Guidewire Software Inc

Previous wording

Global events have adversely affected and may continue 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, inflation, previous bank failures in the United States and Switzerland, and supply chain issues have contributed to global economic and market volatility in recent years. 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

Global events have adversely affected and may continue 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 war between Russia and Ukraine, continued geopolitical instability in the Middle East, escalating tensions in the South China Sea, inflation, previous bank failures in the United States and Switzerland, and supply chain issues have contributed to global economic and market volatility in recent years. 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, inflation levels are impacting the global economy and have magnified 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 collectibility of accounts receivable and unbilled receivables, and the change in fair value of strategic investments. Additionally, inflation levels and political uncertainty are impacting the global economy and have magnified 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 if we increase arrangements with multiple performance obligations that include services at discounted rates, more of the total contract value would be recognized as services revenue, but our reported ARR amount would not be impacted. During the three months ended October 31, 2024, the recurring license and support or subscription contract value recognized as services revenue was $2.1 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 if we increase arrangements with multiple performance obligations that include services at discounted rates, more of the total contract value would be recognized as services revenue, but our reported ARR amount would not be impacted. During the six months ended January 31, 2025, the recurring license and support or subscription contract value recognized as services revenue was $4.6 million.

Previous wording

As of October 31, 2024, ARR was $874 million, compared to $864 million as of July 31, 2024. 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 January 31, 2025, ARR was $918 million, compared to $864 million as of July 31, 2024. 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

Additionally, free cash flow takes into account the impact of changes in deferred revenue, which reflects the receipt of cash payments for 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, commissions, payroll taxes, and other 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.”

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 payments for 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, commissions, payroll taxes, and other 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 $43.3 million during the three months ended October 31, 2024, compared to the same period a year ago, primarily due to the impact of cloud transition agreements entered into and provisioned since October 31, 2023, new subscription agreements, 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 $48.5 million and $91.8 million during the three and six months ended January 31, 2025, 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, and the renewal or extension of subscription services at the fully ramped annual fees after the initial committed term since January 31, 2024.

Previous wording

Support revenue decreased by $1.1 million during the three months ended October 31, 2024, compared to the same period 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 $2.3 million and $3.5 million during the three and six months ended January 31, 2025, 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 increased by $3.4 million during the three months ended October 31, 2024, compared to the same period a year ago, primarily due to higher renewals and, to a lesser extent, expansion orders within our existing customer base, partially offset by agreements that migrated from a term license to a subscription service in the prior year. Ongoing revenue related to migration agreements is recorded as subscription revenue.

Current wording

Term license revenue decreased by $7.3 million and $3.9 million during the three and six months ended January 31, 2025, compared to the same period a year ago, primarily due to agreements that migrated from a term license to a subscription service and, to a lesser extent, fewer expansion orders within our existing customer base, partially offset by an increase in license renewal fees. Ongoing revenue related to migration agreements is recorded as subscription revenue.

Previous wording

Services revenue increased by $10.0 million during the three months ended October 31, 2024, compared to the same period a year ago. Services revenue increased due to improved operational focus that resulted in more new subscription implementation and migration projects than projects that were completed over the past year.

Current wording

Services revenue increased by $9.8 million and $19.8 million during the three and six months ended January 31, 2025, compared to the same period a year ago. Services revenue increased due to improved operational focus that resulted in higher utilization of services employees and more new subscription implementation and migration projects than projects that were completed over the past year.

Previous wording

Cost of subscription and support revenue during the three months ended October 31, 2024 increased by $6.0 million, compared to the same period a year ago, primarily due to increases in cloud infrastructure expense of $8.3 million from increased transaction volume on our cloud services, royalties of $0.4 million, and internal-use software amortization of $0.3 million, partially offset by decreases in personnel costs of $2.3 million associated with lower headcount and professional services of $0.7 million.

Current wording

Cost of subscription and support revenue during the three months ended January 31, 2025 increased by $9.2 million, compared to the same period a year ago, primarily due to increases in cloud infrastructure expense of $8.4 million from increased transaction volume on our cloud services, internal-use software amortization of $0.4 million, and royalties of $0.3 million.

