GUIDEWIRE SOFTWARE, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)


The following discussion and analysis should be read in conjunction with our
consolidated financial statements and related notes thereto included in Item 8
and the Risk Factors included in Item 1A of Part I of this Annual Report on Form
10-K. All information presented herein is based on our fiscal calendar. Unless
otherwise stated, references in this Annual Report on Form 10-K to particular
years or quarters refer to our fiscal years ended in July and the associated
quarters of those fiscal years. We assume no obligation to revise or update any
forward-looking statements for any reason, except as required by law.

We have elected to omit discussion on the earliest of the three years covered by
the consolidated financial statements presented. Refer to Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations located
in our Form 10-K for the fiscal year ended July 31, 2021, filed on September 24,
2021, for reference to discussion of the fiscal year ended July 31, 2020, the
earliest of the three fiscal years presented.

Insight

Guidewire delivers a leading platform that property and casualty ("P&C")
insurers trust to engage, innovate, and grow efficiently. Guidewire's platform
combines core operations, digital engagement, analytics, and artificial
intelligence ("AI") applications delivered as a cloud service or self-managed
software. As a partner to our customers, we continually evolve to enable their
success and assist them in navigating a rapidly changing insurance market.

Our core operational services and products are InsuranceSuite Cloud,
InsuranceNow, and InsuranceSuite for self-managed installations. These services
and products are transactional systems of record that support the entire
insurance lifecycle, including insurance product definition, distribution,
underwriting, policyholder services, and claims management. Our digital
engagement applications enable digital sales, omni-channel service, and enhanced
claims experiences for policyholders, agents, vendor partners, and field
personnel. Our Analytics and AI offerings enable insurers to manage data more
effectively, gain insights into their business, drive operational efficiencies,
and underwrite new and evolving risks. To support P&C insurers globally, we have
localized, and will continue to localize, our platform for use in a variety of
international regulatory, language, and currency environments.

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

InsuranceNow is a comprehensive cloud-based application that provides policy, billing and claims management functionality to insurers.

InsuranceSuite for Self-Managed Installations includes three core applications (PolicyCenter, BillingCenter, and ClaimCenter) that can be licensed separately or together and can be deployed and updated by our customers and their implementation partners.

Our customers range from some of the largest global insurance companies or their
subsidiaries to predominantly national or local insurers that serve specific
states and/or regions. Our customer engagement is led by our direct sales team
and supported by our system integrator ("SI") partners. We maintain and continue
to grow our sales and marketing efforts globally, and maintain regional sales
centers throughout the world.

Because our platform is critical to our new and existing customers' businesses,
their decision-making and product evaluation process is thorough, which often
results in an extended sales cycle. These evaluation periods can extend further
if a customer purchases multiple services and products or is considering a move
to a cloud-based subscription for the first time. Sales to new customers also
involve extensive customer due diligence and reference checks. The success of
our sales efforts relies on continued improvements and enhancements to our
current services and products, the introduction of new services and products,
efficient operation of our cloud infrastructure, continued development of
relevant local content and automated tools for updating content, and successful
implementations.

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We sell our cloud-delivered offerings through subscription services and our
self-managed products through term licenses. We generally price our services and
products based on the amount of DWP that will be managed by our platform. Our
subscription, term license, and support fees are typically invoiced annually in
advance. Subscription services are generally sold with an initial term of
between three and five years with optional annual renewals commencing after the
initial term. Subscription revenue is recognized on a ratable basis over the
committed term, once all revenue recognition criteria are met including
providing access to the service. Term licenses are primarily sold with an
initial two-year committed term with optional annual renewals commencing after
the initial term. We may enter into term license arrangements with our customers
that have an initial term of more than two years or may renew license
arrangements for longer than one year. A small portion of our revenue is derived
from perpetual licenses. Term and perpetual license revenue are typically
recognized when software is made available to the customer, provided that all
other revenue recognition criteria have been met. Our support revenue is
generally recognized ratably over the committed support term of the licensed
software. Our support fees are typically priced as a fixed percentage of the
associated license fees. We also offer professional services, both directly and
through SI partners, to help our customers deploy, migrate, and utilize our
platform, services, and products. A majority of our services revenue is billed
monthly on a time and materials basis.

Over the past few years, we have primarily been entering into cloud-based
subscription arrangements with our new and existing customers, and we anticipate
that subscription arrangements will be a majority of annual new sales going
forward. As this sales model matures, we may decide to change certain contract
terms in new arrangements to remain competitive or otherwise meet market
demands.

