, organizations, economies, and financial markets globally, leading to economic downturns, inflation, and increased market volatility. For instance, the ongoing wars between Israel and Hamas and between Russia and Ukraine, escalating tensions in the South China Sea, high inflation, the recent bank failures in the United States and Switzerland and the related impact on financial markets and institutions, and supply chain issues have contributed to global economic and market volatility. We are unable to accurately predict the full impact that these global events will have on our results of operations, financial condition, liquidity, and cash flows due to numerous uncertainties.

Current wording

Recent global events have adversely affected and are continuing to adversely affect workforces, organizations, economies, and financial markets globally, leading to economic downturns, inflation, and increased market volatility. For instance, ongoing conflicts such as the wars between Israel and Hamas and between Russia and Ukraine, escalating tensions in the South China Sea, high inflation, bank failures in the United States and Switzerland and the related impact on financial markets and institutions, and supply chain issues have contributed to global economic and market volatility. We are unable to accurately predict the full impact that these global events will have on our results of operations, financial condition, liquidity, and cash flows due to numerous uncertainties.

Previous wording

Our business and financial results have been and may in the future be impacted due to these disruptions, which may affect our ARR and revenue growth rates, sales cycles, services revenue and margins, operating cash flow and expenses, employee attrition, hiring and onboarding necessary personnel, allowance for collectibility of accounts receivable and unbilled receivables, and the change in fair value of strategic investments. Additionally, recent inflation levels are impacting the global economy and magnifying the impact of these disruptions.

Current wording

Our business and financial results have been and may in the future be impacted due to these disruptions, which may affect our ARR and revenue growth rates, sales cycles, services revenue and margins, operating cash flow and expenses, employee attrition, hiring and onboarding necessary personnel, allowance for collectability of accounts receivable and unbilled receivables, and the change in fair value of strategic investments. Additionally, recent inflation levels are impacting the global economy and magnifying the impact of these disruptions.

Previous wording

We use ARR to quantify the annualized recurring value outlined in active customer contracts at the end of a reporting period. ARR includes the annualized recurring value of term licenses, subscription agreements, support contracts, and hosting agreements based on customer contractual terms and invoicing activities for the current reporting period, which may not be the same as the timing and amount of revenue recognized. ARR reflects all fee changes due to contract renewals, non-renewals, expansion, cancellations, attrition, or renegotiations at a higher or lower fee arrangement that are effective as of the ARR reporting date. All components of the licensing and other arrangements that are not expected to recur (primarily perpetual licenses and professional services) are excluded from our ARR calculations. In some arrangements with multiple performance obligations, a portion of recurring license and support or subscription contract value is allocated to services revenue for revenue recognition purposes, but does not get allocated for purposes of calculating ARR. This revenue allocation generally only impacts the initial term of the contract. This means that as we increase arrangements with multiple performance obligations that include services at discounted rates, more of the total contract value will be recognized as services revenue, but our reported ARR amount will not be impacted. During the six months ended January 31, 2024, the recurring license and support or subscription contract value recognized as services revenue was $5.2 million.

Current wording

We use ARR to quantify the annualized recurring value outlined in active customer contracts at the end of a reporting period. ARR includes the annualized recurring value of term licenses, subscription agreements, support contracts, and hosting agreements based on customer contractual terms and invoicing activities for the current reporting period, which may not be the same as the timing and amount of revenue recognized. ARR reflects all fee changes due to contract renewals, non-renewals, expansion, cancellations, attrition, or renegotiations at a higher or lower fee arrangement that are effective as of the ARR reporting date. All components of the licensing and other arrangements that are not expected to recur (primarily perpetual licenses and professional services) are excluded from our ARR calculations. In some arrangements with multiple performance obligations, a portion of recurring license and support or subscription contract value is allocated to services revenue for revenue recognition purposes, but does not get allocated for purposes of calculating ARR. This revenue allocation generally only impacts the initial term of the contract. This means that as we increase arrangements with multiple performance obligations that include services at discounted rates, more of the total contract value will be recognized as services revenue, but our reported ARR amount will not be impacted. During the nine months ended April 30, 2024, the recurring license and support or subscription contract value recognized as services revenue was $7.3 million.

