GWRE 10-K & 10-Q changes, risk factors and insider trading

•our quarterly and annual results have fluctuated significantly and may continue to fluctuate significantly due to a number of factors, including economic conditions, shifts in investor sentiment regarding our industry, including with respect to AI and technological displacement, customer behavior, contract provisions and changes, operational costs and reliability, seasonality, and other uncertainties, which has impacted, and could impactcontinue to impact, our stock price;

•issues in the developmentdevelopment, adoption, deployment, workforce use, and use of AI, as well as the usemaintenance of AI by our workforce,technologies, combined with an uncertain regulatory environment, may result in reputational harm, operational disruptions, liability, or other adverse consequences to our business operations;

•required compliance with current and evolving local data privacy and cybersecurity laws and regulations in all jurisdictions where we have customers, and our ability to maintain the security of our customers’ data and our cloud-based products, appropriately limit the use of information, and manage related costs and liabilities incurred.incurred;

We have experienced, and may experiencecontinue to experience, significant quarterly and annual fluctuations in our results of operations due to a number of factors.

Our quarterly and annual results of operations have fluctuated in the past and may fluctuate significantly in the future due to a variety of factors, many of which are outside of our control. This variability has led, and may continue to lead to volatility in our stock price as investors and research analysts respond to quarterly fluctuations. In addition, comparing our results of operations on a period-to-period basis, particularly on a sequential quarterly basis, may not be meaningful. You should not rely on our past results as an indication of our future performance.

•the impact of economic downturnsdownturns, andrecessions, relatedor market volatility caused by economic volatility, inflation, bankdeflation, failuresfinancial instability, public health crises, geopolitical conflicts, and associatedtrade financialuncertainties, instabilitywhich may negatively affect our partners and crises, political uncertainties,vendors, or othercause nationala delay, failure to execute, collection issues, or cancellation of significant customer agreements and worldwideprofessional eventsservice on our business and the businesses of our customers, partners, and vendorsarrangements;

•the proportion and timing of subscription sales as opposed to term software licenses, and the variations in revenue recognition between these contract types;

•our ability to expand market adoption of cloud-based services, including the impact of our customers transitioning from term software licenses to subscription services;

•future accounting pronouncements, changes in accounting rules, new tax laws or regulations, or tax interpretations and our related accounting policies, interpretations, and controls; and

•fluctuations in foreign currency exchange rates; andrates.

The foregoing factors are difficult to forecast, and these, as well as other factors, could materially adversely affect our quarterly and annual results of operations. Further, due to multi-year term licenses and multi-year term license renewals, increasedtiming and pricing of cloud-based subscription services, timing of and billing rates for professional services engagements, and other ongoing aspects of our business, it is challenging to forecast our quarterly and annual results.

We believe our ability to adjust spending quickly enough to compensate for a potential revenue shortfall is limited and our inability to do so could magnify the adverse impact of a potential revenue shortfall on our results of operations. If we fail to achieve our quarterly forecasts, if our forecasts fall below the expectations of investors or research analysts, or if our actual results fail to meet the expectations of investors or research analysts, our stock price has declined in the past and may decline.decline in the future.

The typical sales cycle for our products is lengthy and unpredictable, requires pre-purchase evaluation by a significant number of employees in our customers’ organizations, often involves a significant operational decision by our customers, and could be affected by factors outside of our control. Our sales efforts involve educating our customers about the use and benefits of our products, including the technical capabilities of our products, the potential cost savings achievable by organizations deploying our products, and the benefits and risks associated with cloud-based services. Customers typically undertake a significant evaluation process, which frequently involves not only our products, but also those of our competitors. We spend substantial time, effort, and money in our sales efforts without any assurance that our efforts will produce sales, and our customers have significant negotiating power during the sales process which may result in a lengthy sales cycle and significant contractual complexity. Additionally, we may be unable to predict the sizesize, timing, and terms of the initial contract until very late in the sales cycle, which affects our ability to accurately forecast revenue and ARR. In addition, if we commit to include specific features in our base product offering at the request of a customer or group of customers, we may be unable to recognize revenue until the specific features have been delivered with our products or be subject to penalties or costs. Providing this additional functionality may be time consuming and may involve factors that are outside of our control. Customers may also insist that we commit to certain time frames in which systems built around our products will be operational or that once implemented our products will be able to meet certain operational requirements. Our ability to meet such timeframes and requirements may involve factors that are outside of our control, and failure to meet such timeframes and requirements could result in us incurring penalties and costs and/or making additional resource commitments, which would adversely affect our business and results of operations.

The market for our products is intensely competitive.competitive and rapidly evolving. The competitors we face in any sale opportunity may change depending on, among other things, the line of business purchasing the software, the application or service being sold, the geography in which the customer is operating, and the size of the insurance carrier to which we are selling. For example, we are more likely to face competition from small independent firms when addressing the needs of small insurers. We may also face competition from new market entrants, specialized AI companies, enterprise AI platform providers, and cloud-based vendors that utilize innovative technologies, including AI technologies, to compete with or disrupt portions of our business. These competitors may compete on the basis of price, total cost of ownership, security, innovative technologies such as AI technologies, the time and cost required for implementation, custom development, or unique product features or functions. Outside of the United States,U.S., we are more likely to compete against vendors that may differentiate themselves based on local advantages in language, market knowledge, and pre-built content applicable to that jurisdiction. We also compete with vendors of horizontal software products that may be customized to address needs of the P&C insurance industry.

Additionally, many of our prospective customers operate firmly entrenched legacy systems, some of which have been in operation for decades. Our implementation cycles may be lengthy, variable, and require the investment of significant time and expense by our customers. These expenses and associated operating risks attendant on any significant process re-engineering and new technology implementation, may cause customers to prefer maintaining legacy systems. Also, maintaining these legacy systems may be so time consuming and costly for our potential customers that they do not have adequate resources to devote to the purchase and implementation of our products. We also compete against technology consulting firms that either helped create such legacy systems or may own, in full or in part, subsidiaries that develop software and systems for the P&C insurance industry. Further, as machine learning, AI technologies, including generative AI technologies, and automated decision-making technologies (collectively, “AI technologies”) continue to evolve, our existing and potential customers may leverage evolvingthese AI technologiescapabilities to develop their own solutions that could reduce or eliminate the need for our solutions.

As we expand our product portfolio, we may begin to compete with software and service providers we have not competed against previously. Such potential competitors offer digital engagement and data and analytics tools that may, in time, become more competitive with our offerings.

If our competitors’ products, services, or technologies become more accepted than our solutions, if they are successful in bringing their products or services to market earlier than we are, if their products or services are more technologically capable than ours (including, without limitation, as a result of new or better use of evolving AI technologies, such as generative AItechnologies), or if our customers or potential customers replace our solutions with custom-built software, then our revenue could be adversely affected.

We expect the intensity of competition to remain high in the future, as the amount of capital invested in current and potential competitors, including insurtech companies, has increased significantly in recent years. Additionally, we anticipate that the amount of capital invested in potential new market entrants utilizing AI technologies may increase. As a result, our competitors or potential competitors may develop improved product or sales capabilities, or even a technology breakthroughbreakthrough, such as through the use of AI technologies, that disrupts our market. Continuing intense competition could result in increased pricing pressure, increased sales and marketing expenses, and greater investments in research and development, each of which could negatively impact our profitability. In addition, the failure to increase, or the loss of, market share would harm our business, results of operations, financial condition, and/or future prospects. Our larger current and potential competitors may be able to devote greater resources to the development, promotion, and sale of their services and products than we can devote to ours, which could allow them to respond more quickly than we can to new technologies and changes in customer needs, thus leading to their wider market acceptance. We may not be able to compete effectively and competitive pressures may prevent us from acquiring and maintaining the customer base necessary for us to increase our revenue and profitability.