Previous wording

Cloud infrastructure expense continues to benefit from the efficiencies that we are achieving from our development efforts associated with our GWCP platform and the five-year agreement we entered into with a cloud infrastructure services provider. As a result of efficiencies that we are seeing from our previous investments in cloud operations and development efforts, we are critically evaluating headcount additions, professional services contracts and third-party software costs, along with other investment opportunities. 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 infrastructure expense continues to benefit from the efficiencies that we are achieving from our development efforts associated with our GWCP platform and the five-year agreement we entered into with a cloud infrastructure services provider. As a result of efficiencies that we are seeing from our previous investments in cloud operations and development efforts, we continue to critically evaluate headcount additions, professional services contracts and third-party software costs, along with other investment opportunities. 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 $0.3 million decrease in our cost of license revenue during the three months ended October 31, 2024, compared to the same period a year ago, was due to a decrease in personnel costs associated with the development of online training curriculum included with the latest releases of InsuranceSuite of $0.3 million.

Current wording

The $0.5 million decrease in our cost of license revenue during the three months ended January 31, 2025, compared to the same period a year ago, was due to decreases in royalties of $0.3 million and in personnel costs associated with the development of online training curriculum included with the latest releases of InsuranceSuite of $0.2 million.

Previous wording

The $3.8 million increase in cost of services revenue during the three months ended October 31, 2024, compared to the same period a year ago, was primarily due to increases in subcontractor expenses of $3.2 million due to implementations involving our SI partners and personnel costs of $0.7 million, partially offset by a decrease of $0.2 million related to professional services and software subscription costs.

Current wording

The $3.2 million increase in cost of services revenue during the three months ended January 31, 2025, compared to the same period a year ago, was primarily due to increases in subcontractor expenses of $2.4 million due to implementations involving our SI partners, personnel costs of $0.4 million, professional services of $0.2 million and travel costs of $0.2 million.

Previous wording

We had 563 cloud operations and technical support employees and 794 professional services employees at October 31, 2024, compared to 597 cloud operations and technical support employees and 826 professional services employees at October 31, 2023.

Current wording

We had 591 cloud operations and technical support employees and 802 professional services employees at January 31, 2025, compared to 595 cloud operations and technical support employees and 770 professional services employees at January 31, 2024.

Previous wording

Our gross profit increased $46.1 million during the three months ended October 31, 2024, compared to the same period a year ago. Gross profit was impacted by increases in subscription and support gross profit due to the increase in subscription revenue and cloud operations efficiencies, services gross profit due to an increase in service revenue in conjunction with higher utilization rates, and license gross profit primarily due to an increase in license revenue with no increase in costs.

Current wording

Our gross profit increased $36.7 million during the three months ended January 31, 2025, compared to the same period a year ago. Gross profit was impacted by increases in subscription and support gross profit due to the increase in subscription revenue and cloud operations efficiencies and services gross profit due to an increase in service revenue in conjunction with the completion of certain implementation projects that required significant investment by us and higher utilization rates, 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 60% during the three months ended October 31, 2024 from 54% during the same period a year ago. Gross margin was primarily impacted by the increases in subscription and support revenue at a higher margin due to cloud operations efficiencies, and services revenue, which had a higher margin due to better utilization than in the same period a year ago.

Current wording

Our gross margin increased to 62% during the three months ended January 31, 2025 from 59% during the same period a year ago. Gross margin was primarily impacted by the increases in subscription and support revenue at a higher margin due to cloud operations efficiencies, and services revenue due to completion of certain implementation projects that required significant investment by us and higher utilization rates.

Previous wording

We expect subscription and support gross margin to continue to improve, though at a slower rate than in fiscal year 2024, over the next several years as we gain additional efficiencies and increase the number of cloud customers. We expect services gross margin will improve as we lower our reliance on subcontractors and enter into fewer fixed fee arrangements. We expect license gross profit and license gross margin to decline based on changes in revenue due to customers migrating from licenses to subscription services, the timing of delivery of new multi-year term licenses, and the execution of multi-year term license renewals, as cost of license revenue is expected to be relatively consistent from period to period in the future. Overall, we expect gross margins to continue to improve over time as improvements in subscription and support gross margin and services gross margin will more than offset the negative impact of revenue shifts away from high margin license revenue.

Current wording

We expect subscription and support gross margin to continue to improve, though at a slower rate than in fiscal year 2024, over the next several years as we gain additional efficiencies and increase the number of cloud customers. We expect services gross margin to improve over time, but quarterly results may fluctuate, depending on the usage of subcontractors to supplement projects, investments in customer projects, and the utilization level of our services employees. We expect license gross margins to remain stable but gross profit to decline in general as customers migrate from licenses to subscription services, though this trend could be offset in certain periods in which we enter into new multi-year term licenses or multi-year term license renewals. Overall, we expect gross margins to continue to improve over time as improvements in subscription and support gross margin and services gross margin will more than offset the negative impact of revenue shifts away from high margin license revenue.

