Good day and welcome to Guidewire's Fourth Quarter and Fiscal Year 2016 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Richard Hart, Chief Financial Officer. Please go ahead.

Good afternoon and welcome to Guidewire Software's earnings conference call for the fourth quarter of fiscal year 2016 which ended on July 31 of this year. My name is Richard Hart, and I am the Chief Financial Officer of Guidewire, and with me on the call today is Marcus Ryu, Guidewire's Chief Executive Officer. A complete disclosure of our results can be found in our press release issued today, as well as in our related Form 8-K furnished to the SEC, both of which are available on the Investor Relations section of our website at ir.guidewire.com. As a reminder, today's call is being recorded and a replay will be available following the conclusion of the call. During the call, we will make forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding trends, strategies, and anticipated performance of the business. These forward-looking statements are based on management's current views and expectations as of today, and should not be relied upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. Actual results may differ materially, please refer to the Risk Factors in our most recent Form 10-K and 10-Qs filed with the SEC. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of non-GAAP to GAAP measures is provided in our press release. Reconciliations and additional data are also posted in a supplement on our IR website. During the call, we may offer incremental metrics to provide greater insight into the dynamics of our business. These details may be one-time in nature, and we may or may not provide updates in the future. With that, let me turn the call over to Marcus for his prepared remarks. I will provide details on the fourth quarter of fiscal 2016 and for the full year, and our outlook for Q1 and fiscal 2017.

Thanks, Richard. Revenue and profitability were above the high end of our outlook for the fourth quarter, with total revenue of $141.2 million and non-GAAP net income of $61.9 million. License revenue was $88.2 million, with both term license and total license revenue increasing 20% from a year ago. Term license and maintenance revenue for the trailing 12 months totaled $268 million, an increase of 22% from a year ago and above our target growth of 20%. This performance capped an important year for Guidewire as we gained momentum in the marketplace with the growing adoption of Guidewire's insurance platform. We introduced new versions of all our products including the first cloud-ready release of our core product, Insurance Suite 9. And as of last week welcomed new colleagues from two acquired companies who will help us expand our value proposition to P&C insurers. This is a period of dramatic change for the industry filled with both new threats and new opportunities. We talk to insurers aiming to develop and compete with disruptive new business models to design new products to address emerging risks, to better leverage their existing data, and incorporate new data to price risk more effectively and to engage with their customers digitally with intuitive applications matching today's user's expectations. Guidewire's mission and opportunity is to provide the industry-standard operating platform for insurers to compete effectively in this dynamic landscape. Our continuing investments in research and development reflects this commitment. In the fourth quarter, we began new relationships or expanded existing ones with insurers of all sizes in multiple countries. These insurers adopted components from across Guidewire's insurance platform, our transactional core systems, our data and analytics products, and our digital portal. Our activity in the Tier 1 segment of our market was noteworthy. We completed a follow-on…

Thank you, Marcus. As Marcus indicated, we exceeded our guidance for fourth quarter revenue and earnings. Total revenue in the quarter was $141.2 million, with license revenue of $88.2 million. Within license revenue for the quarter, term license revenue was $82.5 million, an increase of 20% from a year ago. Our quarterly results benefited from an early payment of approximately $2.7 million which contributed to revenue and earnings upside. Under our model, we recognized revenue under the earlier due date or payment receipt. Sometimes customers remit payments early and these payments cannot be anticipated. A sizeable payment of this kind can modestly increase growth and profitability metrics in the current period and lower than subsequent periods to with the guidance I will review for the first quarter and for fiscal 2017 is impacted by this lack of revenue. Perpetual license was $5.7 million in the quarter reflecting anticipating increase in perpetual licenses in the second half of the year. As we have noted, a limited number of transactions in any quarter or year can result in this level of perpetual license. Nevertheless, the term license model remains the predominant way we license our software. Maintenance revenue was $17.0 million for the fourth quarter, up 29% from the year ago, and above our guidance range. Maintenance revenue benefited in part from the recognition of approximately $0.9 million in revenue that we have not been able to recognize previously in fiscal 2016 due to certain contractual provisions. Service revenue was $36.9 million, a decrease of 9% from the year ago. The result was slightly below our guidance range due to the delay of several projects and to a lesser degree, capacity constraints in the Americas regions which developed in the second half of the year with the increasing scope of the digital…

Thank you. [Operator Instructions] And our first question comes from Sterling Auty with JPMorgan.