To extend our technology leadership in the global market and to drive operating
efficiency, we continue to invest in product development and cloud operations to
enhance and improve our current services and products, introduce new services
and products, and advance our ability to securely and cost-effectively deliver
our services in the cloud. Continued investment is critical as we seek to assist
our customers in achieving their technology goals, maintain our competitive
advantage, grow our revenue, expand internationally, and meet evolving customer
demands. In certain cases, we may also acquire skills and technologies to manage
our cloud infrastructure and accelerate our time to market for new products,
solutions, and upgrades.

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. We
encourage our partners to co-market, pursue joint sales initiatives, 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 third-party SI partners to facilitate new
sales and implementations of both our subscription services and self-managed
products. Our partnership with leading SI partners allows us to increase
efficiency and scale while reducing customer implementation and migration costs.
We continue to invest time and resources to increase the number of qualified
consultants employed by our SI partners, develop relationships with new partners
in existing and new markets, and ensure that all SI partners are qualified to
assist with implementing our services and 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 risks
related to expanding to new markets, managing lengthy sales cycles, competing
effectively in the global market, relying on sales to a relatively small number
of large customers, developing new or acquiring existing services and products
successfully, migrating our business towards a subscription model with ratable
revenue recognition, increasing the overall adoption of our services and
products, and cost-effectively and securely managing the infrastructure of our
cloud-based customers. In response to these and other risks we might face, we
continue to invest in many areas of our business, including product development,
cloud operations, cybersecurity, implementation services, and sales and
marketing.

Impact of COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 a
pandemic, which has continued to spread throughout the United States and the
world and has resulted in authorities implementing numerous measures to contain
the virus, including travel bans and restrictions, quarantines, shelter-in-place
orders, and business limitations and shutdowns. While we are unable to
accurately predict the full impact that COVID-19 will have on our results of
operations, financial condition, liquidity, and cash flows due to numerous
uncertainties, including the duration and severity of the pandemic, and
containment measures and if there are any periods of increases in the number of
COVID-19 cases or future variants of the virus

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in areas in which we operate, our compliance with containment measures has
impacted our day-to-day operations and could continue to disrupt our business
and operations, as well as that of our key customers, SI partners, vendors, and
other counterparties, for an indefinite period of time. To support the health
and well-being of our employees, customers, SI partners and communities, a vast
majority of our employees are working remotely. In addition, many of our
existing and potential customers are working remotely, which may continue to
extend our sales cycle, to delay the timing of new orders, and increase the time
to complete professional services engagements in the future.

Our business and financial results since the third quarter of fiscal year 2020
have been impacted due to these disruptions, which has effected our annual
recurring revenue ("ARR") growth rates, services revenue and margins, operating
cash flow and expenses, potentially higher employee attrition, challenges in
hiring necessary personnel, and the change in fair value of strategic
investments. ARR growth rates and revenue, especially services revenue,
continued to be impacted in fiscal year 2022 as a result of these challenges.
Additionally, in recent quarters, inflation has reached levels that have not
been seen for decades, which is impacting the global economy and magnifying the
impact of these and other disruptions.

Although vaccines have made progress against the COVID-19 pandemic in the United
States and certain other parts of the world where vaccinations are widely
available, the economic impact of the pandemic on our business and the
businesses of our customers, SI partners, and vendors may continue. We believe
that new sales activities are being delayed, not cancelled, and implementation
engagements are being rescheduled to later periods or being completed over a
longer period of time. Certain marketing events have been cancelled or
postponed, while others are being hosted both in-person and virtually, like our
customer conference, Connections. Our customers may be unable to pay or may
request amended payment terms for their outstanding invoices due to the economic
impacts from COVID-19 and inflation, and we may need to increase our accounts
receivable allowances. A decrease in orders in a given period could negatively
affect our revenues 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
pandemic's global economic impact could affect our customers' DWP, which could
ultimately impact our revenue as we generally price our services and products
based on the amount of DWP that will be managed by our platform. Additionally,
we may be required to record impairment related to our operating lease assets,
investments, long-lived assets, or goodwill.

We will continue to assess the nature and extent of the impact of COVID-19 on our business.

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Key business indicators

We use certain key metrics and financial measures not prepared in accordance
with United States Generally Accepted Accounting Principles ("GAAP") to evaluate
and manage our business, including ARR and Free Cash 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.

Annual Recurring Revenue (“ARR”)

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 contracts, which may not be the same as
the timing and amount of revenue recognized. All components of the licensing and
other arrangements that are not expected to recur (primarily perpetual licenses
and professional services) are excluded. 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 only impacts the initial term of the contract. This
means that as we increase arrangements with multiple performance obligations
that include services at discounted rates, more of the total contract value will
be recognized as services revenue, but our reported ARR amount will not be
impacted. In fiscal year 2022, the recurring license and support or subscription
contract value recognized as services revenue was $28.9 million.