Previous wording

The $6.4 million increase in research and development expenses during the three months ended October 31, 2024, compared to the same period a year ago, was primarily due to increases in personnel costs of $5.6 million associated with higher headcount, cloud hosting costs of $0.4 million, software subscription costs of $0.4 million, and travel costs of $0.3 million. These increases were partially offset by a decrease in acquisition consideration holdback costs of $0.4 million.

Current wording

The $4.8 million increase in research and development expenses during the three months ended January 31, 2025, compared to the same period a year ago, was primarily due to increases in personnel costs of $4.0 million associated with higher headcount, travel costs of $0.5 million, cloud hosting costs of $0.4 million, and software subscription costs of $0.4 million. These increases were partially offset by decreases in acquisition consideration holdback costs of $0.3 million and professional services of $0.2 million.

Previous wording

Our research and development headcount was 1,167 at October 31, 2024, compared with 1,069 at October 31, 2023.

Current wording

Our research and development headcount was 1,144 at January 31, 2025, compared with 1,087 at January 31, 2024.

Previous wording

We expect our research and development expenses to increase in absolute dollars due to inflation and investments to support our growing customer base, but decrease as a percentage of revenue after our recent period of significant investment in cloud platform capabilities as overall hiring slows and we focus on hiring in lower cost regions. We continue to dedicate internal resources to develop, improve, and expand the functionality of our solutions in the cloud. Research and development expenses may also increase if we pursue additional acquisitions.

Current wording

We expect our research and development expenses to increase in absolute dollars due to inflation and investments to enhance and develop our product and services, but decrease as a percentage of revenue after our recent period of significant investment in cloud platform capabilities as overall hiring slows and we focus on hiring in lower cost regions. We continue to dedicate internal resources to develop, improve, and expand the functionality, efficiency, and security of our solutions in the cloud. Research and development expenses may also increase if we pursue additional acquisitions.

Previous wording

The $6.9 million increase in sales and marketing expenses during the three months ended October 31, 2024, compared to the same period a year ago, was primarily due to increases in personnel costs of $4.8 million associated with higher headcount, including higher contract acquisition costs and stock-based compensation, travel costs of $1.0 million, cloud hosting costs of $0.6 million, and professional services of $0.3 million.

Current wording

The $6.3 million increase in sales and marketing expenses during the three months ended January 31, 2025, compared to the same period a year ago, was primarily due to increases in personnel costs associated with higher headcount, including higher contract acquisition costs and stock-based compensation, of $5.8 million, travel costs of $1.2 million, and cloud hosting costs of $0.4 million, partially offset by a decrease in marketing and advertising costs of $1.0 million.

Previous wording

Our sales and marketing headcount was 483 at October 31, 2024, compared with 465 at October 31, 2023.

Current wording

Our sales and marketing headcount was 496 at January 31, 2025, compared with 469 at January 31, 2024.

Previous wording

The $3.7 million increase in general and administrative expenses during the three months ended October 31, 2024, compared to the same period a year ago, was due to increases in bad debt expense of $1.0 million, professional services cost of $1.0 million, personnel costs of $0.7 million, travel costs of $0.7 million, and cloud hosting costs $0.3 million, partially offset by a decrease in software subscription costs of $0.2 million.

Current wording

The $1.5 million increase in general and administrative expenses during the three months ended January 31, 2025, compared to the same period a year ago, was due to increases in professional services cost of $1.0 million, travel costs of $0.6 million, and software subscription costs of $0.2 million, partially offset by a decrease in personnel costs of $0.2 million.

Previous wording

Our general and administrative headcount was 464 at October 31, 2024, compared with 453 at October 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 474 at January 31, 2025, compared with 449 at January 31, 2024. General and administrative headcount includes facilities personnel whose expenses are allocated across all functional departments.

Previous wording

Interest income increased $3.0 million during the three months ended October 31, 2024, compared to the same period a year ago, primarily due to the higher amount of funds available for investment due to the net cash received from our recent debt offering.

Current wording

Interest income increased $5.4 million and $8.4 million during the three and six months ended January 31, 2025, respectively, compared to the same periods a year ago, primarily due to the higher amount of funds available for investment due to the net cash received from our October 2024 debt offering and positive cash flow.