Our current and potential competitors may also establish cooperative relationships among themselves or with third parties to further enhance their resources and offerings. CurrentMarket consolidation may increase as current or potential competitors may be acquired by other vendors or third parties with greater available resources. As a result of such acquisitions,acquisitions or consolidation, our current or potential competitors might be more able than we are to adapt quickly to new technologies and customer needs, to devote greater resources to the promotion or sale of their products, to initiate or withstand substantial price competition, or to take advantage of emerging opportunities by developing and expanding their product offerings more quickly than we can. Additionally, they may hold larger portfolios of patents and other intellectual property rights as a result of such relationships or acquisitions. If we are unable to compete effectively with these evolving competitors for market share, our business, results of operations, and financial condition could be materially and adversely affected.

We have experienced consistent growth and expect to continue expanding our operations, including increasing the number of employees and broadening the locations and scope of our international operations. In particular, we have been expanding and plan to continue to expand our operations in India. Additionally, we operate a hybrid work environment in which a large portion of our workforce works either in-person on a part-time basis or remotely on a permanent basis, which brings challenges to managing our business and workforce. ThisSpecifically, we may be exposed to risks associated with the locations of remote workers, including compliance with local laws and regulations. Our expansion, combined with the complexity of managing a hybrid and geographically distributed workforce, has placed, and will continue to place, a significant strain on our managerial, administrative, operational, financial and other resources. Further, our ability to expand geographically depends, in large part, on our ability to attract, retain, and integrate managers with the appropriate skills to lead the local business and employees. Similarly, our profitability depends on our ability to effectively utilize personnel with the right mix of skills and experience to perform services for our customers, including our ability to transition employees to new assignments on a timely basis. If we are unable to effectively deploy our employees globally on a timely basis to fulfill the needs of our customers, our reputation could suffer and our ability to attract new customers may be harmed.

Issues in the developmentdevelopment, adoption, deployment, workforce use, and usemaintenance of AI,AI technologies, combined with an uncertain regulatory environment, may result in reputational harm, operational disruptions, liability, or other adverse consequences to our business operations.

We use internally developed and third-party AI technologies inacross our offeringsproducts and business,internal business operations, and we are continuing to make investments in expanding oursuch AI capabilitiescapabilities. inWe consider AI to be an important driver of our products,future professionalgrowth, services,product innovation, and tools,internal includingbusiness byoperations, enhancingalthough, existing or developing new product features and functionality that use or incorporate AI technologies. AI technologies are complex and are rapidly evolving. We expect that increased investment will be required to continuously improve our use of AI technologies. Asas with many technological innovations, there are significant risks involved in developing, maintaining and deploying these technologiescapabilities and there can be no assurance that the usage of or our investments in such technologies will always enhance our productsproducts, reduce implementation complexity or servicescosts, improve service margins, or be beneficial to our business, including ouroverall efficiency or profitability. The use of AI technologies in new or existing offerings may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or cybersecurity risks, privacy concerns, ethical challenges, or other complications that could adversely affect our business, reputation, or financial results.

TheAdditionally, the complexity of our products that incorporate machine learning and AI technologies could result in unforeseen delays or expenses, or undetected defects, bugs, system misconfigurations, or new cybersecurity or unknowndata cybersecurityprivacy risks,vulnerabilities. vulnerabilities,These and challenges, whichchallenges may harm the market acceptance of newour products,offerings, damage our reputationreputation, withcause currentservice level credit penalties or prospectiveimplementation customers,disruptions, cause significant remediation expenses, and may harm our business, results of operations, and financial condition.

Further, the development of next-generation solutions that utilize new and advanced features using or incorporating AI technologies involves making predictions regarding the willingness of the market to adopt such technologies over legacy solutions. The market for products and services that incorporate AI technologies is rapidly evolving, and important assumptions about the characteristics of targeted markets, pricing, sales cycles, cost, performance, and perceived value may be inaccurate. We cannot be sure that the market will continue to grow or that it will grow in ways we anticipate. We may be required to commit significant resources to developing new productsproducts, tools, and capabilities before knowing whether such investment will result in products that the market will accept.

The market for our products is constantly evolving, and our pricing and packaging decisions are made based on the best information available at the time, but future outcomes may changediffer significantly in the future from our expectations. We are continually analyzing and refining our pricing and packaging models to adapt to this dynamic environment. For example, we may need to change our pricing in future periods in response to market demands, the inflation, tariffs, and interest rate environment, or increased costs.costs, especially for the third-party costs that we incur to operate and secure our cloud infrastructure. Our contracts are often multi-year in duration and our inability to foresee changing events could impact the profitability of certain contracts. Further, as competitors introduce new products that compete with ours or reduce their prices, we may be unable to attract new customers or retain existing customers based on our historical pricing. As we expand internationally, we also must determine the appropriate price to enable us to compete effectively in each market. In addition, if our mix or bundle of products sold changes, then we may need to, or choose to, revise our pricing. As a result, we may be required or choose to reduce our prices or change our pricing model, which could harm our business, results of operations, and financial condition. In addition, we cannot predict whether our current or prospective customers, or the market in general, will accept these changes. If these adjustments do not gain acceptance, our business and operational results could be adversely affected. Failure to identify an optimal pricing and packaging strategy may harm our business and operational outcomes. Should customers reject our new or modified pricing plans, we may face increasing challenges in attracting new customers and retaining existing ones, particularly if we apply new pricing models to current customer subscriptions.

To address demand trends in the P&C insurance industry, we offer customers the use of our software products primarily through a cloud-based offering sold on a subscription basis. Our subscription business model has required, and will continue to require, a considerable investment of technical, operational, financial, legal, and sales resources. Our software and cloud services involve the storage and transmission of customer data, including in some cases, personal data, and security incidents or breaches could result in the loss of this information, which in turn could result in litigation, breach of contract claims, indemnity obligations, harm to our reputation, and other liabilities for us. Our cloud offerings will continue to be the focus of existing resources, require us to hire additional resources, and increase costs, especially in cost of subscription and support revenue, cost of services revenue, and research and development, in any given period. We may not be able to efficiently scale such investments to meet customer demand and expectations, which may impact our long-term growth and results of operations. Further, the increase in some costs associated with our cloud services, such as the cost of third-party infrastructure inon which we rely to host our subscription services, may be difficult to predict over time. Furthermore, we may assume greater responsibilities for implementation of subscription services due to our operating and maintaining the cloud environment for our customers. As a result, we may face risks associated with new and complex implementations or migrations, the cost of which may differ from original estimates. Our subscription contracts also contain penalty clauses, for matters such as failing to meet stipulated service levels or other contractual provisions. Should these penalties be triggered, our results of operations may be adversely affected. These penalties and costs have taken, and could takein the future take, the form of monetary credits for current or future service engagements, reduced fees for additional services or products or upon renewal of existing agreements, and a customer’s renegotiation or refusal to pay its contractually obligated subscription or service fees.

•we may enter into agreements with future product delivery requirements, specified terms for product upgrades or functionality, acceptance terms, future product discounts, early termination rights, or unconditional return rights, which may require us to delay revenue recognition for a period of time; and

We provide our customers with upfront estimates regarding the duration, resources, and costs associated with the migration and implementation of our products. Failure to meet these upfront estimates and the expectations of our customers could result from inadequate initial assessments, changes in project scope, our product capabilitiescapabilities, or professional service engagements performed by us, our SI partners, or our customers’ employees, the latter two of which are beyond our direct control. The consequences could include, and have included, monetary credits for current or future service engagements, reduced fees for additional products or upon renewal of existing products, renegotiation or modification of existing contracts that could potentially result in reversals of previously recognized revenue, or a customer’s refusal to pay its contractually obligated fees. In addition, time-consuming or difficult migrations and implementations may also increase the amount of services personnel we must allocate to the project, potentially without commensurate compensation, thereby increasing our costs, lowering our services margin, and adversely affecting our business, results of operations, and financial condition.

