Good day, and welcome to the Guidewire First Quarter Fiscal 2014 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Karen Blasing, Chief Financial Officer. Please go ahead.

Good afternoon, and welcome to Guidewire Software's earnings conference call for the first quarter of fiscal 2014, which ended on October 31. This is Karen Blasing, Chief Financial Officer of Guidewire; and with me on the call is Marcus Ryu, Guidewire's Chief Executive Officer. A complete disclosure of our results can be found in our press release issued today, as well as in our related Form 8-K furnished to the SEC. To access the press release and the financial details, please see the Investor Relations section of our website at www.guidewire.com. As a reminder, today's call is being recorded and a replay will be available following the conclusion of the call. During today's call, we will make statements related to our business that may be considered forward-looking under federal securities laws. These statements reflect our views only as of today and should not be reflected upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. These risks are summarized in the press release that we issued today. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to our annual report on Form 10-K for the period ended July 31, 2013; our quarterly report on Form 10-Q for the period ended April 30, 2013; and our registration statement on Form S-3 filed with the SEC on October 21, 2013; each of which are on file with the SEC. Also, during the course of today's call, we will refer to certain non-GAAP financial measures. A reconciliation schedule showing GAAP versus non-GAAP results have been provided in our press release issued after the close of market today. Additionally, we are providing detailed reconciliation data, as well as recurring revenue calculations, in a supplement posted on our IR website at ir.guidewire.com. Finally, at times in our prepared comments or responses to your questions, we may offer incremental metrics to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that this additional detail may be one-time in nature, and we may or may not provide an update in the future. With that, let me turn the call over to Marcus for his prepared remarks, and then I will provide details regarding our financial results and our outlook.

Thanks, Karen. We are off to a solid start in fiscal 2014, with both revenue and profitability exceeding our expectations for the first quarter. Total revenue was $66.5 million, increased 5% from a year ago and exceeded our expectations on the license and services revenue lines. I would point out that our first quarter tends to be our lightest in revenue due to the seasonal pattern of our sales year and our anniversary billings, which happen each year. Year-over-year growth was also impacted by $5 million in nonrecurring catch-up revenue that we recognized in the first quarter of 2013. Excluding this amount, our first quarter revenue increased 14% from a year ago. While we continue to invest in our long-term growth across a number of sales and product initiatives, our revenue upside in the quarter fell to the bottom line, resulting in a non-GAAP operating loss that was $10 million better than our guidance. As always, we focus on generating recurring term license revenue from license and maintenance fees, and we measure our progress on this key metric on a rolling 4-quarter basis. At the end of the first quarter, this figure totaled $148.5 million, and it represents year-over-year growth of 29%. During Q1, we closed a number of notable transactions across all our product lines and in multiple geographies. I would like to share 2 examples of the deals that we closed. For example, Amerisure, a Michigan-based insurer writing workers' compensation and commercial insurance who has chosen ClaimCenter to be deployed across all their lines of business. Another quite significant win in the quarter was with Direct Line Group or DLG, one of the largest personalized insurers in the U.K. DLG has been -- had been a ClaimCenter customer since 2009 and they are now a full insurance suite…

Thank you, Marcus. We're pleased to report that our results for the first quarter exceeded our revenue and earnings expectations in what has historically been our seasonally weakest quarter. As we have discussed in the past and our historical results demonstrate, a significant portion of our term contracts were originally signed and have their annual anniversary of license and maintenance payments due in our fiscal fourth quarter. Total revenue was $66.5 million for the first quarter of fiscal 2014, a 5% increase from a year ago. As a reminder, revenue in the first quarter of 2013 included $5 million in catch-up revenue, representing final catch-up revenue from historic transactions. Excluding these catch-ups, total revenue increased 14% from a year ago. Looking at the details. License revenue of $18.9 million was down 9% compared to a year ago. Excluding $3.2 million in catch-up license revenue in the year-ago period, license revenue was up 7% from a year ago. In addition, we previously shared that our first quarter of FY '13 also benefited from 2 relatively large transactions that made Q1 a more challenging comparison for growth. Revenue in Q1 did not include the impact of DLG and Amerisure. While those deals were signed in Q1, the revenue will be recognized in Q2. Maintenance revenue, which is recognized ratably through the year, was $9.6 million for the first quarter, up 3% from a year ago and in line with expectations. Service revenue was $38 million, up 15% from a year ago, and it was primarily driven by an additional $4.4 million related to implementation of our software. This growth reflects a small number of contracts, where we are the lead contractor with the SI partners subcontracting to us. Geographically, the U.S. represented 56% of revenue in the first quarter with 44% of…

