Good day and welcome to the Guidewire Fourth Quarter Fiscal 2015 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Richard Hart, Chief Financial Officer. Please go ahead.

Good afternoon and welcome to Guidewire Software’s earnings conference call for the fourth quarter and fiscal year 2015 which ended on July 31. My name is Richard Hart, I am the 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 maybe 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, 2014 and our subsequent quarterly reports on Form 10-Q, which are also 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 has 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 on our fourth quarter and fiscal year financial results and our outlook for Q1 and fiscal year 2016.

Thanks, Richard. We started the year with several straightforward objectives to widen the distance between us and our competitors and product capability and implementation success, to mature and drive the adoption of our newer offerings outside of InsuranceSuite and to expand our customer community, including cementing our emerging leadership position with the largest insurers worldwide. Our fourth quarter results exceeded our expectations for both revenue and profitability and featured progress on all of these dimensions. We signed 12 new customers during the quarter, including several large carriers and a number of Tier 1 insurers ahead of the goal we presented on last quarter’s call. In addition, we made great progress ramping the adoption of our newer products. Measuring our overall market progress at year end, we report that our customers in aggregate have $289 billion of their direct written premiums under license, an increase of 11% from $260 billion at the end of fiscal 2014. This metric counts our customer’s premiums only once even if they license more than one of our core applications and it also reflects only a portion of their total enterprise premiums, especially for larger customers. Consequently, we draw equal encouragement from both the leading share of industry represented by our customer base and the considerable opportunity we have before us in the $2 trillion industry we serve. Reflecting our emphasis on recurring revenue, we attract trailing 12-month term license and maintenance revenue as a metric since the company went public. For Q4, this metric grew 21% to $219 million. It’s worth noting that since we focused on term licenses as our preferred model and since perpetual licenses have decreased from 23% of license revenue in fiscal ‘12 to 5% of license revenue in fiscal ‘15, we expect maintenance revenue growth to continue to lag term…

Thanks, Marcus. We delivered a strong performance in the fourth quarter, exceeding our revenue and earnings expectations. Total revenue in the quarter was $125.9 million, of which license revenue was $73.4 million, above our guidance range of $67.2 million to $71.2 million. Within license revenue, term license was $68.6 million for the quarter, an increase of 16% from a year ago. And perpetual license came in at $4.8 million, a 27% decline from the year ago period. Maintenance revenue was $13.2 million for the quarter, up 10% from a year ago reflecting the back end waiting of new license and maintenance activity in the fourth quarter. Services revenue was $39.4 million, down 3% from a year ago as our strategic partner engagement model with SIs continued to gain momentum. For the fiscal year, total revenue was $380.5 million, of which license revenue totaled $179.2 million above our guidance range of $173 million to $177 million. Within license revenue, term license revenue was $169.4 million, up 21% from fiscal year 2014. And perpetual license revenue declined 18% to $9.8 million, which as I have stated is in line with our focus on reducing perpetual license over time. Maintenance revenue grew to $50 million from fiscal 2015, up 19% year-over-year. Recurring revenue comprising term license and maintenance revenue totaled $219.4 million in fiscal 2015, up 21% from a year ago. Such growth would not have been – would have been in excess of 24% had the adverse impact of foreign exchange not reduced growth by over 300 basis points. We typically discuss recurring revenue on a rolling four quarter basis as a way to underscore the steady growth of recurring revenues, a trend that we believe may at times be difficult to discern due to the seasonal variability of our quarterly revenues.…

Thank you. [Operator Instructions] Our first question is from Walter Pritchard from Citigroup. Please go ahead.

Hey, guys. It’s actually Ken Wong in for Walter. Well, I guess first off, on the Tier 1 customers, five signings, that’s pretty impressive since you guys were expecting three. I guess, how should we think about, I mean, you guys talked about the deals here ramping up and getting bigger, is that something that we should expect to be pretty linear over the course of the next few years? And then is there – are there situations where it could possibly be lumpy in terms of quarter-to-quarter, we see some of the license activity pop up? That maybe first that and then I have got a follow-up.

