Guidewire Software, Inc.

Previous wording

Guidewire is the platform that property and casualty (“P&C”) insurers trust to engage, innovate, and grow efficiently. Our core systems leverage data and analytics, digital, and artificial intelligence (“AI”). As a partner to our customers, we continually evolve to enable their success and assist them in navigating a rapidly changing insurance market.

Current wording

Guidewire is the platform that property and casualty (“P&C”) insurers rely on to engage with customers, innovate, and operate more efficiently. Our platform combines core systems of record with digital, analytics, and artificial intelligence (“AI”) capabilities. We serve insurers of all sizes, ranging from global carriers to regional and local providers, helping them navigate a rapidly changing insurance landscape.

Previous wording

InsuranceSuite Cloud is a highly configurable and scalable product, delivered as a service, and primarily comprised of three core applications (PolicyCenter Cloud, BillingCenter Cloud, and ClaimCenter Cloud) that can be subscribed to separately or together. These applications are built on and optimized for our Guidewire Cloud Platform (“GWCP”) architecture and leverage our in-house cloud operations team. InsuranceSuite Cloud is designed to support multiple releases each year to ensure that cloud customers remain on the latest version and gain fast access to our innovation efforts. Additionally, InsuranceSuite Cloud embeds digital and analytics capabilities natively into our platform. Most new sales and implementations are for InsuranceSuite Cloud.

Current wording

InsuranceSuite is a highly configurable and scalable product, delivered as a service, and primarily comprised of five core applications (PolicyCenter, ClaimCenter, BillingCenter, and the recently announced PricingCenter and UnderwritingCenter) that can be subscribed to separately or together. These applications are built on and optimized for our Guidewire Cloud Platform (“GWCP”) architecture and leverage our in-house cloud operations team. InsuranceSuite is designed to support multiple releases each year to accelerate delivery of new capabilities and ensure that cloud customers remain on the latest version and gain fast access to our innovation efforts. Additionally, InsuranceSuite embeds digital and analytics capabilities natively into our platform. Most new sales and implementations are for InsuranceSuite.

Previous wording

InsuranceNow is a complete, cloud-based application that offers policy, billing, and claims management functionality, plus pre-integrated document production, analytics, and other capabilities, that increases agility without adding complexity. InsuranceNow is hosted on Amazon Web Services (“AWS”) and managed by our internal cloud operations team.

Current wording

InsuranceNow is a complete, cloud-based application that offers policy administration, claims management, and billing functionality, plus pre-integrated document production, analytics, and other capabilities, that increases agility without adding complexity. Like InsuranceSuite, InsuranceNow is hosted on GWCP and managed by our internal cloud operations team. InsuranceNow is currently only available in the United States, and is generally suited to mid-market carriers and managing general agents whose needs are often not as complex as a typical InsuranceSuite customer.

Previous wording

Over the past few years, we have primarily been entering into cloud-based subscription arrangements with our new and existing customers, and we anticipate that subscription arrangements will be a significant majority of annual new sales going forward. We may decide to change certain contract terms in new arrangements to remain competitive or otherwise meet market demands which may impact the way we recognize revenue and/or ARR.

Current wording

Over the past few years, we have primarily been entering into cloud-based subscription arrangements with our new and existing customers, and we anticipate that subscription arrangements will continue to be a significant majority of annual new sales going forward. We may decide to change certain contract terms in new arrangements to remain competitive or otherwise meet market demands which may impact the way we recognize revenue and/or Annual Recurring Revenue (“ARR”).

Previous wording

We work closely with our network of third-party SI partners to facilitate new sales and implementations of our products. Our partnership with leading SI partners allows us to increase efficiency and scale while reducing customer implementation and migration costs. We continue to invest time and resources to increase the number of qualified consultants employed by our SI partners, develop relationships with new partners in existing and new markets, and ensure that all SI partners are qualified to assist with implementing our products. We believe this model will continue to serve us well, and we intend to continue to expand our network of partners and the number of certified consultants with whom we work so we can leverage our SI partners more effectively, especially for future subscription migrations and implementations.