Previous wording

Interest expense includes both stated interest and the amortization of debt issuance costs associated with the outstanding amount due on the $400.0 million aggregate principal amount of our 1.25% Convertible Senior Notes due 2025 (“2025 Convertible Senior Notes”) and the $690.0 million aggregate principal amount of our 1.25% Convertible Senior Notes due 2029 (the “2029 Convertible Senior Notes”, together with the 2025 Convertible Senior Notes, the “Convertible Senior Notes”). The amortization of debt issuance cost is recognized on an effective interest basis. A portion of the 2025 Convertible Senior Notes were retired in October 2024 in connection with the issuance of the 2029 Convertible Senior Notes.

Current wording

Interest expense includes both stated interest and the amortization of debt issuance costs associated with the outstanding amount due on the aggregate principal amount of our 1.25% Convertible Senior Notes due 2025 (“2025 Convertible Senior Notes”) and the aggregate principal amount of our 1.25% Convertible Senior Notes due 2029 (the “2029 Convertible Senior Notes”, together with the 2025 Convertible Senior Notes, the “Convertible Senior Notes”). The amortization of debt issuance cost is recognized on an effective interest basis. A portion of the 2025 Convertible Senior Notes was retired in October 2024 in connection with the issuance of the 2029 Convertible Senior Notes and an additional portion of the 2025 Convertible Senior Notes was retired in December 2024 in transactions with certain holders of the notes. Interest expense also includes the amortization of issuance costs associated with our revolving credit agreement recognized on a straight-line basis.

Previous wording

Interest expense for the three months ended October 31, 2024 consists of stated interest of $1.5 million and non-cash interest expense of $0.5 million related to amortization of debt issuance costs. Interest expense for the three months ended October 31, 2023 consists of stated interest of $1.3 million and non-cash interest expense of $0.4 million related to the amortization of debt issuance costs.

Current wording

Interest expense for the three months ended January 31, 2025 consists of stated interest of $2.9 million and non-cash interest expense of $1.2 million related to amortization of debt issuance costs. Interest expense for the three months ended January 31, 2024 consists of stated interest of $1.3 million and non-cash interest expense of $0.4 million related to the amortization of debt issuance costs.

Previous wording

Other income (expense), net includes foreign exchange gains and losses resulting from fluctuations in foreign exchange rates on monetary asset and monetary liability balances that are denominated in currencies other than the functional currency of the entity in which they are recorded. Our monetary assets and liabilities denominated in currencies other than the functional currency of the entity in which they are recorded consist primarily of trade accounts receivable, unbilled accounts receivable, trade accounts payable, and intercompany receivables and payables. We have significant transactions in the following currencies: Australian Dollar, British Pound, Canadian Dollar, Euro, Indian Rupee, and Polish Zloty. Other income (expense) also includes changes in the fair value of our strategic investments.

Current wording

Other income (expense), net includes foreign exchange gains and losses resulting from fluctuations in foreign exchange rates on monetary asset and monetary liability balances that are denominated in currencies other than the functional currency of the entity in which they are recorded. Our monetary assets and liabilities denominated in currencies other than the functional currency of the entity in which they are recorded consist primarily of trade accounts receivable, unbilled accounts receivable, trade accounts payable, and intercompany receivables and payables. We have significant transactions in the following currencies: Australian Dollar, British Pound, Canadian Dollar, Euro, Indian Rupee, and Polish Zloty. Other income (expense) also includes changes in the fair value of our strategic investments and expenses related to the retirement of a portion of our 2025 Convertible Senior Notes.

Previous wording

Other income (expense), net during the three months ended October 31, 2024 was expense of $4.1 million as compared to expense of $13.7 million during the same period a year ago, due primarily to fluctuations in foreign currency exchange rates.

Current wording

Other income (expense), net during the three months ended January 31, 2025 was expense of $66.3 million, compared to income of $10.8 million during the same period a year ago, primarily due to $53.3 million of expense related to the retirement of a portion of our 2025 Convertible Senior Notes and $25.8 million of higher expense related to fluctuations in foreign currency exchange rates, partially offset by $2.0 million higher gain from the sale of strategic investments.