Thanks, Ken. The way to think about those ramp transactions, again, reminding you that they really apply only a portion of the time and only to the very largest transactions, typically with the largest customers that we have, is to – is indeed to think of them linearly. They typically would involve an increase kind of monotonically upwards year after year getting to an exit rate, which would then be the basis for future renewals into the next contract period. So, they are not lumpy and certainly not quarter-to-quarter, because all of our term license agreements are structured on a -- typically on a single payment per year basis.

Got it. And those contracts, would they still be subject to sort of a percent of the direct written premium that’s under license or is there some prearranged kind of uptick in terms of the current starting point?

Best to think of them as being a pre-negotiated amount that would increase over that period of time for a defined scope of initial license. It’s entirely possible that a customer could choose to license additionally in the other lines of business that were not originally in that first contract scope in which case you would have a layering effect potentially of multiple contracts on to each other, and we have had plenty of examples of that with other customers in the past. But with respect to an individual contract, they would be largely dialed in for the contract period, typically five years.

Got it. Got it. And then Richard, as we think about some of the spending next year and it looks like that will – I guess, first, what are your gross margin expectations heading into next year? Should those continue to trend up or is there going to be a drag? I mean, for example, Q4, we did see a bit of a drag from services, but overall, how should we think about it for ‘16?

Yes, I think that you should model a growth in gross margin commensurate with the mix shift in services and license revenue. And I think that right now what we are projecting is gross margins of up 2 points to about 68%.

Got it. So, I guess that would put OpEx at roughly high-teens growth by my math. Is it fair to assume that most of that is going to R&D since that sounded to be kind of the core focus of what you were discussing earlier, Marcus?

Yes, I think R&D will continue to be an area of focus for us for investments in 2016.

Would you expect that, that would be kind of the outsized uptick from the growth in OpEx here?

Yes, I think if you think of R&D investments as a percentage of revenue on kind of a curve, I think 2016 will be the height of that curve. I think you are going to see as a percentage of revenue, R&D will start declining again after 2016.

Okay, perfect. Thanks a lot, Richard. I will pass for the time.

And we will move on to Justin Furby from William Blair & Company. Please go ahead, sir.

Hey, guys. Thanks and congrats. Few questions. First, I wanted to – it seems like you guys have enough plenty of cross-sell opportunity to feed that beast for a while, but Marcus, I just want to touch on Tier 1 pipeline entering fiscal ‘16. You obviously just closed five of them, including the largest one here in the U.S. market. I am just wondering how you feel about pipeline going forward within these new Tier 1s. And just remind us, I guess how many of them are out there globally, how many Tier 1s and what’s your penetration rate today and what do you think it could be longer term? Sorry, multipart question.

Sure. I will take the latter parts of your question first, Justin. Globally, we count about 50 to 60 Tier 1 customers. There is a little bit of variance in the number because of definition of the boundaries of a carrier can be a little bit tricky when you have multinational carrier groups, but think of it as 50 to 60 in the universe. And of those naturally were most penetrated here in the U.S., where we have roughly half of half of that number and then a couple of significant ones in other countries like Sompo Japan now, Tokio Marine, and a few others in the UK and Australia. So, these conversations all take a long time to evolve into a final consummated contract. And there were sort of a clustering of unusually large number of them in the Q4 of the year, but many of these other dialogs continue onward. And we think that we have validated our relevance and our fitness to serve to the largest insurers anywhere in the world. So, we feel optimistic about a lot of other ones still to come. Equally important is of course that we deliver and evolve the relationships that we have as you have noted.

Right. And on those five deals from the quarter, Richard, I appreciate the commentary on how they ramp, but is there any way to actually quantify Q4 impact if you sort of normalized for that? And I guess I am wondering, if you look at your guidance for fiscal ‘16 presumably you get some degree of step up in your invoice. Does that give you, in theory, more visibility into your outlook this year as you get that or what’s the right way to think about it?