Previous wording

As of January 31, 2024, ARR was $800 million, compared to $763 million as of July 31, 2023. We measure ARR results on a constant currency basis during the fiscal year and revalue ARR at year end to current currency rates.

Current wording

As of April 30, 2024, ARR was $828 million, compared to $763 million as of July 31, 2023. We measure ARR results on a constant currency basis during the fiscal year and revalue ARR at year end to current currency rates.

Previous wording

We monitor our free cash flow, as a key measure of our overall business performance, which enables us to analyze our financial performance without the effects of certain non-cash items such as depreciation, amortization, and stock-based compensation expenses. Additionally, free cash flow takes into account the impact of changes in deferred revenue, which reflects the receipt of cash payment for services and products before they are recognized as revenue, and unbilled accounts receivable, which reflects revenue that has been recognized that has yet to be invoiced to our customers. Our net cash provided by (used in) operating activities is significantly impacted by the timing of invoicing and collections of accounts receivable, the timing and amount of annual bonus payments, as well as payroll and tax payments. Our capital expenditures consist of purchases of property and equipment, primarily computer hardware, software, and leasehold improvements, and capitalized software development costs. Free cash flow in the six months ended January 31, 2024 was impacted by severance payments of $3.3 million. Free cash flow in the six months ended January 31, 2023 was impacted by severance payments of $2.9 million. For a further discussion of our operating cash flows, see “Liquidity and Capital Resources – Cash Flows.”

Current wording

We monitor our free cash flow, as a key measure of our overall business performance, which enables us to analyze our financial performance without the effects of certain non-cash items such as depreciation, amortization, and stock-based compensation expenses. Additionally, free cash flow takes into account the impact of changes in deferred revenue, which reflects the receipt of cash payment for services and products before they are recognized as revenue, and unbilled accounts receivable, which reflects revenue that has been recognized that has yet to be invoiced to our customers. Our net cash provided by (used in) operating activities is significantly impacted by the timing of invoicing and collections of accounts receivable, the timing and amount of annual bonus payments, as well as payroll and tax payments. Our capital expenditures consist of purchases of property and equipment, primarily computer hardware, software, and leasehold improvements, and capitalized software development costs. For a further discussion of our operating cash flows, see “Liquidity and Capital Resources – Cash Flows.”

Previous wording

Subscription revenue increased by $27.1 million and $57.7 million during the three and six months ended January 31, 2024, respectively, compared to the same periods a year ago, primarily due to the impact of cloud transition agreements, new subscription agreements entered into and provisioned since January 31, 2023, and the renewal or extension of subscription services at the fully ramped annual fees after the initial committed term.

Current wording

Subscription revenue increased by $31.3 million and $89.1 million during the three and nine months ended April 30, 2024, respectively, compared to the same periods a year ago, primarily due to the impact of new subscription agreements entered into and provisioned since April 30, 2023, cloud transition agreements, and the renewal or extension of subscription services at the fully ramped annual fees after the initial committed term.

Previous wording

Support revenue decreased by $1.2 million and $3.3 million during the three and six months ended January 31, 2024, respectively, compared to the same periods a year ago, primarily due to customers migrating from on-premise term licenses to subscription services. Support related to subscription arrangements is included in subscription revenue, as support is not quoted or priced separately from the subscription services. As customers enter into a subscription agreement to migrate from an existing term license agreement, the timing and amount of revenue recognized will be impacted by allocations of the total contract value between the license, subscription, and support performance obligations. As a result, we expect the increase in subscription orders as a percentage of total new sales and customers migrating from term licenses to subscription services will result in lower support revenue in the future.

Current wording

Support revenue decreased by $0.9 million and $4.2 million during the three and nine months ended April 30, 2024, respectively, compared to the same periods a year ago, primarily due to customers migrating from on-premise term licenses to subscription services. Support related to subscription arrangements is included in subscription revenue, as support is not quoted or priced separately from the subscription services. As customers enter into a subscription agreement to migrate from an existing term license agreement, the timing and amount of revenue recognized will be impacted by allocations of the total contract value between the license, subscription, and support performance obligations. As a result, we expect the increase in subscription orders as a percentage of total new sales and customers migrating from term licenses to subscription services will result in lower support revenue in the future.