Current wording

We work closely with our network of SI partners to facilitate new sales and implementations of our products. Our partnership with leading SI partners allows us to increase efficiency and scale while reducing customer implementation and migration costs. We continue to invest time and resources to increase the number of qualified consultants employed by our SI partners, develop relationships with new partners in existing and new markets, and ensure that all SI partners are qualified to assist with implementing our products. We believe this model will continue to serve us well, and we intend to continue to expand our network of partners and the number of certified consultants with whom we work so we can leverage our SI partners more effectively, especially for future subscription migrations and implementations.

Previous wording

We face a number of risks in the execution of our strategy, including, but not limited to, risks related to expanding to new markets, managing lengthy sales cycles, competing effectively in the global market, relying on sales to a relatively small number of large customers, developing new or acquiring existing products successfully, making long-term pricing commitments in our customer contracts based on available information and estimates about our future costs that may change, increasing the overall market acceptance of our cloud-based products, maintaining customer satisfaction and renewals of our products, and cost-effectively and securely managing the infrastructure of our cloud-based customers. In response to these and other risks we might face, we continue to invest in many areas of our business, including product development, cloud operations, cybersecurity, introduction of new products and/or new features, implementation and migration services, and sales and marketing.

Current wording

We face a number of risks in the execution of our strategy, including, but not limited to, risks related to fluctuations in our results due to factors largely outside of our control, reliance on sales to a relatively small number of large customers and the related substantial negotiating leverage of these customers, lengthy and variable sales and implementation cycles, competing effectively in the global market, growing our business and managing our expanding operations, development and use of AI in an evolving regulatory environment, making long-term pricing commitments based on cost estimates that may change, expanding market adoption of our cloud-based offerings, maintaining customer satisfaction and renewals, and cost-effectively and securely managing the infrastructure of our cloud-based customers. In response to these and other risks we might face, we continue to invest in many areas of our business, including product development, cloud operations, cybersecurity, introduction of new products and/or new features, implementation and migration services, and sales and marketing.

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 war between Russia and Ukraine, continued geopolitical instability in the Middle East, escalating tensions in the South China Sea, inflation, tariffs, 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, inflationary pressures, 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, currency exchange fluctuations, changes in interest rates, changes in trade policies and practices (including the imposition of tariffs), 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

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 nine months ended April 30, 2025, the recurring license and support or subscription contract value recognized as services revenue was $8.1 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 three months ended October 31, 2025, the recurring license and support or subscription contract value recognized as services revenue was $3.6 million.

Previous wording

As of April 30, 2025, ARR was $960 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 October 31, 2025, ARR was $1,063 million, compared to $1,041 million as of July 31, 2025. 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

A majority of our revenue consists of fees for our subscription services, which are generally priced based on the amount of DWP that is managed by our subscription services. Subscription revenue is recognized ratably over the term of the arrangement, beginning at the point in time our provisioning process has been completed and access has been made available to the customer. The initial term of such arrangements is generally from three to five years. Subscription agreements contain optional annual renewals commencing upon the expiration of the initial contract term. A majority of our subscription customers are billed annually in advance. In some arrangements with multiple performance obligations, a portion of recurring subscription contract value may be allocated to license revenue or services revenue for revenue recognition purposes. For example, in arrangements with multiple performance obligations that include services at discounted rates, a portion of the total contract value related to subscription services will be allocated and recognized as services revenue. Additionally, agreements to migrate an existing term license customer to subscription services contain multiple performance obligations, including a provision to continue using the term license during the subscription service implementation period. Under these migration agreements, a portion of the total contract value related to subscription services could be allocated and recognized as term license and support revenue in the period renewed or delivered.