[Operator Instructions] And we'll go first to Sterling Auty with JPMorgan. Sterling P. Auty - JP Morgan Chase & Co, Research Division: So maybe you could start with, the services revenue came in better than anticipated. You mentioned the go-lives in the quarter. How do you manage the headcount as they roll off of those go-lives? Do they automatically roll into other projects? Do you keep them on the payroll and manage it, so maybe we get a little bit more of a gross margin hit for next quarter versus the investments that you talked about in Tier 1 Europe, et cetera?

Right. So no clear pattern on the transition of services personnel after a go-live for a couple of reasons. Sometimes the initial go-live is only one milestone in a much longer journey where there'll be multiple phases afterwards. It is frequently the case that our participation tapers over time and eventually crops to near 0 from whatever it might have been at the initial project. But there can often be a substantial tail from that go-live that doesn't make it a kind of a discontinuous event. Also, even in those cases where there's only one phase, there's often a meaningful tail of other activities that could go on at the customer. So the go-live is just one milestone. It's a very significant one. Obviously, the customer cares about it, but it doesn't show up in any evident pattern in services directly. Now I think your larger question is, how do we just manage utilization in a context where, by design, we don't want to stay at customers for longer than necessary? And that's just a question of managing the whole portfolio of existing customers and new, anticipated ones. Fortunately, as we have more engagement, more customers, more prospects, at least in principle, we should have -- that portfolio should get easier to manage. But the other challenge that sometimes confounds that, as we talked about in the prepared remarks, is that we have business in different parts of the world, new products and so forth. So that's a juggling act that we don't anticipate getting simpler any time soon. Sterling P. Auty - JP Morgan Chase & Co, Research Division: Okay, got you. And then one follow-up, you mentioned kind of the newer solution, especially on like the portal side, you've got a couple of customers. You anticipate more to come in the coming quarters. How are those deals structured? What kind of size are those deals? And what does the pipeline look like?

Structure-wise, they are software products, just like our core systems applications. They are generally -- they all require that you implemented one of our core applications first. But once you have, we have a very compelling value proposition for them. They're sold on a recurring term license basis and there's a per-premium charge, basis-point charge exactly same in structure to InsuranceSuite. In terms of overall pricing, they are some fraction, depending on the specific use case and the scope of the big core applications. None of them in themselves are as yet as big as the ClaimCenter, let alone a PolicyCenter. There's some portion of that But also the pricing is early. And with every one of our products, there's a pattern as more people adopted the price, we generally improve pricing over time. So those are all the factors, but structurally, exactly the same as our other products.

We'll go next to Brent Thill with UBS.

Marcus, if you could maybe just characterize the pipeline as you look at it today. I think you've mentioned there's some notable opportunities in Europe that you're seeing. If you can just give us a sense of any changes you're seeing in the sale cycles or the initial commitment and maybe just put it in the perspective versus kind of what you've seen over the last 6 months and how that's changed.