Previous wording

We recognized an income tax benefit of $6.4 million and $11.5 million for the three months ended October 31, 2024 and 2023, respectively. The decrease in the amount of income tax benefit recorded for the three months ended October 31, 2024, compared to the same period a year ago was primarily due to an increase in the income before taxes and non-deductible executive compensation, 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 $5.8 million and $2.7 million for the three months ended January 31, 2025 and 2024, respectively, and an income tax benefit of $12.1 million and $14.2 million for the six months ended January 31, 2025 and 2024, respectively. The increase in the amount of income tax benefit recorded for the three months ended January 31, 2025, compared to the same period a year ago was primarily due to an increase in tax deductions from stock-based compensation, the U.S. Foreign-Derived Intangible Income (“FDII”) deduction, and research and development credits, offset by the debt retirement expense which is non-deductible for tax purposes. The decrease in the amount of income tax benefit recorded for the six months ended January 31, 2025, compared to the same period a year ago, was primarily due to the debt retirement expense which is non-deductible for tax purposes, offset by an increase in the deductions for stock-based compensation, FDII deduction, and research and development credits.

Previous wording

The effective tax rate of (230)% for the three months ended October 31, 2024 differs from the statutory U.S. Federal income tax rate of 21% primarily due to the impact of excess tax benefits related to stock-based compensation driven by the recent increase in the market value of our stock. The impact of these deductions on the effective tax rate are magnified by the near breakeven pre-tax income in the quarter. Other contributing factors were research and development credits and the FDII deduction, which were partially offset by non-deductible executive compensation.

Current wording

The effective tax rate of 13% and 30% for the three and six months ended January 31, 2025, respectively, differs from the statutory U.S. Federal income tax rate of 21% primarily due to the debt retirement expense which is non-deductible for tax purposes and other 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

(1) During the three months ended October 31, 2024, we recorded $0.3 million as a loss on the induced conversion of a portion of the 2025 Convertible Senior Notes in other income (expense). Prior to the first quarter of fiscal year 2025, there were no transactions similar to the retirement of debt in any periods presented on the condensed consolidated statements of operations.

Current wording

(1) During the six months ended January 31, 2025, we recorded a $53.6 million loss on retirement of debt in other income (expense) comprised of a $53.3 million loss on extinguishment of a portion of the 2025 Convertible Senior Notes and a $0.3 million loss on the induced conversion of a portion of the 2025 Convertible Senior Notes. Prior to the first quarter of fiscal year 2025, there were no transactions similar to the retirement of debt in any periods presented on the condensed consolidated statements of operations.

Previous wording

As of October 31, 2024, approximately $60.3 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 January 31, 2025, approximately $61.6 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.

Previous wording

Our working capital increased to $1,022.1 million as of October 31, 2024 compared to $457.9 million as of July 31, 2024, primarily due to net proceeds received of $413.6 million from the issuance of the 2029 Convertible Senior Notes. A portion of the gross proceeds were used to purchase capped calls related to the 2029 Convertible Senior Notes and the retirement of a portion of the 2025 Convertible Senior Notes. We are required to and have the ability to settle the principal of the 2025 Convertible Senior Notes and 2029 Convertible Senior Notes in cash, and any conversion premium in cash, equity, or a combination of both.

Current wording

Our working capital increased to $919.4 million as of January 31, 2025 compared to $457.9 million as of July 31, 2024, primarily due to net proceeds received of $412.7 million from the issuance of the 2029 Convertible Senior Notes in October 2024, where a portion of the gross proceeds were used to purchase capped calls related to the 2029 Convertible Senior Notes and the retirement of a portion of the 2025 Convertible Senior Notes. We are required to and have the ability to settle the principal of the 2025 Convertible Senior Notes and 2029 Convertible Senior Notes in cash, and any conversion premium in cash, equity, or a combination of both.

Previous wording

In September 2022, our board of directors authorized and approved a share repurchase program of up to $400.0 million of our outstanding common stock. During the three months ended October 31, 2024, we did not repurchase any shares of our common stock. As of October 31, 2024, $138.2 million remained available for future share repurchases.

Current wording

In September 2022, our board of directors authorized and approved a share repurchase program of up to $400.0 million of our outstanding common stock. During the six months ended January 31, 2025, we did not repurchase any shares of our common stock. As of January 31, 2025, $138.2 million remained available for future share repurchases subject to our compliance with the terms of the Credit Agreement.

Previous wording

We believe that our existing cash and cash equivalents and sources of liquidity will be sufficient to fund our operations for at least the next 12 months. Our future cash requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of our spending to support our research and development and cloud operations efforts, investments in cloud infrastructure, cybersecurity, and operating costs, and expansion into other markets. We also may invest in or acquire complementary businesses, applications or technologies, or may execute on a board-authorized share repurchase program, which may require the use of significant cash resources and/or additional financing.