Our subscription and support revenue was 61%66% and 56%61% of total revenue for fiscal years 20252026 and 2024,2025, respectively. Our subscription and support revenue produces lower gross margins than our license revenue. The gross margin of our subscription and support revenue was 68%73% and 63%68% for fiscal years 20252026 and 2024,2025, respectively, while the gross margin for license revenue was 99% andfor 98% forboth fiscal years 20252026 and 2024, respectively.2025. We expect that subscription revenue will continue to increase as a percentage of total revenue as we contract with new cloud customers and existing customers migrate from term licenses to subscription services. Additionally, we are incurring expenses to operate our cloud services and manage our cloud operations which may not result in an improvement of our subscription and support gross margin. These trends, along with other factors, some of which may be beyond our control, may adversely affect our overall gross and operating margins. These other factors include the percentage of new customers that enter into subscription services agreements as compared to term license agreements, the revenue impact of allocating total contract consideration between license revenue and subscription and support revenue when existing customers transition from term license to subscription services agreements, investments in certain cloud implementations to assist our customers with their migration to our cloud services, continued growth and efficiency of our cloud operations and technical support teams, and the impact on the global economy as a result of economic volatility, inflation, tariffs, or other global events and disasters.

Further, our services revenue was 18% and 18% of total revenue for both fiscal years 20252026 and 2024, respectively.2025. Our services revenue produces significantly lower gross margin than either our license revenue or our subscription and support revenue and has at times been negative. If we experience an increase in the percentage of total revenue represented by services revenue, due to acquisitions or other factors, such increase could reduce our overall gross and operating margins. Fluctuation in our services revenue can result from several factors, some of which may be beyond our control, including change in customer demand for our services team’s involvement in the implementation of and migration to new products, the rates we charge or discounts we offer for our services, our ability to bill our customers for all time incurred to complete a project, the extent and quality of implementations and migrations provided by our SI partners, the extent to which we subcontract services to those SI partners, and the impact on the global economy as a result of economic volatility, inflation, tariffs, or other global events and disasters. Additionally, the failure to improve, or the erosion of, our services margin, whether due to discounts related to encouraging customers to enter into cloud agreements or otherwise, particularly in combination with any increase in services revenue, could adversely affect our overall gross and operating margins. Our services margin may erode if we hire and train additional services personnel to support cloud-based services or markets prior to having customer engagements, if we make investments in customer migrations from self-managed term licenses to subscription services, if we enter into fixed fee services arrangements, if our services personnel are underutilized, if we subcontract out services without an adequate markup, or if we require additional personnel on unexpectedly difficult projects to ensure customer success, perhaps without receiving commensurate compensation.

We sell our products to customers located outside the United States,U.S., and we are continuing to expand our international operations as part of our growth strategy. In fiscal years 20252026 and 2024,2025, $431.6$537.5 million and $347.9$431.6 million of our revenue, respectively, was from customers outside of the United States.U.S. Our current international operations and our plans to expand our international operations subject us to a variety of risks, including:

•the need to localize our contractscontracts, our billing practices, and our products for international customers;

•geographic and political conflicts, such as the war between Russia and Ukraine, continuedongoing geopolitical instabilityconflicts in the Middle East, and the escalating tensions in the South China Sea;

•the burdens and costs of complying with a wide variety of foreign laws and legal standards, including without limitation any new or evolving laws and regulations relating to the use of data in AI, generative AI, machine learning technologies,data, climate-related disclosures, operational resilience, data protection and privacy, particularly in the European Union (“EU”) and the United Kingdom (“U.K.”);

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 artificialpredictive intelligenceand (“generative 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.market.

Our foundational core products, InsuranceSuite and InsuranceNow, are delivered primarilyas asa cloud-based subscription services.service Historically,leveraging InsuranceSuiteour hasproprietary alsocloud beenplatform availablewhich forwe self-managedrefer installations.to as Guidewire Cloud Platform (“GWCP”). These products serve as transactional systems of record, fully supporting insurance operations, including product definition, pricing and rating, underwriting, policy administration, claims managementbilling, and billing.claims management.

In addition, we provide digital engagement productsofferings that enable seamless sales, omnichannelpricing service,and rating solutions, and enhanced claims experiences for policyholders, agents, vendors, and field personnel. Our analytics products allow insurers to manage and use data more effectively, gain business insights, improve operational efficiency, and underwrite emerging risks. To support insurers worldwide, we localize our products to address diverse regulatory, language, and currency requirements. Additionally, we provide Guidewire Marketplace which offers a vetted collection of insurtech applications.

InsuranceSuite is a highly configurable and scalable product, delivered as a service, and primarily comprised of threefive core applications (PolicyCenter, ClaimCenter, BillingCenter, PricingCenter, and BillingCenterUnderwritingCenter) 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 digitaldigital, analytics, and analyticsgenerative AI capabilities natively into our platform. Most new sales and implementations are for InsuranceSuite.

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 UnitedU.S. States,and Canada, and is generally suited to mid-market carriers and managing general agentsagents, who are highly cost sensitive and whose needs are often not as complex as a typical InsuranceSuite customer.

We reach customers directly through our global sales team and in partnership with third-party global system integrators (“SI’sSIs”). Because our platform is central to insurers’ operations, customer evaluation cycles are often extensive, particularly when multiple products are involved or when insurers are moving to GWCP for the first time. Sales processes typically include detailed due diligence and customer reference checks. Our growth depends on continuously enhancing existing products, introducing new capabilities, ensuring efficient cloud operations, and expanding local content,or andmarket-specific providing access to innovation through the Guidewire Marketplace.content.

We sell our products primarily through subscription services for our platform and cloud-delivered products. We generally price our subscription services for the core products based on the amount of Direct Written Premium (“DWP”) managed on our platform, with certain cloud-delivered products priced based on usage orand otherassociated metrics.resource consumption. Initial subscription agreements are generally five years in duration, with annual renewals thereafter. In some instances, we have customers that sign contracts with an initial term of seven years or longer. Subscription revenue is recognized ratably over the contract term. We also offer term licenses, primarily for existing on-premise customers, as well as support and professional services. Support is typically priced as a percentage of license fees and recognized ratably,ratably. while most professionalProfessional services are generally billed monthly on a time-and-materials basis; however, certain services engagements are based on a fixed fee, and revenue is recognized on a percentage of completion basis.

Our track record of success with customers and their implementations is central to maintaining our strong competitive position. We rely on our global services team and SI partners to ensure that teams with the right combination of product, business, and language skills are used in the most efficient way to meet our customers’ implementation and migration needs. We have extensive relationships with SI, consulting, technology, and other industry partners. Our network of partners has expanded as interest in and adoption of our platform has grown. Our strong relationships with leading SI partners enhance our direct sales through co-marketing efforts and by providing additional market validation of the distinctiveness and quality of our offerings. We encourage our partners to co-market, pursue joint sales initiatives, obtain certifications related to our products, and drive broader adoption of our technology, helping us grow our business more efficiently and enabling us to focus our resources on continued innovation and further enhancement of our solutions.

We work closely with our network of SI partners to facilitate new sales and implementations of our products. Our partnershippartnerships with leading SI partners allowsallow 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.

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, developmentdevelopment, adoption, deployment, workforce use and usemaintenance 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.customers, and the impact of these and other factors, including the impact of AI on the insurance and software industries, on our stock price and its volatility. 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.