Sure. Well, it's always a complex picture with things on both side of the ledger, but some clear facts to -- that I hang my hat on when I think through the demand is our team is by far the busiest it's ever been. Our presales team is maxed out in customer engagements and evaluations, and that's pretty much true across all territories for us. So that's obviously good news in terms of the level of demand and engagement we're getting. I think that our visibility, our credential or just general stature in Europe has increased significantly over the last year, and that's partly from investments, partly from some go-lives, partly from team and leadership. So that's all been very encouraging. And we have -- we're certainly in a lot of discussions with some very big insurers as is essential for our business model and for it to be the case. So all that's constructive, as well as new -- a lot of other conversations that go along with the newer products, right? There's discussions around live, around data management, around portals, and each of these are new dimensions of the conversations than we've had before. So those are all positives. On the other side, of course, the sales cycles have not gotten marketedly easier. They're as demanding as ever. I think overall industry economic conditions are no better or worse than they've been. But the same -- overall, the insurance industry kind of reflects the overall macro economy, and it's not a time of fantastic abundance for insurers. So they look at these capital investments very carefully, and the sales cycle remain just as arduous even as our credentials have improved steadily over time.

Okay. Just a quick follow-up on the sales process. In Q1, you had a number of companies usually used as an opportunity to realign. Any major changes? Obviously, the addition of Scott, is there anything that you're looking at in terms of the go-to-market, the changes? Or is it more the same?

It's more evolutionary than revolutionary. Scott is a great add to the team. He just -- it doesn't actually change my degree of commitment to the customer engagement. It just increases the bandwidth that we have this kind of principle-to-principle connections that are still important for our kind of strategic sale. We're steadily adding to the team pretty much across all functions. We need new competencies, especially talk about the data and BI domains that, in a way, is adjacent but different from what we do with the core systems. So the steady increases in investments in the team to cover the demands and to meet our growth targets.

And next, we'll go to Nandan Amladi with Deutsche Bank.

Question on the services mix, touching on Sterling's question, I think. Are -- the level of services increase that you're expecting for the specific focus areas you talked about, is that much more than you were expecting at the beginning of the year? And how long does it stay that way?

Yes -- no, it's relatively the same. And as we really talked about on the fourth quarter earnings announcement as well, we've put an awful lot of investments into Europe in the sales and marketing team there. So it behooves us to ensure that we've got the right consulting services model there as well to support Keith and his team as they work that pipeline and work to close the deals. The same thing, really, with the data management and portal products, so we are putting engineering dollars and efforts toward that. It's in our best interest and I think at our customers' best interest as well to insure that we have a consulting team that's experts in those products and that they get launched very successfully. So it's very much of a continuation down the exact same strategic path.

And Nandan, one thing I'll add to that is it's always been an operating principle with us that we don't want to have license sales ever gated by our ability to implement. And as we increase the product portfolio, we want to be sure, especially with the newer ones, that we're not the constraints on adoption in any way, that doesn't require us to have some capacity -- to invest in some capacity to make sure that we can meet the demand that we're trying to generate. So that's another -- just another parameter that we have to think about in managing the overall services team. But we do expect newer products to follow the same trajectory, the same kind of curve of involvement that we have with ClaimCenter, PolicyCenter, et cetera. We're more involved in the beginning and then as -- and then partners build the credentials and the capabilities to do that, to do more and more of the work over time.

And a quick follow-up, if I might. You mentioned the 12 initial go-lives in the quarter, including 4 policy, that was half as many as you did in all of fiscal '13. Should we expect a similar trajectory for the remainder of the year?

I don't have it at my fingertips. Yes, I don't have it at my fingertips but I think we would certainly have more go-lives this year than we did last year. That's the certainty. And there was a little bit of a clustering, I think, that happened that -- that happened in the quarter and these included some very substantial, major projects. I didn't itemize a lot of them by name, but including a couple of big suite projects, big PolicyCenter projects in other countries as well that were extremely important for us. So they're great proof points -- essential proof points, I think, to compel the market to -- that it's safe to go in the water much more important than anything else we do in marketing; and I think that trajectory remains, by far, our biggest differentiator.