So, I guess there are a couple of things to note. One is amplifying on Marcus’ description. If you look broadly at the ramp transactions this year, what you would note is that there is a linear dynamic, except in year three, where you actually have a relatively significant bump. And I think part of that is the recognition that some of these longer deployment cycles have some milestones associated with year two. Now, all of these were different. There is no real consistent methodology. They are all very deal specific. But if you look at them in aggregate, you would see that kind of dynamic. Two, it’s very difficult to try to understand what the ultimate impact was on term license this year. If you look at it out five years for example and you look at the delta between what we can recognize this year and what we can recognize at the end state, then the delta is approximately $10 million to $12 million. Now, that would assume that you could license those contracts linearly at the initial outset at the same – the onset as we can with most of our other contracts. And that’s an assumption that I am happy to make, but it’s still an assumption, but that’s the delta between the beginning and the end of these contracts on an annual basis. The other thing you asked – I am sorry, Justin, I think you asked three questions there. There was another one embedded in there. Oh, in terms of guidance for next year, is that what you were asking?

Yes, yes, visibility.

Yes. So, I think the visibility is actually – we get a little bit of a tailwind, but it’s relatively modest, because this is a very small percentage of the size of the annual base that comes in every year. So, I wouldn’t count on that increased visibility too much on top of the great visibility we already have, right? So, simply because in light of our model, you have to always consider that the beginning of the year we already have visibility as to 75% to 80% of the license stream that’s coming into the end of the year.

Okay, great. And then just one last one if I may on the data side of things, we are now couple of years, post Millbrook and it sounds like you are now double-digit percentage of bookings as data and some of the newer initiatives. Marcus, I was just curious to get kind of your longer term view of the TAM in that segment. And I have heard you talk about $1 billion plus of license revenue longer term and I am wondering what you think data could be as part of that mix over time?

The data is not one product. It’s a whole frontier of possibilities that range from basic claims like providing better operational visibility into core data and obviously better virtualization of that to much deeper statistical mining for predictive insights to really sort of next generation concepts that we are trying to pioneer with Guidewire Live where you have syndication across enterprises and with other external data sources to yield a completely different category of insights than you could get just from your own enterprise data. So, these are all possibilities. Some of them are more – are easier to define and are more like preexisting software categories. Others are more adventurous or speculative out there. And it’s – so guessing exactly the size of the market would be, for all of them in aggregate, isn’t necessarily a little bit speculative. I can tell you that as you would expect, every insurer of every size has a fundamental need for greater operational data visibility and as the data industry, insurers care passionately about getting higher quality data and using it for insights at every stage of the process. So, we see pretty much an unending frontier of product possibilities both for the products we have already designated as well as completely new categories, which is why we have designated a separate team, quite distinct from the core system team, that’s now just exploring multiple of these opportunities and we see it as a really significant growth vector for the company.

Got it. Thanks, guys. Congrats on a nice quarter.

Thanks.

And we’ll move on to Nandan Amladi from Deutsche Bank.

Hi, good afternoon. Thanks for taking my question. So Marcus, last year, I think at the Analyst Day, you have shown a chart on your land and expand team, and if I recall right, roughly with the same customers that you had if you didn’t add any new customers, you still had about 2.5 times potential to sell. So, you are roughly 40%ish penetrated. First of all, is that number right? And what was it at the end of this year?

I apologize, Nandan, I understand your question. I apologize for not having the exactly that down to the digit updated version of that figure, though we will certainly provide that at our Analyst Day, but it will be directionally very similar to what we had last year. And in fact precisely because of the larger deals that we signed that in aggregate a relatively modest portion, actually, quite a small portion of the total licensable opportunity there. That figure should actually increase, i.e., the percentage of our total licensed opportunity within our customer base should actually decrease year-over-year. I just couldn’t give you the exact number right now.