Thanks, hi guys. I actually got disconnected for couple of minutes or so, hopefully this was already covered. But when you look at the pure public cloud implementation or version of the core platform, where is the interest level in the customer base coming from at the moment? Are you seeing it's the smaller customers that are interested in it or is it for smaller lines among some of your bigger customers or is it kind of up and down the customer size, ones that you're seeing that interest level?

Sterling, I would say that there is a broad cross section of interest. It’s a topic that the CIO of any sized insurance company wants to have a discussion about and sometimes the discussion is not only about our software but our view on how they should think about their overall enterprise IT environment. So it's -- I think there is a broad level of interest across the industry, and I suspect you would find the same in other industries. In terms of the segment of the market that we expect the most rapid adoption or those who we expect to deploy Insurance Suite 9, on public infrastructure very early, and we haven't even released all the aspects of IS9 yet, but I think we would expect it to be probably smaller insurers or greenfield subsidiaries of large insurers, but we could be surprised in our respect and if so we'll adapt accordingly.

All right. And then my one follow-up, in terms of the investments that you're making here for this coming fiscal year, how should we characterize, how much of that incremental investment is other investments whether it be marketing, advertising, etcetera. And within the headcount, how should we think about the split of how much of it is going to go into R&D versus other functions?

Sterling, it's Richard. I think as we look out to fiscal year 2017, I think we're going to see more adds to R&D, in fact this year R&D adds were quite light because we delayed hiring -- primarily until the second half when the market was a little bit more ready. So, I think we're going to continue to see hiring in R&D and maybe in fact increase the actual headcount as we deploy more of those resources to our new polling center although we will continue to hire in all of our locations. We will continue to hire in services during the year and as we seek to address -- continue to address some capacity constraints that crept into the system because of the storage digital greenfield project that we've undertaken, and so you should expect to see hiring in services commensurate with the hiring that we made this year. We are also adding about 20 to 30 people in the sales and marketing organization, primarily handle sales of new products. So we will be increasing quota carrying capacity modestly, and we will also be adding our pre-sales and sales consulting organizations.

Got it, thank you.

Thank you. Our next question comes from Ken Wong with Citigroup.

I guess touching on the -- this capacity greenfield project, so you mentioned $20 million to $25 million in deferred revenue. Any rough sense for how much of that would hit in Q4 when you said that this project probably goes live?

Since we're looking at the project starting towards the latter half of fiscal year '17 and maybe in the fourth quarter, I think we're only currently modeling the low-single digits.

A clarification there, the project has started, when the project will be going live. The initial go-live will be -- is expected in the second half of the year, probably closer to the fourth quarter. So it will be only a few months of ratable recognition of those deferred revenues.

Got you. And then -- I guess on the gross margin impact, so you mentioned -- just trying to circle back there. Around six points on the services side but should we expect that in Q1 that's going to hit meaningfully more so than kind of in the back half of the year? And if so, can you give us some sense of what the margin might be in Q1?

So I think you should expect that to hit linearly throughout the year and unfortunately the margin impact in any particular quarter can vary quite a bit. In part, because of seasonality in the services line whether it's due to holidays or due to summer vacations. So it's a little bit difficult for us to give you guidance on services margins for the quarter right now. But I think if you guide yourself through with the seasonal patterns that we've kind of established, that will give you a sense as to where that impact will be felt, but the 6% applies to the total year.

Got it. And then Marcus, it sounds like for fiscal year '17 you guys mentioned that's going to be maybe more big deal loaded. I guess would you say that that -- again it sounds like it's definitely more Tier 1. Is that just more result of just customers just finding their way on the platform? I'm just kind of getting closer to actually deploying on the platform or is it just you guys have engaged with more of these customers and what we should be expecting longer sales cycles and things that potentially fall to the back half of the year?

No, we wouldn't want to suggest there is a shift in the pace of deals getting done. I think you heard from us over our whole series of calls, important for the Tier 1 segment or the individual accounts within the Tier 1 segment. The fact that we have a long-term -- in some cases, multi-year conversations going with them and the way that it has affected our outlook for this current year is an overall pipeline that is, I would -- I think we'd say modestly tilted towards larger accounts, both net new and existing relationships. And given that fact, and our -- the traditional conservatism that we apply to the forecast in building a financial outlook for the year, there has definitely been a modest effect of that given how early we are in the year right now.