Previous wording

Term license revenue decreased by $2.0 million during the three months ended January 31, 2024, compared to the same period a year ago. This decrease is driven by lower new term license agreements as most of our new sales activity is for subscription services, the impact of contracts with an initial term of greater than two years or a renewal term of greater than one year, and the impact of customers that migrated from a term license to a subscription service. The impact on term license revenue from contracts with an initial term of greater than two years or a renewal term of greater than one year during the three months ended January 31, 2024 was $2.4 million compared with $0.3 million in the prior year period.

Current wording

Term license revenue increased by $4.4 million during the three months ended April 30, 2024, compared to the same period a year ago. This increase was driven by contracts with increases based on the amount of DWP that is managed by our licensed software and changes in the CPI index, contract renewals after the committed term has expired and expansion orders from existing customers, and new term license agreements to existing customers, partially offset by the impact of customers that migrated from a term license to a subscription service. The impact on term license revenue from contracts with an initial term of greater than two years or a renewal term of greater than one year during the three months ended April 30, 2024 was $0.3 million compared with no impact in the prior year period.

Previous wording

Term license revenue decreased by $8.9 million during the six months ended January 31, 2024, compared to the same period a year ago. This decrease is driven by lower new term license agreements as most of our new sales activity is for subscription services, the impact of contracts with an initial term of greater than two years or a renewal term of greater than one year, and the impact of customers that migrated from a term license to a subscription service. The impact on term license revenue from contracts with an initial term of greater than two years or a renewal term of greater than one year during the six months ended January 31, 2024 was $2.4 million compared with $3.7 million in the prior year period.

Current wording

Term license revenue decreased by $4.5 million during the nine months ended April 30, 2024, compared to the same period a year ago. This decrease is driven by lower new term license agreements as most of our new sales activity is for subscription services, the impact of contracts with an initial term of greater than two years or a renewal term of greater than one year, and the impact of customers that migrated from a term license to a subscription service. The impact on term license revenue from contracts with an initial term of greater than two years or a renewal term of greater than one year during the nine months ended April 30, 2024 was $2.7 million compared with $3.7 million in the prior year period.

Previous wording

Services revenue decreased by $15.6 million and $25.1 million during the three and six months ended January 31, 2024, respectively, compared to the same period a year ago. The decrease is primarily driven by the completion of implementations, combined with our SI partners leading more new subscription implementation and migration projects than in the past. Additionally, services revenue overall continues to be impacted by investments in customer implementations, including fixed fee or capped arrangements. In these arrangements when a project extends longer than originally anticipated, the average billing rate we recognize may decrease, which can result in revenue adjustments and lower gross profit.

Current wording

Services revenue decreased by $2.9 million and $28.0 million during the three and nine months ended April 30, 2024, respectively, compared to the same period a year ago. The decrease is primarily driven by the completion of implementations, combined with our SI partners leading more new subscription implementation and migration projects than in the past. Additionally, services revenue overall continues to be impacted by investments in customer implementations, including fixed fee or capped arrangements. In these arrangements when a project extends longer than originally anticipated, the average billing rate we recognize may decrease, which can result in revenue adjustments and lower gross profit.

Previous wording

As we successfully leverage our SI partners to lead more implementations and migrations, we expect our services revenue to decline in the near-term. As we continue to expand into new markets and develop new products, we have, and may continue to, enter into contracts with lower average billing rates, make investments in customer implementation and migration engagements, and enter into fixed price contracts, which may impact services revenue and services margin.

Current wording

As we successfully leverage our SI partners to lead more implementations and migrations, we expect our services revenue could be flat or decline in the near-term. As we continue to expand into new markets and develop new products, we have, and may continue to, enter into contracts with lower average billing rates, make investments in customer implementation and migration engagements, and enter into fixed price contracts, which may impact services revenue and services margin.