Yes, I know that’s fair. And then on the hiring of targets for the year, it looks like you added about half of the new headcount in professional services. So, is the next wave of hiring exclusively focused on R&D because that’s sort of the plan at the beginning of fiscal ‘15 as well?

So, Nandan, I guess, I just want to make sure that it’s clear that we hired significantly more R&D folks this year than we hired professional services consultants. We anticipate that the mix of hiring will actually weigh even more heavily towards R&D next year.

Okay. And then one last question actually refers to an earlier question on this call. Richard, I think you said the R&D as a percentage of revenue will likely peak at fiscal ‘16 and that as a percentage maybe downtick a bit. But I am assuming that still means that on a dollar basis, you will continue to add R&D stock?

Yes, absolutely. I think right now, our plan is to add approximately just kind of round numbers, 100 technical people into the organization. I will say that as we bring up Dublin and we think about other offshore development centers, you will see us equalizing our hiring outside of the U.S. and in the U.S. so that will bring the percentages, which are currently about two-thirds in the U.S. – three-quarters in the U.S. and a quarter abroad a little bit more in line with kind of the two-thirds and one-third split, which will actually decrease some of the R&D costs in the model, but having said that, you should consider R&D coming and kind of reaching approximately 25% of total revenue next year.

Okay, thank you.

And we will take Brent Thill from UBS. Please go ahead, sir.

Good afternoon. Marcus, this year, you corralled all five Tier 1s in Q4. And I am curious when you look at the new Tier 1s in your pipeline, do you expect ‘16 to be that back end loaded again or do you think that this year is a little more linear when you look at the new customer signings?

It’s hard to call, Brent. I mean, if you were to look at my production at the beginning of 12 months ago about where I thought the year would fall, it definitely ended up substantially more back-end loaded in the customer signings than I either would have expected or liked. So, I am hesitant to be specific about the year ahead. I can tell you that we have many dialogues that have been underway for a long time that are still underway that as far as our customer base is concerned, they don’t really care whether it’s Q1 or Q4. They are doing their evaluation cycle. It was somewhat coincidental that a number clustered in the quarter, which is why we felt obliged to give a little bit more visibility about that count in last earnings call than we normally would. I think we will have a better sense of that as always as the year progresses, but I can tell you the important point is that we are – we think we are very relevant and very engaged with the biggest insurers in the world on their most strategic issues and the fact we were able to get some household names into our customer community I think is the best validation of that.

Just on the five wins in Q4, there seems to be some varying levels discussion among your investors about what actually closed. And I think you – I just want to clarify that you said the average penetration is less than 5% on those wins. Is that – was that what you are commenting on just those five or can you maybe provide a little more color about what was involved in this tranche one?

Yes, let me elaborate on that assertion as saying that if you look at those five customers as enterprises and you imagine the total pie charts to be them licensing all of InsuranceSuite as well as data management in our portal products at historical pricing that would be the 100% of the full pie. And of that pie, 5% was represented by the current agreements that we have. And then on top of that, you have to use our commentary about some funds as a ramped license structure that results in a few years of lapsing before we reach the end state run-rate recurring term license amount that is due to us just for those contracts already executed. I hope that’s all clear.

Yes, it is. One quick follow-up for Richard, 18% roughly operating margins in the last four years, you are guiding operating margins below that range. We understand you had a good head on overachieving your guide, but when you think about this year, it sounds like it’s another big R&D hiring year. I was surprised that only 12% of your headcounts were in sales and marketing and it sounds like you are going to continue to stay R&D heavy. But kind of when you leave and I know you are not giving guidance for the year out, we are not asking for that, but when you start to think about leveraging this model, it certainly feels like even at a ceiling of 18 – your view long-term still is a belief that this is a way more profitable business than an 18% ceiling?