Got it. And I forgot, kind of a follow-on that earlier greenfield project line of questioning but -- you mentioned no other customers currently you guys are working with. Is it fair to assume once you guys have the go-live in the back half of the year that it's something that you could bring more people into or I guess basically, is that sort of the threshold or can you guys introduce new customers right now that are into that particular project?

Yes, the first half is what you said, kind of, is absolutely the intention. We're building -- as in all things we do a standard product that we intend to license with standard as possible commercial terms to as many insurers as possible. There is a bit more collaboration with this particular customer and the accounting treatment of that evaluated some of things that we're intending to do here as undelivered elements for this first project but precisely the point is to build a market leading offering that we can license repeatedly and that is absolutely what our customer wants as well.

Okay, it's fantastic. Thanks a lot guys.

Thank you. We'll take our next question from Justin Furby with William Blair & Company.

Yes, thanks guys. I wanted to first ask on seasonality. I guess Marcus or Richard, can you remind us why last year was more balanced across quarters and why you expect more seasonality return this year? And I'm curious how you're guiding to the digital and data products this year? It seems like they are probably with a positive surprise, a 25% of bookings. If it comes in again at that level in fiscal '17, would that be more upside or what is the guidance factor on those products? And you will get a couple of follow-ups.

Sure, I appreciate the question Justin. So the first question was about the linearity or seasonality of the year. I would love to understand why the year that we have -- that we just finished was more linear than usual. I think it was just a modest statistical loop because certainly every other year we've had including the ones when we were a private company had the classic enterprise software sales pattern of deals shifting towards the back half of the year, no matter where in the calendar we had rotated our fiscal year. And last year was a bit anomalous in that respect just because of a couple of transactions. And our outlook right now, here we are in the first month of -- or the second month of the fiscal year is that it's probably going to be more like the standard seasonal pattern, though there is only the chance of being surprised again, it only takes a few deal to make a big difference in that shape. The second part of your question was about the contribution of newer products to the bookings expectation for the year. We were positively surprised last year, I think that because while first there is a tailwind of demand for the themes that our newer products address, namely data and digital. Also our sales team I think found some real targets of opportunity on existing customers that were very satisfied with their platform or the insurance suite investment they made and saw a very logical expansion of the scope of their program to include data and digital. And then we added a bit to that with some modest sales incentive that in hindsight we're probably a bit more than necessary, although which motivated more success in the newer products than we had originally expected. Looking into this year, we don't think -- we don't expect any acceleration there. It could be something quite close to what we experienced last year but it's important to keep in mind that the newer products are combined with an insurance suite sale or bundled with that. And so in a sense it's -- it is a subset of the total addressable market that we have whereas we can -- we're aspiring to sell insurance way to lots of met new customers as well, and that's obviously not the case with the newer products.

Got it, that's helpful. And then Richard, there were lot of moving parts with guidance and I guess could you go back to the cash flow guidance, I thought you said high 60's, low 70's operating cash flow and if I heard that right, that's a pretty big disconnect between your operating or your EBITDA guidance for fiscal '17. So what -- did I hear that right and what drives the disconnect better [ph]?

So Justin, please correct me; are you referring to my cash flow guidance for or perspective for fiscal year '17? If that's the case, I think you're understating that perspective because I think as I'm just trying to find it again, I apologize I had a lot to say today.

Yes, I was referring to fiscal '17 Richard, just the operating cash flow data. I think…

So what I said was $70 million to $85 million.

70 to 85, all right, okay. Sorry, is there anything to think about in terms of that versus your margin guidance and just from a cash flow perspective versus last year and how it played out?

I mean -- I think last year we did very, very well in collections which led to an outsize performance on the cash flow for operating and free cash flow. I think this year as we give guidance for the year or give our perspective for the year, which is something we have not done in the past, we want to take a slightly more conservative view simply because we can be whip side [ph] a little bit by the effects of working capital on that perspective.

Okay, got it. And then last question on the margins for this year, I guess when you think out to what you laid out last year, the analyst data, high 20% to 30% margin, sort of five-year frame look itself. When our four years from that, is there any change to that deal? It would seem like you're being a pretty big ramp exiting fiscal '17 to get there. I guess are you really thinking that view as you start to get into some of these newer cloud investments? Thanks.