We have experienced seasonal variations in our license revenue and, to a lesser extent, in our subscription revenue as a result of increased customer orders in our fourth fiscal quarter, which is the quarter ending July 31. We generally see significantly increased orders in our fourth fiscal quarter due to efforts by our sales team to achieve annual incentives. As a result, a significantly higher percentage of our annual license revenue and cash receipts have historically been recognized in our fourth fiscal quarter. Because we recognize revenue upfront for term licenses compared to over time for subscription services, changesan increase in the mix between term licenselicenses anddue subscriptionto servicesrenewals or expansion orders, or a decrease from migrations or non-renewals may impact our quarterly results. Additionally, any significant multi-year term license renewal or term license non-renewal could impact quarterly results.results and cash flows. Subscription sales now represent the significant majority of total sales and, as a result when compared to term license sales, the revenue we recognize in the initial fiscal year of an order is lower, deferred revenue is higher, and our total reported revenue growth may be adversely affected in the near term due to the ratable nature of these arrangements. Over time, this ratable revenue dynamic has and will dampen the impact of seasonality on our revenue. However, our cash flows remain subject to seasonal variations and will most likely remain concentrated in the fourth fiscal quarter due to the annual billing arrangements of our customer contracts.

Our services revenue is also subject to seasonal fluctuations, though to a lesser degree than our license revenue and subscription revenue. Our services revenue is impacted by the number of billable days in a given fiscal quarter. Our second fiscal quarter, which is the quarter ending January 31, usually has fewer billable days due to the impact of calendar year end holidays in Europe and the United States.holidays. Our fourth fiscal quarter usually has fewer billable days due to the impact of vacations taken by our services professionals. Because we pay our services professionals the same amount throughout the year, our gross margins on our services revenue are usually lower in these quarters. This seasonal pattern, however, may be absent in any given year.

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, the ongoing conflicts such as the war between Russia and Ukraine, continued geopolitical instabilityconflicts in the Middle East, escalating tensions in the South China Sea, inflationary pressures, currency exchange fluctuations, changes in interest rates, changes in trade policies and practices (including the imposition of tariffs), previous bank failures in the United StatesU.S. 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.

Our customers may be unable to pay or may request amended payment terms for their outstanding invoices due to the economic impacts from these disruptions, and we may need to increase our accounts receivable allowances. A decrease in orders in a given period could negatively affect our revenue and ARR in future periods, particularly if experienced on a sustained basis, because a substantial proportion of our new software subscription services orders is recognized as revenue over time. Also, the global economic impact of these disruptions could affect our customers’ DWP, which could ultimately impact our revenue as we generally price our products based on the amount of DWP that will be managed by our products. As a result of these developments and the related economic impact to our business, we may be required to record impairment related to our operating lease assets, investments, long-lived assets, capitalized software development costs, intangible assets, or goodwill.

We use certain key metrics and financial measures not prepared in accordance with United StatesU.S. Generally Accepted Accounting Principles (“GAAP”) to evaluate and manage our business, including ARR and freeFree cashCash flow.Flow. For a further discussion of how we use key metrics and certain non-GAAP financial measures, see “Non-GAAP Financial Measures” in this Annual Report on Form 10-K.

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. InDuring the fiscal year 2025,ended July 31, 2026, the recurring license and support or subscription contract value recognized as services revenue was $9.5$7.2 million.

As of July 31, 2025,2026, ARR was $1,041$1,237 million, or $1,032$1,242 million based on currency exchange rates as of July 31, 2024.2025. We measure ARR results on a constant currency basis during the fiscal year and revalue ARR at year end to current currency exchange rates. ARR grew in fiscal year 20252026 by 20%,19%, or 19%both on a reported and constant currency basis.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on its standalone selling price (“SSP”) in relation to the total fair value of all performance obligations in the arrangement. Some of our performance obligations, such as support, implementation services, and training services, and certain subscription services have observable inputs that are used to determine the SSP of those distinct performance obligations. Where SSP is not directly observable, we determine the SSP using information that may include market conditions and other observable inputs. In the circumstances when available information to determine SSP is highly variable or uncertain, such as for our term licenses, we will use the residual method.

The majority of our contracts contain multiple performance obligations, such as when licenses are sold with support, implementation services or training services. As customers enter into a subscription agreement to migrate from an existing term license agreement, customers maymay, for a period of time, be under contract for self-managed licenses and support, in addition to subscription services, for a period of time, which may require an allocation of the transaction price to each performance obligation. New and migration subscription agreements also typically include implementation, configuration, and training services, which may require an allocation of the transaction price to each performance obligation.

The following table sets forth our results of operations for the years presented. The data has been derived from the consolidated financial statements contained in this Annual Report on Form 10-K. The results of operations for any period should not be considered indicative of results for any future period. Certain figures included in this document have been subjected to rounding adjustments. Accordingly, figures shown in the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

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 generally sold under an initial term of two years 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.

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.services, while certain services engagements are based on a fixed fee, and revenue is recognized on a percentage of completion basis.

Subscription revenue increased by $190.0$248.4 million compared to the prior yearyear, primarily due to the impact of new subscription agreements and cloud transition agreements entered into and provisioned since July 31, 20242025, ofnew $154.0subscription million,agreements, and the renewal or extension of subscription services at the fully ramped annual fees after the initial committed term of $28.2 million.term.

Support revenue decreased by $7.8$8.8 million compared to the prior year, 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, subscription,support, and supportlicense performance obligations. As a result, we expect that the increasesmall inpercentage subscriptionof ordersterm licenses 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.

Revenue related to new term licenses and multi-year term license renewals is generally recognized upfront and, as a result, no additional license revenue is recognized until after the committed term expires. As a customer enters into a subscription agreement to migrate from an existing term license agreement, the timing and amount of revenue recognitionrecognized will be impacted by allocations of total contract value between license, subscription, and support performance obligations. License revenue growth has and will be negatively impacted as subscription sales increase asare a percentagesignificant majority of total new sales and as customers migrate from term licenses to subscription services instead of renewing their term licenses.

Term license revenue increaseddecreased by $3.0$17.4 million compared to the prior yearyear, primarily due to higher renewals and expansion orders within our existing customer base, partially offset by the impact of customersagreements that migratedmigrate customers from a term license to a subscription service.service, partially offset by an increase in renewals. Ongoing revenue related to migration agreements is recorded as subscription revenue. The impact on term license revenue from contracts with an initial term of greater than two years or a renewal term of greater than one year was $0.5 million during fiscal year 2025, as compared to $2.7 million in the prior year.

Services revenue increased by $38.0$50.7 million compared to the prior yearyear, primarily 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.projects.

As we successfully leverage our SI partners to lead more implementations and migrations, weWe expect our services revenue couldto fluctuate between periods.periods due to changes in the volume, size, mix, and timing of our professional services engagements, and how quickly we deliver that work. Our services revenue and margins may also be affected by negotiated billing rates, utilization levels, and our use of subcontractors. Additionally, services revenue overall may continue to be impacted by contracts with lower average services billing rates and investments in customer implementations,implementations and migration projects, 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,products and services, 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.contracts, which could impact our services revenue and gross margins.

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,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.

The $30.3 million increase in costCost of subscription and support revenue wasincreased by $30.1 million compared to the prior year, primarily due to increases in cloud infrastructure costsexpense of $26.6$14.6 million fromdriven by increased transaction volume on our cloud services, personnel costs of $4.5 million as a result of higher compensation related to bonus and other benefits, internal-use software amortization of $1.2 million, royalties of $0.6$8.9 million due to higher usage, andheadcount, amortization of intangiblesintangible assets of $0.3$2.0 million due to newly acquired intangible assets being amortized.amortized, Theseand increases were partially offset by a decrease in professional services expenseroyalties of $2.9$1.7 million.

The $0.9 million decrease in our costCost of license revenue wasdecreased by $1.6 million compared to the prior year, primarily due to a $0.6decrease millionin personnel costs of $1.3 million, and to a lesser extent, a decrease in personnelroyalties. Personnel costs associated with the development of online training curriculum includedare withprimarily focused on our cloud services, thus contributing to the latestdecrease releasesin cost of InsuranceSuitelicense and lower royalties of $0.3 million.revenue.

The $23.9 million increase in costCost of services revenue wasincreased by $49.1 million compared to the prior year, primarily due to increases in personnel expense of $13.5$27.6 million,million due to higher headcount, subcontractor expense of $9.3$14.1 million due to implementations involving our SI partners, professional services expense of $0.6 million, and software subscriptions and travel expenses of $0.5$4.0 million.