Absolutely, absolutely. I mean, there is absolutely no reason why we cannot accommodate a margin structure that is typical for mature vertical companies. And in those structures, the R&D is much more muted than where it is today and where it’s going in fiscal year ‘16. But at the end of the day, right now, we are sensing a great deal of demand for new innovation from our target market and I think we are in a position that we can manage to deliver that kind of innovation and I think it’s something that we should do. So, these investments are purposeful, I think they are well thought out and they are reflective of customer demand.

Thanks for the help.

And we will move on to Sterling Auty from JPMorgan.

Thanks. Hi, guys. Marcus, you have often commented about the hyper-competitiveness that’s in the market, but I can’t help notice that within the Tier 1 wins includes policy wins at customers that I would think would have been anchored tenants of some of your biggest competitors. Can you kind of highlight how these wins came about and what it suggests about the competitive landscape?

I appreciate the question, Sterling. That is the case that in each of these very large customers, you are trying to find an incredibly complex enterprise IT landscape, where they have relationships with every technology company under the sun and in many cases every software company that serves the P&C industry. And all of them, of course, are competing for the opportunity, some more credibly than others. I think you are familiar with our roster of competitors and you can be sure that those that are active in the U.S. were in heavy pursuit of each of these deals as well. Qualitatively, I will say that we do best the larger the customer is, the larger the insurer the more they care about extremely highly engineered software that can perform at very, very large production volumes and those are areas where we have particularly strong credentials to demonstrate. And they also care a great deal about what their peer group is doing. And so, momentum within this segment is a pretty important factor for each of them to consider as when they go through their own selection process. So, all of that’s been into the positive. That said we still face a very competitive landscape. And as you get to the sort of Tier 3 and Tier 4 insurers and as you move away from the English speaking world, you find that we compete with a whole host of small, often smaller, often regional-only competitors that can be very challenging to compete with, because they have local knowledge and sometimes much greater contractual flexibility than we do and the like. So, if you were to pick a total pie chart of all the questions and decisions being made in the global industry, you would see us winning a majority of them and you would also see all lots of other little wedges of companies that you may not be familiar with that are specific to different segments that where they were able to score one or two some small single-digit number of wins against us. And that’s pretty much been the competitive landscape for the last few years and it will probably be the case next year as well.

When you look at the comments you made about signing master license agreements, I am just curious within these large wins, are they contractually obligated to continue to rollout or how much is dependent on success of each stage? And if you are successful, do they kind of automatically lock you in to winning the next round. So in other words, what’s the visibility on driving that 5% penetration to a much higher level in the coming years?

There is a bit of variance from contract to contract, but some of them work exactly as you described where unless there was something that would be – something would go egregiously wrong with the project in a way that has never happened in the Guidewire project before, they would be the expectation in some places the commercial commitment to expand the relationship. And as you can imagine, these are all very negotiated contracts and they are trade-offs that we base between volume discounts and upfront commitment versus more delayed commitments and the like. And we juggle all of those factors to ensure that we are really preserving the value of the customer relationship while acknowledging their need to see proof and validation in their enterprise over time, but we are very protective of the value of our software as well as the precedence that we set. And we are very confident in our ability both to make the project successful and to expand the relationship. If you were to look across the entire universe of our customers, you would see not only have we delivered to all of them and kept those relationships intact and renewed to the tune of 100%, but those relationships tend to expand over time to additional products and additional use of the products they license and we very much bet on that and expect that in these new relationships as well.

Last quick housekeeping question, Richard, in the big deals that were signed are all of these annual payments or is any percentage of them actually more quarterly type of payment contract structures?

So, if you look at our base overall and as you may likely know, Sterling, we have kind of 80% of our deals are annual payment deals and about 20% are quarterly payment deals kind of broad numbers. In each particular case, in the deals we are talking about all of them are annual deals.

Great. Thank you, guys.

Thanks.

And we will move on to Tom Roderick from Stifel. Please go ahead.