Sure. The timing of those -- of any potential transition, a part of our licensing model can have an impact on margin that is difficult for us to control over a long period of time. Having said that, I think if you look at the -- what we hope to be able to achieve from the pricing perspective for that particular type of engagement, I think the margin impact is actually quite modest when those projects actually come to full realization. And when we can amortize the investments we've made in cloud operations and production services over multiple customers as oppose to just one. And indeed, the margin impact this year naturally reverses a significant portion of itself, simply from the operation of the deferred revenue that comes in next year. So that deferred revenue actually carries with it a very healthy margin, and so that deferred revenue flows through the year next year, you will simply see margins accreting kind of almost to the same level that they were impacted this year for that particular engagement. So we are not moving away from our current commitment and we will update the street if we ever decide to do so.

Thanks very much guys.

Thank you. Our next question comes from Nandan Amladi with Deutsche Bank.

Thank you, good afternoon. The first question is on the mix of new versus upsell. You've launched a whole bunch of new products this past year, Version 9 now has different configurations you've been deploying in. So has that changed at least early indications on the mix between you and upsell?

Nandan, at Analyst Day we were planning on talking a little bit about the mix between our land and expand strategy. Last year if you recall, we were slightly weighted towards land, this year you will see the reverse. As a result of the fact that we were selling a lot of the new products to our installed base, as well as the fact that we were able to convert a couple of existing large clients with additional sales. So I think the preliminary view of that kind of land and expand statistic is, that we were 60% expand this year versus 40% land. So indeed, more in line with where we were in 2012 when we -- in 2013 when we expanded our licenses to nationwide in hard part [ph].

All right. And my second question you probably, I've answered this already. The ramped deals, obviously, those had counters upsell. So if you've shift seeing that shift, if that explains largely.

Yes, so we haven't talked about it but I think this year as we look through -- pass through the year, we note that the ramp transactions represent on a percentage basis about the same as they did last year as a percentage of sales. So we think that escalating payments in our licensed agreements or at least a significant minority of those licenses seem to be here to stay.

Great, thank you.

Thank you. Our next question comes from Alex Zukin with Piper Jaffray.

Thanks for taking my questions. So maybe I missed this in the prepared remarks or maybe just a step back for a second, Marcus, is there any chance you can maybe simplify or just introduce this digital greenfield product; what is the strategy? Is this a domestic or international customer? And ultimately why you engaged in this arrangement in the first place and what's kind of the pay-off behind some of these investments that you've made? And then I've got a follow-up.

Sure. I'm happy to give a little more context. Out of respect for the customer and their own business intentions, you will understand that we don't want to share their name specifically but I think I can tell you, it is the U.S. customer, it's a large P&C player with -- that writes many different standard lines of P&C insurance. Like other insurers, they feel both the pressures and the opportunities of -- even there is change in end market behavior for new digital technologies, for new approaches and to particular analytics and alike. And they have a notion that they can go to market -- they want to go to market as rapidly and even vigorously as possible with a new offering as unburdened as possible from their current state business, even with some other marketing approaches wrapped around that, try to make a splash in the market. And that -- we see that kind of innovation or that kind of intention expressed both by, very longstanding, well established insurers as well as new entrants. It's very thematic of what we're seeing in the industry overall and it's a trend that we think normally is inevitable but the one you want to have a central role in enabling. So everything that they are doing will be based on our platform. Some of the capabilities that they want are net new functionality to what we offer today and there was an opportunity to collaborate with them in a really -- kind of high stakes market live context to get their advice and their inputs and prioritization as we put those features into the platform. There was another very important dimension here in that, they want to deploy at cloud base as possible, and that is a significant difference from really…

And Marcus was this an existing customer that was a policy customer with guide where that you expanded the relationship whether or was this a net new customer that engaged and completely -- that you've engaged in a net new way?

It's the former, we had a relationship with their current state business which is more conventional style project with involving data conversion and integration into an existing enterprise IT environment and are like -- this customer also -- at the same time that business will continue -- we wanted to take a greenfield approach to different market segments with a completely digital kind of strategy. So it's the same enterprise but in a sense two different projects under that roof. There is a longer term path of conversion but at this stage of the project it's really two different distinct efforts underway.

And then separately, last Q4 you guys signed a record, I think five Tier 1's. Can you update -- and you mentioned farmers I think in the script as one were you, expanded into claim center in addition of kind of the policy center -- sign of the time. Can you update us on kind of the penetration of the total potential licensing opportunities at those? And how you're thinking about that in terms of the guidance for the next year?