Current wording

The majority of our revenue consists of fees for our subscription services, which are generally priced based on the amount of DWP that is managed by our subscription services. Subscription revenue is recognized ratably over the term of the arrangement, beginning at the point in time our provisioning process has been completed and access has been made available to the customer. The initial term of such arrangements is generally five years, though in some instances customers have entered into contracts with an initial term of seven years or longer. Subscription agreements contain optional annual renewals commencing upon the expiration of the initial contract term. A majority of our subscription customers are billed annually in advance. In some arrangements with multiple performance obligations, a portion of recurring subscription contract value may be allocated to license revenue or services revenue for revenue recognition purposes. For example, in arrangements with multiple performance obligations that include services at discounted rates, a portion of the total contract value related to subscription services will be allocated and recognized as services revenue. Additionally, agreements to migrate an existing term license customer to subscription services contain multiple performance obligations, including a provision to continue using the term license during the subscription service implementation period. Under these migration agreements, a portion of the total contract value related to subscription services could be allocated and recognized as term license and support revenue in the period renewed or delivered.

Previous wording

A substantial majority of our license revenue consists of term license fees. Our term license revenue is primarily generated through license fees that are billed annually in advance during the term of the contract, including any renewals. Our term license fees are generally priced based on the amount of DWP that will be managed by our licensed software. Our term licenses are sold under an initial term with optional annual renewals after the initial term. Term license revenue for the committed term of the customer agreement is generally fully recognized upon delivery of the software or at the beginning of the renewal term. We do enter into license arrangements that have an initial term of two or more years and renewal terms of more than one year which results in significantly higher revenue in the initial year of the committed term than arrangements for our subscription services.

Current wording

The majority of our license revenue consists of term license fees. Our term license revenue is primarily generated through license fees that are billed annually in advance during the term of the contract, including any renewals. Our term license fees are generally priced based on the amount of DWP that will be managed by our licensed software. Our term licenses are sold under an initial term with optional annual renewals after the initial term. Term license revenue for the committed term of the customer agreement is generally fully recognized upon delivery of the software or at the beginning of the renewal term. We do enter into license arrangements that have an initial term of two or more years and renewal terms of more than one year which results in significantly higher revenue in the initial year of the committed term than arrangements for our subscription services.

Previous wording

Our services revenue is primarily derived from implementation and migration services performed for our customers, reimbursable travel expenses, and training fees. A majority of our services engagements are billed and revenue is recognized on a time and materials basis upon providing our services.

Current wording

Our services revenue is primarily derived from implementation and migration services performed for our customers, reimbursable travel expenses, and training fees. A majority of our services engagements are billed and revenue is recognized on a time and materials basis upon providing our services, while certain services engagements are based on a fixed fee and revenue is recognized on a percentage of completion basis.

Previous wording

Subscription revenue increased by $46.0 million and $137.8 million during the three and nine months ended April 30, 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.

Current wording

Subscription revenue increased by $54.6 million during the three months ended October 31, 2025, compared to the same period a year ago, primarily due to the impact of cloud transition agreements entered into and provisioned since October 31, 2024, new subscription 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 $2.2 million and $5.7 million during the three and nine months ended April 30, 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.

Current wording

Support revenue decreased by $2.1 million during the three months ended October 31, 2025, 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.

Previous wording

Term license revenue increased by $2.1 million during the three months ended April 30, 2025, 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 the impact of customers that migrated from a term license to a subscription service.

Current wording

Term license revenue increased by $4.6 million during the three months ended October 31, 2025, compared to the same period a year ago, primarily due to an annual renewal after the end of a multi-year commitment entered into during the three months ended October 31, 2020 by a customer, partially offset by the impact of customers that migrated from a term license to a subscription service.

Previous wording

Services revenue increased by $8.0 million and $27.8 million during the three and nine months ended April 30, 2025, compared to the same periods 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.

Current wording

Services revenue increased by $12.7 million during the three months ended October 31, 2025, compared to the same period a year ago, due to higher utilization of services employees and new subscription implementation and migration projects.

Previous 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. Additionally, services revenue overall may continue to be impacted by contracts with lower average services billing rates and investments in customer implementations, including fixed fee or capped arrangements, to accelerate customer transition to the cloud. In these arrangements when a project extends longer than originally anticipated, the average billing rate we recognize may decrease, which can result in revenue adjustments and lower gross profit. 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.