And we'll go next to Tom Roderick with Stifel. Tom M. Roderick - Stifel, Nicolaus & Co., Inc., Research Division: So maybe I could follow up on Brent's question about the pipeline, and maybe rather than sort of qualitative question about it, can you walk us through, Marcus -- I mean, you've been serving as Head of Sales now and congratulations for being able to take that hat off for now. But can you talk us through what you'd seen, particularly some of your larger Tier 1, even Tier 2 deals that are working their way to the pipeline? Are you seeing, as you go through policy deployments or policy engagements, that there are long proof of concepts or long pilots that are in place? Does that change if you're working with the key systems integrator like a PwC or like a Capgemini? Maybe just kind of take us through the process of when you get engaged on the policy potential project and how long that can take to convert, particularly as you're looking at Tier 1 opportunities.

Sure. So as I think we've discussed before, there's -- broadly speaking, there are 2 phases to our sales cycle, right? There's a long process of deliberation about whether or not the company -- the customer, that is, is ready to make a large capital investment for core system and business transformation. And then there is a period of getting very serious in due diligence, evaluation, negotiation, et cetera. And the latter part -- the second phase is sort of a maximum compressibility on it. It still takes something like a year for a company even once they're serious to go through all of those steps to their full satisfaction for governance and care. And that's certainly -- and that's, broadly speaking, true almost regardless of the size of customer. Because this is just as strategic a project to a $400 million insurer as it is to a $4 billion to a $10 billion insurers. It's a similar strategic import to the decision-maker in each of those cases, and they're going to go through those steps, in many cases, requiring us to prove things that we've already sometimes dozens or hundreds of times before, but that's just what's at stake. There is always, almost always, some form of proof of concept. There is almost never a pilot. Though when a project goes live, there will be a pilot period but that's just a rollout factor. But in terms of making the decision to implement the software, that's going to be a substantial chunk with capital investment and a big team to get it done on the customer side, and so there's a proof of concept that precedes that but once they do the project, it is going to be for a big chunk of business. That's the only way it…

Certainly, Tom. So on -- your question on the handicapping of the Tier 1s, of course, we handicap them. There are 2 significance, both in the timing of them and ultimately, how much the Tier 1 decides to purchase at any one time, whether they go for a full enterprise or they buy -- the full enterprise with all products or whether they would go for a single line of business with a single product. And often that decision gets made at the board level with very senior people as those Tier 1 carriers, really, at the last minute. So we'd be kind of -- we'd be foolish on our side to count on those in our guidance numbers when they really do have that character to them. So our guidance actually, and our handicapping system really just kind of reflects that customer base. Then you did ask about -- we do seasonally expect a lot of our license revenue to be completed in the fourth quarter. Now it's built on a very large, existing customer base of customers who first signed their contracts in our fourth quarter and whose anniversary dates for their fees is in that fourth quarter as well. So the fourth quarter has a big base in it already, which gives us tremendous visibility because we know with certainty when we're expecting to invoice those customers. Now on top of that, we are in very close contact with our sales team. We have meetings with them every other week and discuss the character and nature of the contracts, nature of the customers that they are bringing through the sales cycle, what's in the forecast, what's in their pipeline and their expected time to close with it as well. So we keep an active management and a very active dialogue going with the sales team. So -- but the close proximity that we have to the sales team, I think, adds to that visibility as well to those fourth quarter achievements.

We'll go next to Walter Pritchard with Citi.

Karen, just wondering on the guidance. If I look at your Q1 performance on services in your Q2 guidance at the midpoint, your annual guidance basically suggests that your services revenue for the second half of the year will decline, which is pretty different than what we've seen in the last, say, 2 or 3 years. And I'm just wondering, is it truly that you do expect by that point that you'll have offloaded more of that services business? Or is there an element of conservatism built into that second half decline?

There's a little bit of handicapping that goes into our service projects as well. Clearly, our service projects are long in nature, lasting several quarters and sometimes even a couple of years or so. But we do have a natural roll-off when those projects end and before new projects are started. So clearly, our fourth quarter would be handicapped even for service projects on that side. And there is some seasonality associated with our services. We don't bill on an 8-hour day. We bill on a professional billing day. And in the second quarter, with Thanksgiving and Christmas, Hanukkah and New Year's all happening between November and the end of January, we don't have as many professional billing days there. So typically, there's a seasonal factor that affects our services revenue as well.