Gross Profit:

Our gross profit increased by $168.7$195.3 million compared to the prior year. Gross profit was primarily impacted by anthe increase in subscription and support gross profit due to the increase in subscription revenue andfrom cloud operationsmigrations efficiencies.and Licensenew and renewed subscription orders at a rate higher than subscription and support costs. This increase was partially offset by a decrease in license gross profit slightly increased primarily as a result of customer renewals and lower costs associated with development of online training curriculum. Services gross margin increased due to increasedlower license revenue fromas newcustomers implementationmigrate andto migrationsubscription projects, higher utilization rates and the completion of certain implementation projects that required significant investment by us.services.

We expect subscription and support gross margin to continue to improve, though at a slower rate than in recent years, as we gain additional efficiencies and increase the number of cloud customers.customers and scale our cloud platform. We expect services gross margin will continue to improve as we entergain intoadditional fewer fixed fee arrangements,efficiencies, but could fluctuate between periods based on the use of subcontractors to supplement our internal services team.team and the impact of any arrangements entered into to encourage customers to migrate from licenses to subscription services. We expect license gross profit to decline over time due to customers migrating from licenses to subscription services.services but can fluctuate quarter to quarter depending on the timing of renewals and license revenue 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.

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.services, and software costs. In each case, personnel costs include salaries, bonuses, commissions, benefits, and stock-based compensation.

Our research and development expenses primarily consist of personnel costs for our technical staffstaff, web hosting costs, and consultantssoftware providingsubscription professional services.costs.

The $26.8 million increase in researchResearch and development expenses wasincreased by $43.9 million compared to the prior year, primarily due to increases in personnel costs of $23.3$30.9 million due to higher headcount, professional services of $1.0 million, web hosting costs of $1.0 million,and software subscription costs of $0.9$7.9 million, and travelprofessional costsservices of $0.6$3.7 million.

We expect our research and development expenses to increase in absolute dollars due to inflation and investments to enhance and develop our products and services,services butand, decrease asto a percentagelesser ofextent, 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.inflation. We continue to dedicate internal resources to develop, improve, and expand the functionality, efficiency, and security of our solutions in the cloud. ResearchOur research and development expenses may also increase as we dedicate more resources to our software development efforts, including additional costs to utilize AI tools and develop AI-driven solutions for our customers, as well as if we pursue additional acquisitions.

Our sales and marketing expenses primarily consist of personnel costs for our salessales, marketing, and marketingcustomer success employees. Included in our personnel costs are commissions, which are considered contract acquisition costs and are capitalized when earned and expensed over the anticipated period of time that goods and services are expected to be provided to a customer, which we estimate to be approximately five years. Sales and marketing expenses also include travel expenses, professional services for marketing activities, and amortization of certain acquired intangibles.

The $31.3 million increase in salesSales and marketing expenses wasincreased by $28.6 million compared to the prior year, primarily due to increases in personnel costs,costs includingof $18.9 million associated with higher headcount, which includes the impact of contract acquisition costs and stock-based compensation, of $24.1 million,costs, travel costs of $3.2$4.9 million, web hosting expenses of $2.6 million,and marketing and advertising expenses of $0.6$4.9 million,million softwaredue subscriptionsto ofcustomer $0.6 million,events and professionalincreased serviceslead costsgeneration of $0.5 million. These increases wereactivity, partially offset by a decreasedecreases in web hosting expenses of $1.6 million and amortization of intangiblesintangible assets of $0.3$0.7 million.

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

Interest income increaseddecreased by $13.1$8.1 million incompared fiscalto yearthe 2025,prior year, primarily due to increasedlower interest rates and lower available funds availableto for investmentinvest due to purchases under our Octoberstock 2024repurchase debt offering and positive operating cash flow.program.

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% Convertibleconvertible Seniorsenior Notes due 2025 (“2025 Convertible Senior Notes”) and the aggregate principal amount of our 1.25% Convertible Senior Notesnotes due 2029 (the “2029 Convertible Senior Notes”) and, for the comparative fiscal year 2025, our 1.25% convertible senior notes due 2025 (the “2025 Convertible Senior Notes,” together with the 20252029 Convertible Senior Notes, the “Convertible Senior Notes”). The amortization of debt issuance costcosts is recognized on an effective interest basis. Our 2025 Convertible Senior Notes were partially retired in October 2024 and December 2024, and were fully settled on their maturity date of March 15, 2025. Beginning in fiscal year 2025, interestInterest expense also includes the commitment fees on our undrawn senior secured revolving credit facility in an aggregate principal amount of $300.0 million (the “2025 Credit Facility”) and the amortization of theissuance costs associated issuancewith costs.our revolving credit agreement entered into in December 2024 recognized on a straight-line basis.

The market for our products is constantly evolving, and our pricing and packaging decisions are made based on the best information available at the time, but future outcomes may changediffer significantly in the future from our expectations. We are continually analyzing and refining our pricing and packaging models to adapt to this dynamic environment. For example, we may need to change our pricing in future periods in response to market demands, the inflation, tariffs, and interest rate environment, or increased costs. Our contracts are often multi-year in duration and our inability to foresee changing events could impact the profitability of certain contracts. Further, as competitors introduce new products that compete with ours or reduce their prices, we may be unable to attract new customers or retain existing customers based on our historical pricing. As we expand internationally, we also must determine the appropriate price to enable us to compete effectively in each market. In addition, if our mix or bundle of products sold changes, then we may need to, or choose to, revise our pricing. As a result, we may be required or choose to reduce our prices or change our pricing model, which could harm our business, results of operations, and financial condition. In addition, we cannot predict whether our current or prospective customers, or the market in general, will accept these changes. If these adjustments do not gain acceptance, our business and operational results could be adversely affected. Failure to identify an optimal pricing and packaging strategy may harm our business and operational outcomes. Should customers reject our new or modified pricing plans, we may face increasing challenges in attracting new customers and retaining existing ones, particularly if we apply new pricing models to current customer subscriptions.

•the need to localize our contractscontracts, our billing practices, and our products for international customers;

•geographic and political conflicts, such as the war between Russia and Ukraine, continuedongoing geopolitical instabilityconflicts in the Middle East, and the escalating tensions in the South China Sea;

Our products and business involve the collection, storage and processing of customer data and, in some cases, information that relates to individuals and/or constitutes personal data (including from our employees, business partners and others, and, in some cases, from our customers), and our products may provide business critical software and analytics necessary for our customers’ operations. As such, we may be an attractive target for data security attacks that threaten the confidentiality, integrity, and availability of our information technology systems and confidential information. Security incidents or breaches could result in public disclosure of confidential information or personal information, loss or modification of data affecting our customers’ operations, fraud or theft, ransom demands, or other misuse of confidential information or personal information, which in turn could result in our cloud services being perceived as not being secure, a reduction in customers using our products, as well as litigation, breach of contract claims, indemnity obligations, additional reporting requirements and/or oversight, restrictions on processing data, and other liabilities for our Company,liabilities, all of which could lead to loss of revenue, a diminished ability to retain or attract new customers due to reputational harm, fines, costs, or other penalties or sanctions. While we have taken, and are continually updating and enhancing, steps to protect the confidential information, customer data and personal data that we steward, including confidential information we may obtain through our customer support services or customer usage of our cloud-based services, our security measures or the security measures of companies we rely on could be breached. We rely on third-party technology and systems for a variety of information technology systems and related products and services, including, without limitation, cloud computing services, encryption and authentication technology, employee email, content delivery to customers, back-office support, and other functions. Our ability to control or prevent breaches of any of these systems may be beyond our control. Any failure by a third party to prevent or mitigate data security incidents, breaches or improper access to, or use, acquisition, disclosure, alteration or destruction of customer data could have adverse consequences for us. Because techniques used to obtain unauthorized access or infiltrate, sabotage, disable or degrade systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures despite our efforts in implementing and deploying security measures. The use of constantly evolving technologies by diverse threat actors, including state-sponsored organizations, opportunistic hackers and hacktivists, such as the increased use of AI technologies, are sophisticated and complex and may increase the velocity of such threats, frequency of incident cases, and otherwise magnifying the risks associated with these types of attacks. These attack vectors may include social engineering/phishing, malware (including ransomware), malfeasance by insiders, human or technological error, and as a result of malicious code embedded in open source software or the exploitation of bugs, misconfigurations or exploited vulnerabilities in software or hardware that is integrated into our (or our suppliers’ or service providers’) information technology systems, products or services. Although we have developed systems and processes designed to protect our and our customers’ data, prevent loss or unauthorized modification of data, ensure only authorized use of services, and prevent other cybersecurity incidents or breaches, including systems and processes designed to reduce the impact of a security incident or breach to a third-party vendor, such measures cannot provide absolute security, and our systems may be vulnerable to malware or physical or electronic break-ins that our security measures may not be able to detect, investigate, remediate or recover from, or to avoid a material adverse impact to our information technology systems, confidential information, supply chain or business. Moreover, we have acquired and continue to acquire companies whose systems may contain cybersecurity vulnerabilities and/or unsophisticated security measures, which may expose us to significant cybersecurity, operational, and financial risks. Because our products are integrated with our customers’ systems and processes, any circumvention or failure of our cybersecurity defenses or measures could compromise the confidentiality, integrity, and availability of our customers’ own information technology systems and/or confidential information as well.