If a customer contract contains invoicing amounts that increase over the
contract term, then ARR reflects the annualized invoicing amount outlined in the
contract for the current reporting period. For example, given a contract with
annual invoicing of $1.0 million at the beginning of year one, $2.0 million at
the beginning of year two, and $3.0 million at the beginning of year three, and
the reporting period is subsequent to year two invoicing and prior to year three
invoicing, the reported ARR for that contract would be $2.0 million.

As of July 31, 2022, ARR was $664 million, or $683 million based on currency
exchange rates as of July 31, 2021. In March 2022, we announced that we will
stop doing business and terminated all customer contracts in Russia. The impact
of this decision resulted in the removal of $3.1 million in ARR. We measure ARR
on a constant currency basis during the fiscal year and revalue ARR at year end
to current currency rates. ARR grew in fiscal year 2022 by 14%, or 17% on a
constant currency basis.

Free movement of capital

We monitor our free cash flow, as a key measure of our overall business
performance, which enables us to analyze our financial performance without the
effects of certain non-cash items such as depreciation, amortization, and
stock-based compensation expenses. Additionally, free cash flow takes into
account the impact of changes in deferred revenue, which reflects the receipt of
cash payment for services and products before they are recognized as revenue,
and unbilled accounts receivable, which reflects revenue that has been
recognized that has yet to be invoiced to our customers. Our net cash provided
by (used in) operating activities is significantly impacted by the timing of
invoicing and collections of accounts receivable, the timing and amount of
annual bonus payments, as well as payroll and tax payments. Our capital
expenditures consist of purchases of property and equipment, primarily computer
hardware, software, and leasehold improvements, and capitalized software
development costs. Free cash flow in fiscal year 2022 was impacted by payments
of $69.1 million related to our fiscal year 2021 corporate bonus and accrued
vacation balances in countries in which we adopted a non-accrual vacation
policy, which was $47.8 million higher than the bonus payment during fiscal year
2021. A portion of the fiscal year 2020 bonus in the amount of $9.9 million,
which would have been paid in the first quarter of fiscal year 2021, was
accelerated due to the COVID-19 pandemic and paid in fiscal year 2020, which
correspondingly resulted in lower bonus payments in fiscal year 2021. This
partial early bonus payout was approved by our board of directors in order to
support our employees and, in turn, their local economies during the
extraordinary situation created by the COVID-19 pandemic. The build out and
furnishing of our new offices in Mississauga, Canada and Dublin, Ireland
impacted free cash flow by a total of $15.6 million for the fiscal year 2021.
For a further discussion of our operating cash flows, see "Liquidity and Capital
Resources - Cash Flows."

                                                                Fiscal years ended July 31,
                                                                2022                    2021
                                                                       (in thousands)

Net cash provided by (used in) operating activities ($37,940)

       $     111,587
Purchases of property and equipment                               (9,510)               (19,008)
Capitalized software development costs                           (12,266)                (9,846)
Free cash flow                                            $      (59,716)         $      82,733



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Significant Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP.
Accounting policies, methods, and estimates are an integral part of the
preparation of our consolidated financial statements in accordance with GAAP
and, in part, are based upon management's current judgments. Those judgments are
normally based on knowledge and experience with regard to past and current
events and assumptions about future events. Certain accounting policies,
methods, and estimates are particularly sensitive because of their significance
to our consolidated financial statements and because of the possibility that
future events affecting them may differ markedly from management's current
judgments. While there are a number of significant accounting policies, methods,
and estimates affecting our consolidated financial statements, which are
described in Note 1 "The Company and a Summary of Significant Accounting
Policies and Estimates" to our consolidated financial statements included in
this Annual Report on Form 10-K, our revenue recognition policies are critical
to the periods presented.

Revenue Recognition

Revenue recognition requires judgment and the use of estimates, especially in
identifying and evaluating the various non-standard terms and conditions in our
contracts with customers as to their effect on reported revenue.

Our revenue is derived from contracts with customers. The majority of our
revenue is derived from subscriptions to our cloud services, licensing
arrangements for our software, and implementation and other professional
services arrangements. We account for revenue in accordance with Accounting
Standards Codification 606, Revenue from Contracts with Customers ("ASC 606").
The core principle of ASC 606 is to recognize revenue upon the transfer of
services or products to customers in an amount that reflects the consideration
we expect to be entitled to in exchange for those services or products. We apply
a five-step framework to recognize revenue as described in our Revenue
Recognition policy included in Note 1 of our consolidated financial statements
included in this Annual Report on Form 10-K.