Previous wording

Cost of subscription and support revenue during the six months ended January 31, 2024, decreased by $6.6 million, compared to the same period a year ago, primarily due to decreases in cloud infrastructure expense of $4.9 million, professional services of $2.1 million, and amortization of intangibles of $1.4 million due to certain acquired intangible assets being fully amortized, partially offset by increases in internal-use software amortization of $0.9 million and royalties of $0.9 million.

Current wording

Cost of subscription and support revenue during the nine months ended April 30, 2024 decreased by $7.7 million, compared to the same period a year ago, primarily due to decreases in professional services of $3.5 million, cloud infrastructure expense of $3.2 million, personnel costs of $1.8 million associated with lower headcount, and amortization of intangibles of $1.4 million due to certain acquired intangible assets being fully amortized, partially offset by increases in royalties of $1.2 million and internal-use software amortization of $1.0 million.

Previous wording

Cloud hosting costs are benefiting from the efficiencies that we are achieving from our development efforts associated with GWCP and the cost benefits associated with the five-year agreement with a cloud infrastructure services provider that was entered into in the second quarter of fiscal year 2023. As a result of efficiencies that we are seeing from our previous investments in cloud operations and development efforts along with the challenges presented by the macroeconomic environment, we have also slowed hiring and are critically evaluating professional services contracts and third-party software costs. However, we expect cost of subscription and support revenue to increase in absolute dollars due to the increased number of customers utilizing our cloud services, the volume of transactions by our cloud customers, and the impact of inflation and other macroeconomic events.

Current wording

Cloud hosting costs are benefiting from the efficiencies that we are achieving from our development efforts associated with our GWCP platform and the cost benefits associated with the five-year agreement with a cloud infrastructure services provider that was entered into in the second quarter of fiscal year 2023. As a result of efficiencies that we are seeing from our previous investments in cloud operations and development efforts along with the challenges presented by the macroeconomic environment, we have also slowed hiring and are critically evaluating professional services contracts and third-party software costs. However, we expect cost of subscription and support revenue to increase in absolute dollars due to the increased number of customers utilizing our cloud services, the volume of transactions by our cloud customers, and the impact of inflation and other macroeconomic events.

Previous wording

The $0.4 million decrease in our cost of license revenue during the three months ended January 31, 2024, compared to the same period a year ago, was due to lower personnel costs associated with the development of online training curriculum included with the latest releases of InsuranceSuite of $0.3 million and a decrease in royalties of $0.1 million.

Current wording

The $0.4 million decrease in our cost of license revenue during the three months ended April 30, 2024, compared to the same period a year ago, was due to lower personnel costs associated with the development of online training curriculum included with the latest releases of InsuranceSuite of $0.4 million.

Previous wording

The $1.0 million decrease in our cost of license revenue during the six months ended January 31, 2024, compared to the same period a year ago, was primarily due to decreases in personnel costs associated with the development of online training curriculum included with the latest releases of InsuranceSuite of $0.8 million and royalties of $0.2 million.

Current wording

The $1.4 million decrease in our cost of license revenue during the nine months ended April 30, 2024, compared to the same period a year ago, was primarily due to lower personnel costs associated with the development of online training curriculum included with the latest releases of InsuranceSuite of $1.2 million and lower royalties of $0.2 million.

Previous wording

The $11.3 million decrease in cost of services revenue during the three months ended January 31, 2024, compared to the same period a year ago, was primarily due to decreases in subcontractor expenses of $14.1 million due to the completion of certain fixed fee engagements and more customer engagements being led by SIs and professional services of $0.1 million, partially offset by an increase in personnel costs of $2.9 million which includes severance expense of $3.3 million.

Current wording

The $8.6 million decrease in cost of services revenue during the three months ended April 30, 2024, compared to the same period a year ago, was primarily due to decreases in subcontractor expenses of $8.7 million due to the completion of certain fixed fee engagements and more customer engagements being led by SIs, software subscription costs of $0.6 million, and personnel costs of $0.7 million, partially offset by increases in travel costs of $1.1 million and professional services of $0.2 million.