In January 2026, our board of directors approved and authorized a new share repurchase program of up to $500.0 million of our outstanding shares of common stock, following the completion of our previous $400.0 million share repurchase program authorized in September 2022. As of JanuaryApril 31,30, 2026, $490.0$240.5 million of our share repurchase program remained available for future repurchases. Share repurchases under the share repurchase program may be made from time to time, in the open market, in privately negotiated transactions and otherwise, at the discretion of management and in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act, and other applicable legal requirements. Such repurchases may also be made in compliance with Rule 10b5-1 trading plans entered into by us. The timing, pricing, and size of these repurchases will depend on a number of factors, including the market price of our common stock and general market and economic conditions. The share repurchase program does not obligate us to repurchase any dollar amount or number of shares, and the program may be suspended or discontinued at any time, which may result in a decrease in the price of our common stock. Our share repurchase program could affect the price of our common stock, increase volatility, and diminish our cash reserves.

As of JanuaryApril 31,30, 2026, we had outstanding an aggregate principal amount of $690.0 million of our 2029 Convertible Senior Notes, due November 2029. In addition, we have available a $300.0 million senior revolving credit facility, arranged by a syndicate of financial institutions. Our indebtedness may increase our vulnerability to any generally adverse economic and industry conditions, and we and our subsidiaries may, subject to the limitations in the terms of our existing and future indebtedness, incur additional debt, secure existing or future debt, or recapitalize our debt. If we incur additional indebtedness, the risks related to our business would increase and our ability to service or repay our indebtedness may be adversely impacted.

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. OngoingGeopolitical conflictsand macroeconomic factors, such as the war between Russia and Ukraine, continuedongoing geopolitical instabilityconflicts in the Middle East, escalating tensions in the South China Sea, high interest rates, tariffs, financial instability and crises, pandemics, and supply chain issuesissues, have added to global economic and market volatility. Our past business and financial results, including our ARR growth rates, services revenue, and margins, have been adversely impacted due to the disruptions resulting from such events, and may be again in the future. Such global events have disrupted and may again disrupt the normal operations of our customers’ businesses and our SI partners’ businesses. The related impacts of global events on the global economy could decrease or delay technology spending and adversely affect demand for our products. Further, our sales and implementation cycles could increase, which could result in contract terms more favorable to customers and a potentially longer delay between incurring operating expenses and the generation of corresponding revenue, if any, or difficulty in accurately forecasting our financial results. Additionally, our customers may be unable to pay outstanding invoices or may request amended payment terms due to the economic impacts from such global events and related implementation delays. As a result of such developments and the related economic impact to our business, we may be required to record impairment related to our operating lease assets, investments, long-lived assets, or goodwill. Due to the continuing and evolving nature of such global events, it is not possible for us to accurately predict the duration or magnitude of the adverse impacts and effects on our business, results of operations, or financial condition. Further, to the extent global events adversely affect our business, results of operations, or financial condition, itsuch events may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

General worldwide economic conditions remain unstable, and prolonged economic uncertainties or downturns could harm our business, results of operations, or financial condition. In particular, global inflation concerns, ongoing conflicts such as the war between Russia and Ukraine, continuedongoing geopolitical instabilityconflicts in the Middle East, escalating tensions in the South China Sea, tariffs, and the occurrence of regional epidemics or a global pandemic and related public health measures, have created and may continue to create global economic uncertainty in regions in which we have significant operations. These conditions may make it difficult for our customers and us to forecast and plan future business activities accurately, and could cause our customers to reevaluate their decision to purchase our products, which could delay and lengthen our sales cycles, delay or increase pricing pressures on services engagements, or result in cancellations of planned purchases. Moreover, during challenging economic times our customers may face issues in gaining timely access to sufficient credit, which could result in an impairment of their ability to make timely payments to us. If that were to occur, we may not receive amounts owed to us and may be required to record an accounts receivable allowance, which would adversely affect our financial results. A substantial downturn in the P&C insurance industry may cause firms to react to worsening conditions by reducing their capital expenditures, reducing their spending on information technology, delaying or canceling information technology projects, or seeking to lower their costs by renegotiating vendor contracts. Negative or worsening conditions in the general economy both in the United States and abroad, including conditions resulting from financial and credit market fluctuations, tariffs, and inflation, could cause a decrease in corporate spending on enterprise software in general, and in the insurance industry specifically, and negatively affect the rate of growth of our business.

Our customers are P&C insurers that have experienced, and will likely experience in the future, losses from catastrophes or terrorism that may adversely impact their businesses. Catastrophes that impact our business, our customers, or third parties we rely on can be caused by various events, including, without limitation, hurricanes, tsunamis, floods, typhoons, windstorms, earthquakes, hail, tornadoes, explosions, volcanic eruptions, severe weather, excessive heat, epidemics, pandemics, and fires. Climate change and other environmental factors are contributing to an increase in erratic weather patterns globally and intensifying the impact of certain types of catastrophes. Moreover, acts of terrorism, armed conflict, or uncertainty in the geopolitical landscape, includingsuch as the ongoing war between Russia and Ukraine and continued geopolitical instabilityconflicts in the Middle East, as well as the escalation of tensions in the South China Sea, could cause disruptions to our business or our customers’ businesses or the economy as a whole. The risks associated with natural catastrophes, the geopolitical landscape, and terrorism are inherently unpredictable, and it is difficult to forecast the timing of such events or estimate the amount of losses they will generate. Events such as hurricanes, wildfires, heatwaves, earthquakes, and flooding in various regions illustrate the potential severity of such occurrences and their significant impact on P&C insurers. Such events may adversely impact our current or potential customers, which may prevent us from maintaining or expanding our customer base and increasing our revenue, as such events may cause customers to postpone purchases and professional service engagements or to discontinue existing projects.

The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Although we believe our operating activities act as a natural hedge for a majority of our foreign currency exposure at the cash flow or operating income level because we typically collect revenue and incur costs in the currency of the location in which we provide our products and services, our relationships with our customers are long-term in nature so it is difficult to predict if our operating activities will provide a natural hedge in the future. In addition, because our contracts are characterized by large annual payments, significant fluctuations in foreign currency exchange rates that coincide with annual payments may affect our cash flows, revenue or financial results in such quarters. Our results of operations may also be impacted by transaction gains or losses related to revaluing certain current asset and liability balances that are denominated in currencies other than the functional currency of the entity in which they are recorded. Moreover, significant and unforeseen changes in foreign currency exchange rates may cause us to fail to achieve our stated projections for revenue, ARR, and operating income, which could have an adverse effect on our stock price. We expect global exchange rates for various currencies may be more volatile than normal as a result of ongoingglobal conflicts,events, including the war between Russia and Ukraine, continuedongoing geopolitical instabilityconflicts in the Middle East, the escalation of tensions in the South China Sea, and related events. We will continue to experience fluctuations in foreign currency exchange rates, which, if material, may harm our revenue, ARR, or results of operations.