Current wording

We believe that our existing cash and cash equivalents and other sources of liquidity will be sufficient to fund our operations for at least the next 12 months. Our future cash requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of our spending to support our research and development and cloud operations efforts, investments in cloud infrastructure, cybersecurity, and operating costs, and expansion into other markets. We also may invest in or acquire complementary businesses, applications or technologies, or may execute on a board-authorized share repurchase program, which may require the use of significant cash resources and/or additional financing.

Previous wording

Net cash used in operating activities was $62.3 million for the three months ended October 31, 2024 compared to net cash used in operating activities of $72.1 million during the three months ended October 31, 2023. This $9.8 million decrease in operating cash used was attributable to a $46.1 million decrease in net loss, after excluding the impact of non-cash charges such as deferred taxes, stock-based compensation expense, depreciation and amortization expense, and other non-cash items, offset by a $36.3 million increase in cash used by working capital activities.

Current wording

Net cash provided by operating activities was $23.7 million for the six months ended January 31, 2025 compared to net cash used in operating activities of $2.8 million during the six months ended January 31, 2024. This $26.5 million increase in cash provided by operating activities was attributable to a $54.5 million decrease in net loss, after excluding the impact of non-cash charges such as deferred taxes, stock-based compensation expense, depreciation and amortization expense, loss on retirement of debt, and other non-cash items, partially offset by a $28.0 million increase in cash used by working capital activities.

Previous wording

Net cash used in investing activities was $77.6 million for the three months ended October 31, 2024 compared to net cash used in investing activities of $27.8 million during the three months ended October 31, 2023. The $49.8 million increase in cash used in investing activities was primarily due to net purchases in excess of maturities and sales of available-for-sale securities being higher compared to the same period a year ago by $48.9 million, an increase in cash used to acquire strategic investments of $0.5 million, and an increase in purchases of property and equipment and capitalized software development costs of $0.4 million.

Current wording

Net cash used in investing activities was $130.5 million for the six months ended January 31, 2025 compared to net cash used in investing activities of $51.2 million during the six months ended January 31, 2024. The $79.3 million increase in cash used in investing activities was primarily due to higher net purchases in excess of maturities and sales of available-for-sale securities compared to the same period a year ago of $79.2 million, a decrease in cash received from the sale of strategic investments of $0.8 million, and an increase in strategic investments purchased of $0.5 million, partially offset by lower purchases of property and equipment and capitalized software development costs of $1.3 million.

Previous wording

Net cash provided by financing activities for the three months ended October 31, 2024 was $415.5 million compared to no cash provided by financing activities for the three months ended October 31, 2023. This $415.5 million increase in cash provided by financing activities was due to $672.8 million cash received, net of paid issuance costs, from the issuance of the 2029 Convertible Senior Notes and $1.9 million cash received from the issuance of common stock upon exercise of stock options, which were partially offset by $58.8 million used to purchase capped calls related to the 2029 Convertible Senior Notes and $200.4 million used to retire $120.9 million aggregate principal amount of the 2025 Convertible Senior Notes.

Current wording

Net cash provided by financing activities for the six months ended January 31, 2025 was $259.9 million compared to minimal cash provided by financing activities for the six months ended January 31, 2024. This $259.9 million increase in cash provided by financing activities was due to $671.8 million cash received, net of paid issuance costs, from the issuance of the 2029 Convertible Senior Notes and $2.5 million cash received from the issuance of common stock upon exercise of stock options, partially offset by $353.5 million used to retire $220.9 million aggregate principal amount of the 2025 Convertible Senior Notes, $58.8 million used to purchase capped calls related to the 2029 Convertible Senior Notes, and $2.1 million used to establish our revolving credit facility.

Previous wording

During the three months ended October 31, 2024, we retired $120.9 million aggregate principal amount of the 2025 Convertible Senior Notes in cash for $200.5 million, which included related accrued interest of $0.1 million, and issued $690.0 million aggregate principal amount of the 2029 Convertible Senior Notes.

Current wording

During the six months ended January 31, 2025, we retired $220.9 million aggregate principal amount of the 2025 Convertible Senior Notes in cash for $354.0 million, which included related accrued interest of $0.5 million, and issued $690.0 million aggregate principal amount of the 2029 Convertible Senior Notes.