Previous wording

The $31.0 million decrease in cost of services revenue during the six months ended January 31, 2024, compared to the same period a year ago, was primarily due to decreases in subcontractor expenses of $32.2 million due to the completion of certain fixed fee engagements and more customer engagements being led by SIs and professional services of $0.3 million, partially offset by an increase in personnel costs of $1.4 million which includes severance expense of $3.3 million.

Current wording

The $39.6 million decrease in cost of services revenue during the nine months ended April 30, 2024, compared to the same period a year ago, was primarily due to decreases in subcontractor expenses of $40.9 million due to the completion of certain fixed fee engagements and more customer engagements being led by SIs, software subscription costs of $0.5 million, travel costs of $0.2 million, and web hosting costs of $0.2 million, partially offset by an increase in personnel costs of $2.0 million which includes severance expense of $3.0 million.

Previous wording

We had 595 cloud operations and technical support employees and 770 professional services employees at January 31, 2024, compared to 649 cloud operations and technical support employees and 804 professional services employees at January 31, 2023.

Current wording

We had 604 cloud operations and technical support employees and 750 professional services employees at April 30, 2024, compared to 645 cloud operations and technical support employees and 779 professional services employees at April 30, 2023.

Previous wording

Our gross profit increased $18.9 million during the three months ended January 31, 2024, compared to the same period a year ago. Gross profit was impacted by an increase in subscription and support gross profit due to the increase in subscription revenue and cloud operations efficiencies, partially offset by decreases in services gross profit due to the investments that we are making in our customers' transition to subscription services and the impact of a reduction-in-force during the quarter and, to a lesser extent, license gross profit due to customer migrations to subscription services.

Current wording

Our gross profit increased $43.3 million during the three months ended April 30, 2024, compared to the same period a year ago. Gross profit was impacted by an increase in subscription and support gross profit due to the increase in subscription revenue and cloud operations efficiencies, license gross profit primarily due to an increase in license revenue, and services gross profit due to lower subcontractor costs.

Previous wording

Our gross margin increased to 59% during the three months ended January 31, 2024 from 53% during the same period a year ago. Gross margin was primarily impacted by the increase in subscription and support revenue at a higher margin due to cloud operations efficiencies, offset by a decrease in services revenue, which has a negative margin and was impacted by a reduction-in-force during the quarter, due to more SIs contracting directly with our customers.

Current wording

Our gross margin increased to 59% during the three months ended April 30, 2024 from 48% during the same period a year ago. Gross margin was primarily impacted by the increase in subscription and support revenue at a higher margin due to cloud operations efficiencies and services revenue, which had a negative margin in the same period a year ago and was impacted by lower subcontractor costs.

Previous wording

Our gross profit increased $59.1 million during the six months ended January 31, 2024, compared to the same period a year ago. Gross profit was impacted by an increase in subscription and support gross profit due to the increase in subscription revenue and cloud operations efficiencies and improvements in services gross profit due to the completion of certain implementation projects that required significant investment by us and more SIs contracting directly with our customers, partially offset by a decrease in license gross profit due to lower license revenue as customers migrate to subscription services.

Current wording

Our gross profit increased $102.4 million during the nine months ended April 30, 2024, compared to the same period a year ago. Gross profit was impacted by an increase in subscription and support gross profit due to the increase in subscription revenue and cloud operations efficiencies and improvements in services gross profit due to the completion of certain implementation projects that required significant investment by us and more SIs contracting directly with our customers, partially offset by a decrease in license gross profit due to lower license revenue as customers migrate to subscription services.

Previous wording

Our gross margin increased to 57% during the six months ended January 31, 2024, from 46% during the same period a year ago. Gross margin was primarily impacted by the increase in subscription and support revenue at a higher margin due to cloud operations efficiencies and, to a lesser extent, improvements in services gross margin due to completion of certain implementation projects that required significant investment by us and more SIs contracting directly with our customers.

Current wording

Our gross margin increased to 58% during the nine months ended April 30, 2024, from 46% during the same period a year ago. Gross margin was primarily impacted by the increase in subscription and support revenue at a higher margin due to cloud operations efficiencies and, to a lesser extent, improvements in services gross margin due to completion of certain implementation projects that required significant investment by us and more SIs contracting directly with our customers.