In the event the conditional conversion feature of the 2029 Convertible Senior Notes is triggered, the holders thereof will be entitled under the terms of the 2029 Indenture to convert their 2029 Convertible Senior Notes at their option. As of JanuaryApril 31,30, 2026, the conditional conversion feature of our 2029 Convertible Senior Notes was not triggered. If the conditional conversion feature of the 2029 Convertible Senior Notes is triggered and one or more holders elect to convert their 2029 Convertible Senior Notes, we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, in certain circumstances, such as conversions by holders or redemption, we could be required under applicable accounting rules to reclassify all or certain of the outstanding principal of such series of notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

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,States and Canada, and is generally suited to mid-market carriers and managing general agents whose needs are often not as complex as a typical InsuranceSuite customer.

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, the ongoing conflicts such as the war between Russia and Ukraine, continued geopolitical instabilityconflicts 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.

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 sixnine months ended JanuaryApril 31,30, 2026, the recurring license and support or subscription contract value recognized as services revenue was $4.6$5.9 million.

As of JanuaryApril 31,30, 2026, ARR was $1,121$1,147 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.

Subscription revenue increased by $61.1$65.7 million and $115.7$181.3 million during the three and sixnine months ended JanuaryApril 31,30, 2026, respectively, compared to the same periods a year ago, primarily due to the impact of cloud transition agreements entered into and provisioned since JanuaryApril 31,30, 2025, new subscription agreements, and the renewal or extension of subscription services at the fully ramped annual fees after the initial committed term.

Support revenue decreased by $1.7$2.8 million and $3.8$6.6 million during the three and sixnine months ended JanuaryApril 31,30, 2026, 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 that the small percentage of term licenses 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.

Term license revenue decreased by $4.2$1.2 million and $0.8 million during the three and nine months ended JanuaryApril 31,30, 2026, respectively, compared to the same periodperiods a year ago, primarily due to agreements that migrated from a term license to a subscription service.

Services revenue increased by $14.4$17.4 million and $27.1$44.4 million during the three and sixnine months ended JanuaryApril 31,30, 2026, respectively, compared to the same periods a year ago, due to higher utilization of services employees and new subscription implementation and migration projects.

Cost of subscription and support revenue during the sixthree months ended JanuaryApril 31,30, 2026 increased by $14.7$10.5 million compared to the same period a year ago, primarily due to increases in personnel costs of $6.3 million due to higher headcount, cloud infrastructure expenseexpenses of $6.0$6.1 million fromdriven by increased transaction volume on our cloud services, personnel costs of $2.5 million due to higher headcount, amortization of intangible assets of $0.9$0.7 million, and royalties of $0.7$0.5 million.

We expect the cost of subscription and support revenue to increase in absolute dollars due to thea increasedgreater number of customers utilizing our cloud services, thecontinued volumeadoption of transactionscloud-based byand ourAI-related product features, growth in cloud customers,customer transaction volume, and the impact of inflation and other macroeconomic events.

Cost of license revenue decreased by $0.5 million and $0.7$1.3 million during the three and sixnine months ended JanuaryApril 31,30, 2026, respectively, compared to the same periods a year ago, primarily due to decreases in personnel costs of $0.3 million and $0.7$1.0 million, respectively, and to a lesser extent, decreases in royalties. 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.

The $21.9$15.1 million increase in cost of services revenue during the sixthree months ended JanuaryApril 31,30, 2026, compared to the same period a year ago, was primarily due to increases in personnel costs of $16.2$8.2 million due to higher headcount andheadcount, subcontractor expenses of $4.0$3.8 million due to implementations involving our SI partners.partners, and travel expenses of $2.2 million.

We had 651663 cloud operations and technical support employees and 947972 professional services employees at JanuaryApril 31,30, 2026, compared to 591 cloud operations and technical support employees and 802836 professional services employees at JanuaryApril 31,30, 2025.

Our gross profit increased $52.4$53.9 million during the three months ended JanuaryApril 31,30, 2026, 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 from cloud migration and new and renewed subscription orders.orders at a rate higher than subscription and support costs. Services contributed to the increased gross profit due to higher utilization of services employees and higher revenues from new subscription implementation and migration projects. These increases were partially offset by a decrease in license gross profit due to lower license revenue as customers migrate to subscription services.

Our gross margin increased to 64% during the sixthree months ended JanuaryApril 31,30, 2026 from 61%62% during the same period a year ago. Gross margin increased primarily due to the growth in subscription and support revenue which continues to outpace personnelincreases andin cloud infrastructure and personnel costs.

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 and scale our cloud platform. 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.team and the impact of any arrangements entered into to encourage customers to migrate from licenses to subscription services. 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 revenue 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.

Our research and development expenses primarily consist of personnel costs for our technical staffstaff, web hosting costs, and consultantssoftware providingsubscription professional services.costs.

The $13.1$15.0 million increase in research and development expenses during the three months ended JanuaryApril 31,30, 2026, compared to the same period a year ago, was primarily due to increases in personnel costs of $11.8$11.0 million associated with higher headcount.headcount, and web hosting and software subscription costs of $2.8 million driven by increased product development efforts.

The $22.5$37.4 million increase in research and development expenses during the sixnine months ended JanuaryApril 31,30, 2026, compared to the same period a year ago, was primarily due to increases in personnel costs of $18.5$28.4 million associated with higher headcount, professional services of $1.5 million, and web hosting expensesand software subscription costs of $1.3$5.7 million.

Our research and development headcount was 1,3401,369 at JanuaryApril 31,30, 2026, compared with 1,1441,204 at JanuaryApril 31,30, 2025.

We expect our research and development expenses to increase in absolute dollars due to inflation and investments to enhance and develop our productproducts 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. Our research and development expenses may also increase as we dedicate more resources to our software development effortsefforts, utilize AI tools to accelerate development efforts, and our investmentinvest in AI-driven solutions for our customers, as well as if we pursue additional acquisitions.

The $18.8$10.4 million increase in sales and marketing expenses during the sixthree months ended JanuaryApril 31,30, 2026, compared to the same period a year ago, was primarily due to increases in personnel costs of $13.1$7.8 million associated with higher headcount, which includes the impact of contract acquisition costs, travel expenses of $3.1 million, and marketing and advertising expenses of $2.5 million, partially offset by decreases in amortization of intangible assets of $0.3$1.9 million due to customer events and webincreased hostinglead costsgeneration of $0.3 million.activity.

Our sales and marketing headcount was 547554 at JanuaryApril 31,30, 2026, compared with 496497 at JanuaryApril 31,30, 2025.

We expect our sales and marketing expenses to continue to increase in absolute dollars dueas towe inflationsupport new product initiatives and investmentsongoing tosubscription supportand ongoingcloud growth, but decreaseto grow more slowly than revenue over time. As a result, we expect sales and marketing expense as a percentage of revenue to decline as overallwe hiringrealize slowsefficiencies afterand ourleverage recentprior periodinvestments of investment to build out ourin customer success team and add analytics and cloud sales capabilities.success.

The $6.6$2.4 million increase in general and administrative expenses during the three months ended JanuaryApril 31,30, 2026, compared to the same period a year ago, was due to increases in personnel costs of $4.9$2.6 million, driven by the impact of annual salary increases,increases and an increase in the annual bonus accrual and stock-based compensation, professionalwhich services expenses of $1.0 million, and facilities costs of $0.6 million,was partially offset by athe decreasenet impact of fluctuations in bad debt expenses, web hosting, software subscription costsand ofprofessional $0.4services million.costs.