Current wording

As we successfully leverage our SI partners to lead more implementations and migrations, we expect our services revenue could fluctuate between periods. Additionally, services revenue overall may continue to be impacted by contracts with lower average services billing rates and investments in customer implementations, including fixed fee or capped arrangements, to accelerate customer transition to the cloud. In these arrangements when a project extends longer than originally anticipated, the average billing rate we recognize may decrease, which can result in revenue adjustments and lower gross profit. 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.

Previous wording

Our cost of subscription and support revenue primarily consists of personnel costs for our cloud operations and technical support teams, cloud infrastructure costs, development of online training curriculum, amortization of intangible assets, and royalty fees paid to third parties. Our cost of license revenue primarily consists of development of online training curriculum, royalty fees paid to third parties, and amortization of intangible assets. Our cost of services revenue primarily consists of personnel costs for our professional service employees, third-party subcontractors or consultants, and travel costs. In instances where we have primary responsibility for the delivery of services, subcontractor fees are expensed as cost of services revenue. In each case, personnel costs include salaries, bonuses, benefits, and stock-based compensation.

Current wording

Our cost of subscription and support revenue primarily consists of personnel costs for our cloud operations and technical support teams, cloud infrastructure costs, development of online training curriculum, amortization of intangible assets, and royalty fees paid to third parties. Our cost of license revenue primarily consists of royalty fees paid to third parties, and amortization of intangible assets. Our cost of services revenue primarily consists of personnel costs for our professional service employees, third-party subcontractors or consultants, and travel costs. In instances where we have primary responsibility for the delivery of services, subcontractor fees are expensed as cost of services revenue. In each case, personnel costs include salaries, bonuses, benefits, and stock-based compensation.

Previous wording

Cost of subscription and support revenue during the three months ended April 30, 2025 increased by $6.2 million, compared to the same period a year ago, primarily due to increases in cloud infrastructure expense of $3.9 million from increased transaction volume on our cloud services, personnel costs of $2.5 million, and internal-use software amortization of $0.5 million, partially offset by a decrease in professional services of $0.6 million.

Current wording

Cost of subscription and support revenue during the three months ended October 31, 2025 increased by $9.9 million, compared to the same period a year ago, primarily due to increases in cloud infrastructure expense of $4.7 million from increased transaction volume on our cloud services, personnel costs of $3.1 million due to higher headcount, professional services of $1.1 million, royalties of $0.3 million, internal-use software amortization of $0.3 million, and amortization of intangible assets of $0.3 million primarily driven by intangible assets acquired during the quarter ended April 30, 2025.

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 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.

Current wording

As a result of efficiencies that we are seeing from our continuous investments in cloud operations and development efforts, we critically evaluate headcount additions, professional services contracts and third-party software costs, along with other investment opportunities. However, we expect the 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 $0.8 million decrease in our cost of license revenue during the nine months ended April 30, 2025, 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 $0.5 million and royalties of $0.3 million.

Current wording

The $0.2 million decrease in our cost of license revenue during the three months ended October 31, 2025, compared to the same period a year ago, was primarily due to a decrease in personnel costs of $0.3 million. Personnel costs associated with the development of online training curriculum are primarily focused on our cloud services, thus contributing to the decrease in cost of license revenue.

Previous wording

The $13.1 million increase in cost of services revenue during the nine months ended April 30, 2025, compared to the same period a year ago, was primarily due to increases in subcontractor expenses of $7.5 million due to implementations involving our SI partners, personnel costs of $5.7 million, and professional services of $0.3 million, partially offset by a decrease in travel costs of $0.4 million.

Current wording

The $8.9 million increase in cost of services revenue during the three months ended October 31, 2025, compared to the same period a year ago, was primarily due to increases in personnel costs of $6.9 million due to higher headcount, subcontractor expenses of $0.9 million due to implementations involving our SI partners, professional services of $0.5 million, travel expenses of $0.4 million, and web hosting expenses and software subscription costs of $0.3 million.