Sure. Just to reiterate what I said in the prepared remarks there was also International Australia Group or IAG which is the largest domestic insurer in Australia, they are a Tier 1 by our definition. We have served them really with an acquired subsidiary in New Zealand and this new relationship that we're starting with them is a much more enterprise-wide for their core domestic business. And then the other one I mentioned was MAPFRE which is a net new customer, new for us, quite a large multi-national and a company at Europe based in Spain, that's a new relationship. To the other part of your question about expansion within some of the new Tier 1s that we signed, that is absolutely happening, not exactly at the same pace and relationship as you would expect but we've advanced dialogue with multiple of them and they comprise a meaningful portion of our outlook for this current fiscal year.

And then maybe Richard, just a quick one on -- you may have addressed this in the Q&A already. But the maintenance revenue -- the sequential decline in the maintenance revenue in Q1 that looks a little bit different, is that because of some of the pull-in that you mentioned or is there some other dynamic we should take note of?

Yes, that's right. I mean unfortunately every once in a while we have catch-ups and true-ups that can modestly influence any particular quarter. In this particular case in Q4, we benefited by about $900,000 of that kind of recognized maintenance set of payments that were being -- in some cases were being made, in some cases the contract required us not be involved until acceptance but those announcements were curling and that's the primary effect from quarter to quarter. On a year-over-year basis, that seems to be understood as that last year we benefited simply by a front end loaded calendar of new deals and therefore we had more time to generate more maintenance revenue during the year whereas this year we're going back to our more traditional seasonal pattern, and in fact if you look at Q1 and you actually adjust for the effect of the prepayment, Q1 is growing 11% year-over-year which is much more in-line with our traditional Q1 dynamic.

Thanks guys. I'll jump back in the queue.

Thank you. Our next question comes from Tom Roderick with Stifel.

Hey gentlemen, good afternoon. Thanks for taking my question. Marcus, can you just talk a little bit more about your current thinking about the go-to-market for your cloud-based offerings, Version 9, and particularly I'd love to hear a little bit more about any sort of incremental CapEx plans that sort of has to be rolled into the model. And then beyond that, what kind of role can your global services partners take in deploying cloud as well? Thanks.

Sure. First an important clarification that what we are releasing with Insurance Suite 9 is a cloud deployment option, you can take our software and run it in a production environment on public infrastructure, most obviously Amazon Web Services or Azure. That does not commit us in those deployments for us to be the one taking production responsibility for the deployment. And it does not fundamentally change the nature or the division of labor that we have with our systems integrator partner. As you'd expect, those partners are very enthusiastic to be involved in any project, whether it's deployed on-premise or on public infrastructure and we expect that will continue pretty much along the same track that we've had before. In terms of the capital requirements for insurance, there really are none that specifically overtime as we -- as part of our functional roadmap as we offer services that will be cloud native, some assets of the functionality that we intend to develop will be delivered in -- at the cloud native service kind of form. And there may be some modest CapEx that's associated with that development and how we characterize the investment to build those services versus our traditional software approach but those are modest and don't really, materially affect our outlook certainly for this year.

Got it, that's a helpful clarification. And then with all the success you've had in last year around the digital portal business and seems like that will reset to continuing going forward. Can you provide a little bit of an update just around some of the ongoing traction with Guidewire Live apps, the suite of the apps you've got there and what the existing partners are doing to sort of continue to put some of their own data into Guidewire Live and how they are thinking about that these days?

Yes, we've evolved our go-to-market approach with Guidewire Live and the whole thesis about the way that predicted analytics and data visualization will be used by the industry, so it's been meaningfully useful period of working with customers with it but I think we've concluded that the initial hypothesis of how we would go to market with that functionality and standalone almost differently, separately branded category of products isn't the most effective and that really what insurers wanted to see that data visualization and that -- and any kind of analytic insight that comes out of that data to be embedded with the core application. And so we've taken the approach of kind of incorporating that into the future sets of what we're doing with -- really insurance suite itself and it's a good early example of what I just mentioned in response to your other question Tom about a cloud native service that is delivered in sort of hybrid warm [ph] to customer. And from the end-users perspective, it's all the same, whether domestic of functionality or delivered on-premise and some come from calling a cloud-based service. So that's the approach that we're taking with Live and the big push that we're making overall with our data initiative is a combination of the business and some kind of conventional business intelligence but in a very insurance specific form and getting the most of out the predictive analytics acquisition that we made just a few months ago and applying predictive analytic intelligence to all the decision in the insurance lifecycle. I think there is enormous potential for that and it's actually a catalyst even for core system sales and that insurers recognize that's -- it's essential to their competitiveness in the future.

That's great. Thanks very much. I appreciate it.