Previous wording

The $3.8 million increase in research and development expenses during the three months ended January 31, 2024, compared to the same period a year ago, was primarily due to increases in personnel costs of $3.6 million associated with higher headcount, professional services of $0.6 million, and software subscription costs of $0.1 million. These increases were partially offset by decreases in acquisition consideration holdback costs of $0.4 million recognized over a service period relating to the HazardHub acquisition and cloud hosting costs of $0.2 million.

Current wording

The $3.1 million increase in research and development expenses during the three months ended April 30, 2024, compared to the same period a year ago, was primarily due to increases in personnel costs of $3.1 million associated with higher headcount, travel costs of $0.7 million, software subscription costs of $0.3 million, and cloud hosting costs $0.2 million. These increases were partially offset by a decrease in acquisition consideration holdback costs of $1.2 million due to the departure of former employees prior to completion of their service requirements.

Previous wording

The $8.1 million increase in research and development expenses during the six months ended January 31, 2024, compared to the same period a year ago, was primarily due to increases in personnel costs of $9.8 million associated with higher headcount, software subscription costs of $0.8 million, and travel costs of $0.1 million. These increases were partially offset by decreases in cloud hosting costs of $1.9 million, and acquisition consideration holdback costs of $0.8 million recognized over a service period relating to the HazardHub acquisition.

Current wording

The $11.1 million increase in research and development expenses during the nine months ended April 30, 2024, compared to the same period a year ago, was primarily due to increases in personnel costs of $12.9 million associated with higher headcount, software subscription costs of $1.1 million, and travel costs of $0.8 million. These increases were partially offset by decreases in acquisition consideration holdback costs of $2.1 million due to the departure of former employees prior to completion of their service requirements and cloud hosting costs of $1.7 million.

Previous wording

Cloud hosting costs are benefiting from the efficiencies that we are achieving with GWCP and the five-year agreement with a cloud infrastructure services provider that was entered into in the second quarter of fiscal year 2023.

Current wording

Cloud hosting costs are benefiting from the efficiencies that we are achieving with our GWCP platform and the five-year agreement with a cloud infrastructure services provider that was entered into in the second quarter of fiscal year 2023.

Previous wording

Our research and development headcount was 1,087 at January 31, 2024, compared with 1,002 at January 31, 2023.

Current wording

Our research and development headcount was 1,115 at April 30, 2024, compared with 1,019 at April 30, 2023.

Previous wording

The $4.4 million increase in sales and marketing expenses during the three months ended January 31, 2024, compared to the same period a year ago, was primarily due to increases in marketing and advertising expenses of $2.8 million due to the timing of Connections, our annual customer conference, which was held in the first quarter of fiscal year 2023 as compared to the second quarter of fiscal year 2024, personnel costs of $1.2 million, including $1.0 million related to contract acquisition costs, travel costs of $0.2 million, and professional services costs of $0.2 million.

Current wording

The $3.6 million increase in sales and marketing expenses during the three months ended April 30, 2024, compared to the same period a year ago, was primarily due to increases in personnel costs, including contract acquisition costs, of $4.0 million and travel costs of $0.5 million, partially offset by decreases in marketing and advertising expenses of $0.5 million and cloud hosting costs $0.3 million.

Previous wording

The $2.5 million increase in sales and marketing expenses during the six months ended January 31, 2024, compared to the same period a year ago, was primarily due to increases in personnel costs of $2.2 million, including $0.9 million related to contract acquisition costs, marketing and advertising costs of $0.3 million, and software subscription costs of $0.2 million, partially offset by lower cloud hosting costs of $0.2 million.

Current wording

The $6.1 million increase in sales and marketing expenses during the nine months ended April 30, 2024, compared to the same period a year ago, was primarily due to increases in personnel costs, including contract acquisition costs, of $6.2 million, travel costs of $0.6 million, and software subscription costs $0.2 million, partially offset by lower cloud hosting costs of $0.6 million and marketing and advertising costs of $0.2 million.