Got it. And then just on the secondary proceeds, any more commentary around, I mean, it would seem like acquisitions to be the obvious use there, given you have plenty of cash in the bank prior to raising the money. Can you talk about what you may be -- your earnout [ph] -- what you may be looking for in the M&A front that's sort of how you're thinking about using that cash?

Sure. Nothing concrete to share yet, obviously, or we would have spoken to it in the prepared remarks. But we are -- we're absolutely thinking about all our growth options. We've -- it's always been our thesis that if we win the core system game and become the market share leader, industry leader in our core business, that we're going to have lots of interesting options to build upon that. And sometimes, that route is best achieved through acquisition. However, as we said during the transaction marketing, we're also thinking about internal growth initiatives as well. We don't want to be constrained only to think about acquisition as an option. And so there are some interesting possibilities there that are also under evaluation. And the nature of our software is a substantial enterprise software, and that's not built overnight. So we're talking about a substantial capital investment over -- sometimes could be a multiyear horizon to really go after the biggest opportunities, and we want to think seriously about those while being mindful, of course, on the impact in our financial model. But we are trying to play the long game here to build a real global industry-leading company in our chosen market, and that requires a longer horizon. But -- so very much in evaluation mode, nothing yet to share, but I think we will, at some point, over the coming quarters.

We'll go next to Brendan Barnicle with Pacific Crest Securities.

Karen, we saw rolling fourth quarter recurring revenue decelerate against an easier comp a year ago. Can you remind us what all the puts and takes are that go into what's happening with growth on that piece of the business?

Yes. So the one catch-up revenue in the first quarter of fiscal year '13, obviously, rolled off because fourth quarter now includes Q2 fiscal '13 through Q1. So that catch-up revenue was included in the sequential quarters before that as one factor. But it's -- and additionally, it's -- so that, obviously Brendan, that's probably the biggest factor associated with even just the small decline. I think it went down 31% to 29% on a rolling 4-quarter basis.

And so since we don't have as much of the catch-up revenue, is the 20% range the right way for us to be thinking about that rolling 4-quarter revenue going forward?

Yes, absolutely.

Okay. And then, Marcus, you mentioned some about the progress you guys are making on the BI and the data work in those new products. I don't remember if I heard you discuss it or not. But what's the channel plan for implementing or distributing those products and integrating those products?

No, it's the same direct sales force. We're talking about Guidewire, I want to distinguish Guidewire data management from Guidewire Live, right? Data management is on-premise BI enterprise data warehouse. Guidewire Live is our SaaS-based data visualization tools. Both of them sold by our direct sales force. In the case of Live, there's no implementation, so they're kind of instant on or near instant on. In the case of data management, there is implementation effort. So of course, we expect significantly -- this -- only a fraction of what the core systems themselves take to implement.

That's actually what I was asking about. Are E&Y and your other partners ramping up on that as quickly as they are on the other products?

Well, I think they all certainly see the opportunity and they've all asked a lot about it. I think their general modus operandi is to see demand before they do a lot of prospective investments or they actually kind of differ in their appetite for that prospective investment; some are more entrepreneurial than others. And I think the whole theme of data and -- of much richer data structured -- capture of data -- of structured data, mining it for analytic insights, operational insights. These are at the absolute top of every sea-level executive agenda and almost every insurer we talk to. So the SIs certainly want to play in that demand. It's also complex base [ph] though, and so they're -- they have a lot of investments to make beyond just Guidewire so...

And we have no additional questions in our queue at this time. I would like to turn the call back over to Mr. Ryu for any additional or closing remarks.

No other remarks. Thank you all for participating in our call today and goodbye.

And that does conclude today's call. Thank you all for your participation.