Thank you. [Operator Instructions] Our next question comes from Rishi Jaluria with JMP Securities.

Thank you for taking my question. Just kind of a quick one for you Richard on the cash flow guidance coming back to that. The cash flow guidance you gave was roughly in-line with what you're giving in terms of guidance for non-GAAP operating income for the year. And I was just trying to understand because I know the dynamics affecting operating income include deferrals of revenue related to this digital greenfield project as well as the investment, and I'm just wondering how that's -- why the cash flow would still be in-line and still be declining because it wouldn't be impacted as much by the deferral revenues.

Yes, you're absolutely right in understanding that deferral of revenues will actually create a little bit of spacing [ph] between reported operating income and reported cash flows. If my cash flow guidance is modest, it's because I have seen over the last two years a very big swing in accounts receivable significantly affecting that line. If we are able to maintain DSOs where we were able to finish this year, I believe cash flows will be higher than what I've indicated that I wanted to just take a conservative position on that.

Okay, thank you very much.

Thank you. Our next question comes from Brent Thill with UBS.

Thanks. Richard, it's been four years historically when you were at 18% margins that came in higher this year, kind of blew out the trend. Now you're guiding margins below what you've done the last five years. So I think everyone has -- try to make sure we digest this correctly and if I just want to make sure I get this correct. The result of this is because of the new line of business, secondarily, the return of larger deals which is -- are lumpier and then thirdly, increase in sales and marketing. Is there anything else to take into account why that should trend down after it's been starting to trend back up after this year?

Yes, I think what I would suggest is that this should be viewed as a somewhat temporary decline that have we suggested margins will come back into line next year and some of the accounting related effects of the -- work with this digital greenfield customer kind of hit us this year. But then as we hope, we're still recognizing that deferred revenue next year which brings along with it quite a healthy margin. You will see the benefits of that transition clearly in the next fiscal year. In addition to that, one of the realities of our industry is that anybody that we acquire will likely not have the requisite ability to account for revenue in the way we account for revenues because they will miss one of the key important elements of having the SOE or standalone value or be able to recognize revenue as we do when we sold the software. So as a result, one of the challenges we face is that we are funding a sort of sale opportunities towards the two new acquired transactions in a way that we don't benefit from until we establish the SOE or until the deferred revenue write-downs that we experienced in the first year for those revenues that are ratable kind of come back in year two. So those are the two big things that you're going to see impacting margins. What you will not see impacting margins is any significant increase as a percentage of revenue of expenses, sales and marketing or R&D. Those expenses will be in line pretty much from year-over-year -- on a year-over-year basis.

Thank you.

Thank you. Our next question comes from Bradley Sills with Bank of America Merrill Lynch.

Thanks. Not to be the dead horse too much, but on the digital greenfield investment that you're making; it's a new line of business but it's commissioned by a single customer. How do you envision kind of the long-term for that business as its potentially the size of your data business. Overtime, is it applicable to the broader installed base, given that it's commissioned by single customer, what gives you the confidence that this is something that you view as applicable to the wider market in your installed base? Thank you.

Yes Brad, I think I may have contributed to a misunderstanding in my prepared remarks about the line of business. This is not a new line of business for Guidewire, these are new capabilities for our core platform that we intend to sell through the entirety of our markets. What -- the new line of business we referred to is for our customer who expanded the business scope of the project, and that decision was kind of finalized in the quarter which resulted in some of the change in our outlook at least as far the GAAP numbers are concerned. So it's really about working with a specific customer to advance the Vanguard of our core products capabilities that led to an accounting deferral of the work we're doing with that one customer. But the products that we will have -- the products that we have today and what they are deploying will be something applicable to the entirety of our markets.

Got it.

What is really is the production services that we will be ultimately accountable for in this engagement post go-live. And we are building that capability and that skill set, so that should other customers want to engage with us in that way will be able to actually scale that up going forward.

Yes. And Richard makes a good point, it's -- this is non-additional product, that capability is a different model of how we can serve customers that have really want more extensive division of labor with the technology provider. And in this particular case, we are taking on the entirety of that work but going forward we expect that even projects that have that deployment model will do one with the standard small amount of Vanguard personnel complemented by mostly systems integrator staff.

Great, thanks for the clarification guys.

Thank you. That does conclude today's question-and-answer session. I'd like to turn the conference back to our presenters for any additional or closing remarks.

No additional comments. Thanks for joining us in today's call.

Thank you.