Previous wording

Our sales and marketing headcount was 469 at January 31, 2024, compared with 470 at January 31, 2023.

Current wording

Our sales and marketing headcount was 475 at April 30, 2024, compared with 471 at April 30, 2023.

Previous wording

General and administrative expenses was relatively flat during the three months ended January 31, 2024, compared to the same period a year ago, which was due to a decrease in facilities costs of $1.1 million primarily due to the assignment of the lease agreement for our previous headquarters and concurrent sublease for less office space in San Mateo, California during the third quarter of fiscal year 2023, offset by increases in personnel costs of $0.6 million due to the results of a payroll tax audit in Ireland and software subscription costs of $0.4 million.

Current wording

The $4.5 million decrease in general and administrative expenses during the three months ended April 30, 2024, compared to the same period a year ago, was due to decreases in facilities costs of $7.9 million primarily due to the assignment of the lease agreement for our previous headquarters and concurrent sublease for less office space in San Mateo, California during the third quarter of fiscal year 2023 and software subscription costs of $0.1 million, partially offset by higher personnel costs of $2.5 million and professional services cost of $1.0 million.

Previous wording

The $3.1 million decrease in general and administrative expenses during the six months ended January 31, 2024, compared to the same period a year ago, was due to decreases in facilities costs of $2.3 million primarily due to the assignment of the lease agreement for our previous headquarters and concurrent sublease for less office space in San Mateo, California during the third quarter of fiscal year 2023, personnel costs of $0.8 million due to the results of a payroll tax audit in Ireland, and professional services of $0.7 million, partially offset by an increase in software subscription and web hosting costs of $0.9 million.

Current wording

The $7.6 million decrease in general and administrative expenses during the nine months ended April 30, 2024, compared to the same period a year ago, was due to decreases in facilities costs of $11.5 million primarily due to the assignment of the lease agreement for our previous headquarters and concurrent sublease for less office space in San Mateo, California during the third quarter of fiscal year 2023 and cloud hosting costs of $0.8 million, partially offset by higher personnel costs of $2.8 million, software subscription costs $1.5 million, and professional services of $0.3 million.

Previous wording

Our general and administrative headcount was 449 at January 31, 2024, compared with 449 at January 31, 2023. General and administrative headcount includes facilities personnel whose expenses are allocated across all functional departments.

Current wording

Our general and administrative headcount was 452 at April 30, 2024, compared with 431 at April 30, 2023. General and administrative headcount includes facilities personnel whose expenses are allocated across all functional departments.

Previous wording

We expect that our general and administrative expenses will increase in absolute dollars due to inflation and investments required to support our strategic initiatives, grow our business, and meet our product and information security, compliance and reporting obligations, but decrease as a percentage of revenue as overall hiring and investments slow. Additionally, we have three customers in Argentina, which represent approximately $6.5 million of accounts receivable and approximately $5 million of ARR as of January 31, 2024, who have limitations and restrictions on paying outstanding amounts due to us because of certain government restrictions limiting the amount of U.S. dollars that can be sent out of such country. If these customers are not able to send U.S. dollars outside of

Current wording

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

Previous wording

Interest income increased $4.9 million and $10.9 million during the three and six months ended January 31, 2024, compared to the same period a year ago, primarily due to higher interest rates on invested funds.

Current wording

Interest income increased $4.2 million and $15.1 million during the three and nine months ended April 30, 2024, respectively, compared to the same periods a year ago, primarily due to higher interest rates on invested funds.

Previous wording

Interest expense for the six months ended January 31, 2024 consists of stated interest of $2.5 million and non-cash interest expense of $0.9 million related to amortization of debt issuance costs. Interest expense for the six months ended January 31, 2023 consists of stated interest of $2.5 million and non-cash interest expense of $0.8 million related to the amortization of debt discount and issuance costs.

Current wording

Interest expense for the nine months ended April 30, 2024 consists of stated interest of $3.8 million and non-cash interest expense of $1.3 million related to amortization of debt issuance costs. Interest expense for the nine months ended April 30, 2023 consists of stated interest of $3.8 million and non-cash interest expense of $1.3 million related to the amortization of debt discount and issuance costs.