Hey, gentlemen. Good afternoon. Marcus, I wanted to see if you could provide just a little bit more detail. I know you have been getting questions for a long time on a handful of these big customers. You have announced State Farm and Chubb, which are two of the biggest here in the U.S. Of course, State Farm is way up there. Can you provide anymore detail with respect – and I am sorry, if I missed it, but with respect to what it is that they are committing to today in terms of products or interest level? And then I have a follow-up behind that, but I would love to hear anything else you can add about those two carriers particularly?

Yes. So, both of those relationships were for PolicyCenter. PolicyCenter and a couple of the sort of the ancillary modules that go along with PolicyCenter our rating and some cases reinsurance or client data management, but not for the other two big applications in InsuranceSuite, namely ClaimCenter and BillingCenter. In both cases, actually, in all of the cases, on all five of those relationships, we did not structure a full enterprise license commitment across all lines of business. That’s important to understand. And that’s also what you would expect from the 5% figure that we have been discussing already on the call. So, we are talking about one or more lines of business for PolicyCenter has been the scope. But also as mentioned in the commentary, every one of them, I believe, given the valuation of the full platform and more or less all the products that we have, very much with the mind of making an enterprise level decision process or platform going forward. And how that ultimately translated into commercial contracts and then what portion of that was visible in the quarters – in the periods, revenue, which was kind of variable across each of the five of them, but that was the spirit in which all of those relationships and indeed all the customer relationships we signed for the year were undertaken.

Wonderful. That’s great deal and that’s great detail. So, maybe just a little follow-on behind the selection process and I think Sterling asked you about the competitive landscape. I presume that all of these Tier 1s have had a long sales cycle, but also some level of proof of concept that has gone on for a while. If you can speak to some of these larger U.S. carriers and the two I just asked about, Farmers is another good example? How long were those in proof-of-concepts? I guess, I gather that probably looking at multiple lines in those proof-of-concepts, but within the environment that they were testing in and transitioning into, how long have those been going on? And what does that proof-of-concept pipeline look like as you head into 2016 here with other Tier 1s?

Sure. So, the proof-of-concept pipeline is actually not that materially different for a big insurer versus a smaller one. Typical of proof-of-concept structure will last between three to maybe eight weeks on the outside of work, because even for a large insurer, you can generally validate what you are trying to prove. The complexity with the larger insurer is that you may have to do multiple proof-of-concepts for different segments of their business, personal versus commercial versus specialty versus international and so forth where they will feel that their requirements are diverse enough and the business constituents are disparate enough that they will want to do those separately at the moment they are ready to make a decision. That’s fairly typical. So – and even a medium sized insurer will also care very passionately about de-risking the project and we will ultimately want to do a proof-of-concept of some form. So, that’s not really a fundamental difference. But as you guess, all of them did involve very, very thorough evaluations and they typically take a bit longer in order to coalesce institutional decision to act, because they have to be sure that they are not fragmenting their technology decisions. Maybe 10 or 15 years ago, they were more sanguine about potentially adopting off the different technology for different subsidiaries. These days, there is much more of a desire to rationalize, standardize and simplify their core system decisions, which if we do our job right, is a trend that we should be a beneficiary of. To the other part of your question, Tom, about level of activity, I think we are going to be characteristically coy and say we are in a lot of conversations, we are in a lot of POCs that are underway right now that are the basis as always of making a judgment about the year. The challenge for us and this is coming to play out this year in the fourth quarter is translating, but can feel like a great deal of progress and a deal of even high degree of confidence – or very high degree of confidence in a selection and a contract into the actual reporting financial outcome based on the shape of the final deal and how much of that’s recognizable in the first period. That’s always the challenge. And what you see Richard and I do is take kind of the portfolio approach that the balances weighted probabilities to try to come up with a cautious guidance that we feel very confident of delivering on.

That’s great. Very helpful detail. I appreciate it.