Previous wording

We had 591 cloud operations and technical support employees and 836 professional services employees at April 30, 2025, compared to 604 cloud operations and technical support employees and 750 professional services employees at April 30, 2024.

Current wording

We had 625 cloud operations and technical support employees and 909 professional services employees at October 31, 2025, compared to 563 cloud operations and technical support employees and 794 professional services employees at October 31, 2024.

Previous wording

Our gross profit increased $40.5 million during the three months ended April 30, 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.

Current wording

Our gross profit increased $51.1 million during the three months ended October 31, 2025, compared to the same period a year ago. Gross profit was primarily impacted by the increase in subscription and support gross profit due to the increase in subscription revenue and cloud operations efficiencies. Services contributed to the increased gross profit due to higher utilization of services employees and higher revenues from new subscription implementation and migration projects.

Previous wording

Our gross margin increased to 62% during the three months ended April 30, 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.

Current wording

Our gross margin increased to 63% during the three months ended October 31, 2025 from 60% 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 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.

Current wording

We expect subscription and support gross margin to continue to improve, though at a slower rate than in recent years, as we increase the number of cloud customers. We expect services gross margin will continue to improve as we gain additional efficiencies, but could fluctuate between periods based on the use of subcontractors to supplement our internal services team. We expect license gross profit to decline over time due to customers migrating from licenses to subscription services but can fluctuate quarter to quarter depending on the timing of renewals and license allocation from migration orders. 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

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. The largest components of our operating expenses are personnel costs for our employees and, to a lesser extent, professional services. In each case, personnel costs include salaries, bonuses, commissions, benefits, and stock-based compensation. We allocate overhead such as information technology infrastructure and software expenses, information security infrastructure and software expenses, and facilities expenses to all functional departments based on headcount. As such, these general overhead expenses are reflected in cost of revenue and each functional operating expense.

Current wording

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. The largest components of our operating expenses are personnel costs for our employees and, to a lesser extent, professional services. In each case, personnel costs include salaries, bonuses, commissions, benefits, and stock-based compensation.

Previous wording

The $6.8 million increase in research and development expenses during the three months ended April 30, 2025, compared to the same period a year ago, was primarily due to increases in personnel costs of $5.7 million associated with higher headcount, professional services of $0.5 million, and software subscription costs of $0.2 million.

Current wording

The $9.4 million increase in research and development expenses during the three months ended October 31, 2025, compared to the same period a year ago, was primarily due to increases in personnel costs of $6.7 million associated with higher headcount and headcount added through acquisitions, professional services of $1.5 million, web hosting expenses of $0.7 million, and travel expenses of $0.3 million.

Previous wording

Our research and development headcount was 1,204 at April 30, 2025, compared with 1,115 at April 30, 2024.

Current wording

Our research and development headcount was 1,279 at October 31, 2025, compared with 1,167 at October 31, 2024.

Previous 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.

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 as 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 $7.3 million increase in sales and marketing expenses during the three months ended April 30, 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 $4.8 million, marketing and advertising costs of $1.1 million, cloud hosting costs of $1.0 million, travel costs of $0.3 million, and software subscription costs of $0.2 million.

Current wording

The $12.8 million increase in sales and marketing expenses during the three months ended October 31, 2025, compared to the same period a year ago, was primarily due to increases in personnel costs of $6.9 million associated with higher headcount, which includes the impact of contract acquisition costs and stock-based compensation, marketing and advertising expenses of $3.5 million due to the timing of Connections, our annual customer conference, which was held in the second quarter of fiscal year 2025 and in the first quarter of fiscal year 2026, travel expenses of $2.5 million, and software subscription costs of $0.1 million, partially offset by a decrease in web hosting costs of $0.2 million.

Previous wording

Our sales and marketing headcount was 497 at April 30, 2025, compared with 475 at April 30, 2024.

Current wording

Our sales and marketing headcount was 534 at October 31, 2025, compared with 483 at October 31, 2024.

Previous wording

The $5.2 million increase in general and administrative expenses during the three months ended April 30, 2025, compared to the same period a year ago, was due to increases in personnel costs of $2.1 million, professional services cost of $2.1 million, travel costs of $0.5 million, and software subscription costs of $0.4 million.