The $12.3$14.7 million increase in general and administrative expenses during the sixnine months ended JanuaryApril 31,30, 2026, compared to the same period a year ago, was due to increases in personnel costs of $7.4$9.9 million driven by the impact of annual salary increases,increases and an increase in the annual bonus accrual and stock-based compensation, professional services of $2.2$1.8 million, bad debt expenses of $1.3 million, travel expenses of $1.0$1.5 million, and facilities costs of $0.9 million, partially offset by a decrease in software subscription costs of $1.1$1.2 million.

Our general and administrative headcount was 476491 at JanuaryApril 31,30, 2026, compared with 474468 at JanuaryApril 31,30, 2025. General and administrative headcount includes facilities personnel whose expenses are allocated across all functional departments.

Interest income decreased $3.2$2.5 million and $2.2$4.7 million during the three and sixnine months ended JanuaryApril 31,30, 2026, respectively, compared to the same periods a year ago, primarily due to lower interest rates.rates and lower available funds to invest due to purchases under our stock repurchase program.

Interest expense for the three months ended JanuaryApril 31,30, 2026 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 JanuaryApril 31,30, 2025 consists of stated interest of $2.9$2.4 million andmillion, non-cash interest expense of $1.2$1.1 million related to the amortization of debt issuance costs.costs, and $0.2 million of commitment fees on our undrawn 2025 Credit Facility.

Interest expense for the sixnine months ended JanuaryApril 31,30, 2026 consists of stated interest of $4.3$6.5 million, non-cash interest expense of $2.0$2.9 million related to amortization of debt issuance costs, and $0.5 million of commitment fees on our undrawn 2025 Credit Facility. Interest expense for the nine months ended April 30, 2025 consists of stated interest of $6.8 million, non-cash interest expense of $2.8 million related to the amortization of debt issuance costs, and $0.3 million of commitment fees on our undrawn 2025 Credit Facility. Interest expense for the six months ended January 31, 2025 consists of stated interest of $4.4 million and non-cash interest expense of $1.7 million related to the amortization of debt issuance costs.

Other income (expense), net during the three months ended JanuaryApril 31,30, 2026 was incomeexpense of $27.0$18.9 million, compared to expenseincome of $66.3$34.1 million during the same period a year agoago. dueThis tochange $53.3was millionprimarily driven by a foreign currency loss of expense$20.1 related to the retirement of a portion of our 2025 Convertible Senior Notesmillion during the three months ended JanuaryApril 31, 2025. Additionally, during the three months ended January 31,30, 2026, we recorded a foreign currency gain of $26.9 million, compared to a lossgain of $16.0$34.2 million during the same period a year ago due to fluctuations in foreign currency exchange rates.

Other income (expense), net during the sixnine months ended JanuaryApril 31,30, 2026 was income of $21.6$2.8 million, compared to expense of $70.3$36.3 million during the same period a year ago due to $53.6 million of expense related to the retirement of a portion of our 2025 Convertible Senior Notes during the sixnine months ended JanuaryApril 31,30, 2025. Additionally, during the sixnine months ended JanuaryApril 31,30, 2026, we recorded a foreign currency gain of $21.7$1.5 million, compared to a loss of $20.2$14.0 million during the same period a year ago due to fluctuations in foreign currency exchange rates.

We recognized an income tax expense of $14.4$3.3 million and an income tax benefit of $5.8$2.7 million for the three months ended JanuaryApril 31,30, 2026 and 2025, respectively, and an income tax expense of $7.6$10.9 million and an income tax benefit of $12.1$9.4 million for the sixnine months ended JanuaryApril 31,30, 2026 and 2025, respectively.

The change in income taxes recorded for the sixthree months ended JanuaryApril 31,30, 2026, compared to the same period a year ago, was primarily due to an increase in income before taxes, an increase in non-deductible executive compensation, a decrease in the Foreign-Derived Intangible Income (“FDII”) deduction, a decrease in research and development credits due to U.S. tax law changes under H.R. 1 enacted on July 4, 2025, offsetand bya an increasedecrease in the deductions for stock-based compensation.compensation, offset by a decrease in income before taxes.

In the United States, on July 4, 2025, H.R. 1 was signed into law. Among other provisions, the legislation reinstated immediate expensing for domestic research and experimental expenditures, extended 100% bonus depreciation for qualified property placed in service beginning January 20, 2025, and made certain other provisions of the Tax Cuts and Jobs Act permanent. The legislation has multiple effective dates, with certain provisions effective in fiscal year 2026 and others effective from fiscal year 2027. We recognized the fiscal year 2026 tax effects of the legislation in our income tax provision for the three and sixnine months ended JanuaryApril 31,30, 2026.

The effective tax rate of 19%17% and 8%9% for the three and sixnine months ended JanuaryApril 31,30, 20262026, respectively, differs from the statutory U.S. Federal income tax rate of 21% primarily due to tax deductions for stock-based compensationcompensation, the FDII deduction, and research and development credits, partially offset by state taxes and certain non-deductible expenses, including the limitation on executive compensation.

As of JanuaryApril 31,30, 2026, approximately $82.5$92.3 million of our cash and cash equivalents were domiciled in foreign jurisdictions. We may repatriate foreign earnings to the United States in the future to the extent that the repatriation is not restricted by local laws or there are no substantial incremental costs associated with such repatriation.

In December 2024, we entered into a revolving credit agreement (the “Credit Agreement”), which provides for a senior secured revolving credit facility in an aggregate principal amount of $300.0 million (the “2025 Credit Facility”). At our discretion, it allows flexibility for an uncommitted upsize of the aggregate principal amount of the 2025 Credit Facility or the establishment of incremental term loan facilities, in each case, as further set forth in the Credit Agreement. As of JanuaryApril 31,30, 2026, there were no outstanding borrowings of revolving loans under the 2025 Credit Facility and we were in compliance with related covenants. As of April 30, 2026, there was an outstanding standby letter of credit issued under the 2025 Credit Facility in an immaterial amount.

During the three and sixnine months ended JanuaryApril 31,30, 2026 ,2026, we repurchased 740,9951,696,180 and 2,437,175 shares of common stockstock, respectively, at an average price of $199.99.$147.07 and $163.16, respectively.

During the three and sixnine months ended JanuaryApril 31,30, 2025, we did not repurchase any shares of common stock.

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

Net cash provided by operating activities was $44.6$105.8 million for the sixnine months ended JanuaryApril 31,30, 2026 compared to net cash provided of $23.7$56.0 million during the sixnine months ended JanuaryApril 31,30, 2025. This $21.0$49.8 million increase in cash provided by operating activities was attributable to a $104.1$82.2 million increase in net income, after excluding the impact of non-cash charges such as deferred taxes, stock-based compensation expense, depreciation and amortization expense, and other non-cash items, offset by ana $83.1$32.4 million increase in cash used by working capital activities.

Net cash used in investing activities was $204.6$133.4 million for the sixnine months ended JanuaryApril 31,30, 2026 compared to net cash used in investing activities of $130.5$178.6 million during the sixnine months ended JanuaryApril 31,30, 2025. The $74.0$45.2 million increasedecrease in cash used was primarily due to $33.3higher millionproceeds net cash paid as purchase consideration forfrom the acquisition of ProNav, higher net purchases in excess of maturitiessales and salesmaturities of available-for-sale securitiessecurities, relative to purchases, compared to the same period a year ago of $26.0$80.2 million, partially offset by a net $17.7 million impact from strategic investment activity, an increase of $6.7 million in net cash paid as purchase consideration for business acquisitions, an increase in purchases of property and equipment primarily due to new office build outs of $6.5$7.6 million, a net $7.2 million impact from strategic investment activity, and an increase in capitalized software development costs of $1.0$3.0 million.