And we will move on to Brendan Barnicle from Pacific Crest Securities. Please go ahead.

Thanks so much. Marcus, the services business was down about 3% last year. Your guidance implies about 3% this year. Is that the right trajectory to think of how that business sort of fades as you outsourced more of it? And is there a baseline below which you don’t see that you can go where you always have to have a certain amount of your own people involved? It means that the business stays at sort of the certain level?

Yes. So, there is a bit of quarterly variance. And so I don’t want to put too much talk in any kind of quarter-to-quarter movement, because of course the utilization of our people is highly contingent on which projects are starting, which ones are rolling off and the timing effects and the like, but absolutely, as a trend, as a percentage of revenue of services, we expect a decline. Now, there is a floor, because as I said in my prepared comments, it’s absolutely vital and we are insistent on this in the sales process that we play a strong advisory or even lead role on the implementation for customers of any size. That’s important for everyone’s interest, I think for pretty obvious reasons. And that leads us to believe that something like – when you marry that with our aspirations for growth in new customer acquisition and new project initiations and the like to something like a 30% floor of revenue coming from professional services. We could be a few points above or below that, but directionally, that’s how it models out. And we have a lot of confidence in our partners and we expect to sign on more and have them do lots of – basically every project with us side-by-side, but we are going to be very insistent on participating at some minimal level for everyone’s interest.

Great. And then most of the call we talked about some of the big domestic wins. Obviously, you have had some big international ones in prior quarters. As we think about that next year, should we expect more of international focus? And how do you feel in terms of staffing in go-to market for your international expansion?

Right. International is obviously vital to our business. A majority of the global premium sits outside of North America and indeed outside of the English speaking world. So, it’s very important that we can succeed not just in English speaking countries and certainly not just in the U.S., it’s always going to be more difficult for us as a U.S. based insurer to sell internationally and in many of these countries even substantial ones like France or Italy or even in Germany. While they are very large markets, none of them are as big as the U.S. or the U.S. and Canada combined. So, making investments at a product and go-to-market level always involve certain trade-offs and compromises that we don’t face in our biggest market. So, for all those reasons, it’s a harder slog. We have lower sales productivity. The competition is tougher. But we are just as determined to succeed there. And I think what you saw in this last quarter and indeed in the year overall was some very significant international wins with non-English speaking carriers. Sompo Japan is a completely domestic Japanese insurer. 99% of this policyholders are Japanese nationals, I believe. And that’s the guess, not a certainty, but I mean, that – Zürich Germany is a domestic, large domestic insurer that writes basically every line of business. And to have their commitment on the Guidewire platform is a very, very useful market signals that the product is primetime in those key geographies.

Great. Thanks a lot guys.

And we will move on to Peter Lowry from JMP Securities.

Hi, thanks for taking my question. It’s actually JMP Securities. Are there any changes to or tweaks to your sales or service structure required as you manage and penetrate Tier 1 customers versus landing new business, especially given the ramp of Tier 1 customers in Q4?

That’s an excellent question. And indeed, we as a company are evolving into more and more of – into an acknowledgment of the need for an ongoing account relationship or an account management kind of structure, where we are present and relevant at a principal to principal level in a way that transcends any given project or even any given program. We may have multiple different streams underway with a very large insurer that are only kind of tangentially related to each other, but we need to have some program level relationship that can talk about them in concert and keep coherent relationship going. So, that’s very important. And we have – are thinking about that in our territory assignments and in our staffing models for both services and for sales to ensure that we don’t become too transactional in our posture with our customers. And there are some markets where we have been doing that for a really long time already like in Japan and then there are others, including here in the U.S. where we are really building that into our staffing expectations.

Okay, thanks and congratulations again on a great quarter.

Thanks Peter.

This does conclude our question-and-answer session. I would like to turn the call back over to Marcus Ryu for closing and additional remarks.

No additional comments. Thank you all for participating in our call today. Goodbye.