Current wording

The $5.7 million increase in general and administrative expenses during the three months ended October 31, 2025, compared to the same period a year ago, was due to increases in personnel costs of $2.5 million driven by higher headcount, bad debt expenses of $1.3 million, professional services of $1.1 million, and travel expenses of $0.7 million.

Previous wording

Our general and administrative headcount was 468 at April 30, 2025, compared with 452 at April 30, 2024. General and administrative headcount includes facilities personnel whose expenses are allocated across all functional departments.

Current wording

Our general and administrative headcount was 481 at October 31, 2025, compared with 464 at October 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 and $11.4 million during the three and nine months ended April 30, 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.

Current wording

Interest income increased $1.0 million during the three months ended October 31, 2025 compared to the same periods a year ago, primarily due to the higher amount of funds available for investment from our October 2024 debt offering, partially offset by lower interest rates.

Previous 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. Our 2025 Convertible Senior Notes were partially retired in October and December 2024, and were fully settled on their maturity date of March 15, 2025. Interest expense also includes the amortization of issuance costs associated with our revolving credit agreement recognized on a straight-line basis.

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. Our 2025 Convertible Senior Notes were partially retired in October and December 2024, and were fully settled on their maturity date of March 15, 2025. Interest expense also includes commitment fees on our undrawn 2025 Credit Facility and 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 April 30, 2025 consists of stated interest of $2.4 million and non-cash interest expense of $1.1 million related to amortization of debt issuance costs. Interest expense for the three months ended April 30, 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.

Current wording

Interest expense for the three months ended October 31, 2025 consists of stated interest of $2.2 million, non-cash interest expense of $1.0 million related to amortization of debt issuance costs, and $0.2 million of commitment fees on our undrawn 2025 Credit Facility. 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 the amortization of debt issuance costs.

Previous wording

Other income (expense), net during the three months ended April 30, 2025 was income of $34.1 million, compared to expense of $6.5 million during the same period a year ago due to fluctuations in foreign currency exchange rates.

Current wording

Other income (expense), net during the three months ended October 31, 2025 was expense of $5.3 million, compared to expense of $4.1 million during the same period a year ago due to fluctuations in foreign currency exchange rates.

Previous wording

We recognized an income tax expense of $2.7 million and an income tax benefit of $8.6 million for the three months ended April 30, 2025 and 2024, respectively, and an income tax benefit of $9.4 million and $22.9 million for the nine months ended April 30, 2025 and 2024, respectively. The change in the income tax benefit (expense) recorded for the three months ended April 30, 2025, compared to the same period a year ago was primarily due to an increase in 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. The decrease in the amount of income tax benefit recorded for the nine months ended April 30, 2025, compared to the same period a year ago, was primarily due to an increase in income before taxes and 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.

Current wording

We recognized an income tax benefit of $6.8 million and an income tax benefit of $6.4 million for the three months ended October 31, 2025 and 2024, respectively. The change in income taxes recorded for the three months ended October 31, 2025, compared to the same period a year ago was primarily due to an increase in deductions from stock-based compensation, partially offset by an increase in income before taxes and non-deductible executive compensation and a decrease in the foreign derived intangible income deduction and research and development credits due to U.S. tax law changes under H.R. 1 enacted on July 4, 2025.

Previous wording

The effective tax rate of 6% for the three months ended April 30, 2025 differs from the statutory U.S. Federal income tax rate of 21% primarily due to the impact of tax deductions from stock-based compensation, research and development credits, and the FDII deduction, which were partially offset by non-deductible executive compensation.

Current wording

The effective tax rate of (28)% for the three months ended October 31, 2025 differs from the statutory U.S. Federal income tax rate of 21% primarily due to tax deductions for stock-based compensation and research and development credits, partially offset by state taxes and certain non-deductible expenses, including the limitation on executive compensation. During the three months ended October 31, 2024, the impact of tax deductions for stock based compensation on the effective tax rate was magnified by the near breakeven pretax income.