Previous wording

Other income (expense), net during the three and six months ended January 31, 2024 was income of $10.8 million and expense of $3.0 million, respectively, as compared to income of $11.3 million and expense of $2.5 million during the respective periods a year ago, due primarily to fluctuations in foreign currency exchange rates.

Current wording

Other income (expense), net during the three months ended April 30, 2024 was expense of $6.5 million as compared to expense of $3.4 million during the same period a year ago, due primarily to fluctuations in foreign currency exchange rates. Other income (expense), net during the nine months ended April 30, 2024 was expense of $9.5 million as compared to expense of $5.9 million during the same period a year ago, due primarily to fluctuations in foreign currency exchange rates.

Previous wording

In addition to foreign currency exchange rate fluctuations during the three months ended January 31, 2024, one of our strategic investments was acquired by a privately-held limited partnership. As a result, we received $12.1 million in consideration for our equity interest in the investee, composed of $6.5 million in cash and $5.6 million of an ownership interest in the privately-held limited partnership, and recognized a $1.8 million gain in excess of cost in other income (expense), net.

Current wording

In addition to foreign currency exchange rate fluctuations during the nine months ended April 30, 2024, one of our strategic investments was acquired by a privately held limited partnership. As a result, we received $12.1 million in consideration for our equity interest in the investee, composed of $6.5 million in cash and $5.6 million of an ownership interest in the privately held limited partnership, and recognized a $1.8 million gain in excess of cost in other income (expense), net in the second quarter of fiscal year 2024.

Previous wording

We recognized an income tax benefit of $2.7 million and an income tax provision of $1.0 million for the three months ended January 31, 2024 and 2023, respectively; and an income tax benefit of $14.2 million and $15.1 million for the six months ended January 31, 2024 and 2023, respectively. The change in the amount of income tax recorded for the three months ended January 31, 2024, compared to the same period a year ago, was primarily due to an increase in tax deductions from stock-based compensation, offset by a decrease in the loss before taxes. The change in the amount of income tax recorded for the six months ended January 31, 2024, compared to the same period a year ago, was primarily due to a decrease in the loss before taxes, offset by an increase in tax deductions from stock-based compensation, the U.S. Foreign-Derived Intangible Income (“FDII”) deduction, and research and development credits.

Current wording

We recognized an income tax benefit of $8.6 million and $10.7 million for the three months ended April 30, 2024 and 2023, respectively, and an income tax benefit of $22.9 million and $25.8 million for the nine months ended April 30, 2024 and 2023, respectively. The change in the amount of income tax recorded for the three and nine months ended April 30, 2024, compared to the same periods a year ago was primarily due to a decrease in the loss before taxes, offset by an increase in tax deductions from stock-based compensation, the U.S. Foreign-Derived Intangible Income (“FDII”) deduction, and research and development credits.

Previous wording

The effective tax rate of (39)% and 45% for the three and six months ended January 31, 2024, respectively, differs from the statutory U.S. Federal income tax rate of 21% primarily due to state taxes, permanent differences related to stock-based compensation, research and development credits, foreign earnings taxed in the U.S., the FDII deduction, and certain non-deductible expenses, including the limitation on executive compensation.

Current wording

The effective tax rate of 61% and 50% for the three and nine months ended April 30, 2024, respectively, differs from the statutory U.S. Federal income tax rate of 21% primarily due to state taxes, permanent differences related to stock-based compensation, research and development credits, foreign earnings taxed in the U.S., the FDII deduction, and certain non-deductible expenses, including the limitation on executive compensation.

Previous wording

As of January 31, 2024, approximately $66.4 million of our cash and cash equivalents were domiciled in foreign jurisdictions. We may repatriate foreign earnings to the United States in the future to the extent that the repatriation is not restricted by local laws or there are no substantial incremental costs associated with such repatriation.

Current wording

As of April 30, 2024, approximately $54.9 million of our cash and cash equivalents were domiciled in foreign jurisdictions. We may repatriate foreign earnings to the United States in the future to the extent that the repatriation is not restricted by local laws or there are no substantial incremental costs associated with such repatriation.