Our customers have significant negotiating power during the sales process, which
can and does result in terms and conditions that are different from our standard
terms and conditions. When terms and conditions of our customer contracts are
not standard, certain negotiated terms may require significant judgment in order
to determine the appropriate revenue recognition in accordance with ASC 606.

Estimates and assumptions requiring significant judgment as part of our revenue policy in accordance with ASC 606 are as follows:

Allocation of the transaction price to the performance obligations of the contract

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, 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 may 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.

Additionally, contract modifications for services and products that are distinct
but are not priced commensurate with their SSP or are not distinct from the
existing contract may affect the initial transaction price or the allocation of
the transaction price to the performance obligations in the contract. In such
cases, revenue recognized may be adjusted.

Modernization of Articles 101, 103 and 105 of the SK Regulation

The SEC issued Release No. 33-10825, "Modernization of Regulation S-K Items 101,
103, and 105," effective for annual periods beginning subsequent to November
2020. This release was adopted to modernize the description of business, legal
proceedings, and risk factor disclosures that registrants are required to make
pursuant to Regulation S-K. Specifically, this release requires registrants to
provide disclosures relating to their human capital resources and to restructure
their risk factor

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disclosures. In addition, the publication increases the threshold for disclosure of environmental proceedings to which the government is a party.

Management report, selected financial data and additional financial information

The SEC issued Release No. 33-10890 "Management's Discussion and Analysis,
Selected Financial Data, Supplementary Financial Information" which became fully
effective on August 9, 2021. This release was adopted to modernize, simplify,
and enhance certain financial disclosure requirements in Regulation S-K.
Specifically, the SEC eliminated the requirement for selected financial data,
only requiring quarterly disclosure when there are retrospective changes
affecting comprehensive income, and amending the matters required to be
presented under Management's Discussion and Analysis ("MD&A") to, among other
things, eliminate the requirement of the contractual obligations table.

With the adoption of this version, we have eliminated from this document the elements discussed above which are no longer necessary. Information about our contractual obligations is always disclosed in narrative form in the “MD&A and Discussion of Financial Condition and Results of Operations” in Item 7 of Part II of this Annual Report on Form 10-K.

Recent accounting pronouncements

See Note 1 "The Company and Summary of Significant Accounting Policies and
Estimates" to our consolidated financial statements included in this Annual
Report on Form 10-K for a full description of recent accounting pronouncements
adopted, including the dates of adoption, and recent accounting pronouncements
not yet adopted.

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Operating results

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 for any period should
not be considered indicative of results for any future period.


                                                                            

Closed fiscal years July 31,

                                                                             As a % of Total                              As a % of Total
                                                        2022                     Revenue                 2021                 Revenue
                                                                            (in thousands except percentages)
Revenue:
Subscription and support                       $      343,708                            42  %       $  252,358                       34  %
License                                               258,631                            32             303,792                       41
Services                                              210,275                            26             187,117                       25
Total revenue                                         812,614                           100             743,267                      100
Cost of revenue:
Subscription and support                              213,275                            26             164,983                       22
License                                                 8,754                             1              10,569                        1
Services                                              238,365                            29             199,502                       27
Total cost of revenue                                 460,394                            56             375,054                       50
Gross profit:
Subscription and support                              130,433                            16              87,375                       12
License                                               249,877                            31             293,223                       39
Services                                              (28,090)                           (3)            (12,385)                      (2)
Total gross profit                                    352,220                            44             368,213                       49
Operating expenses:
Research and development                              249,665                            31             219,494                       30
Sales and marketing                                   194,611                            24             160,544                       22
General and administrative                            107,391                            13              93,759                       13
Total operating expenses                              551,667                            68             473,797                       65
Income (loss) from operations                        (199,447)                          (24)           (105,584)                     (16)
Interest income                                         6,277                             1               7,395                        1
Interest expense                                      (19,446)                           (2)            (18,711)                      (3)
Other income (expense), net                           (17,099)                           (2)             12,619                        2
Income (loss) before provision for (benefit
from) income taxes                                   (229,715)                          (27)           (104,281)                     (16)
Provision for (benefit from) income taxes             (49,284)                           (6)            (37,774)                      (7)
Net income (loss)                              $     (180,431)                          (21) %       $  (66,507)                      (9) %

Comparison of the years ended July 31, 2022 and 2021

Revenue

We derive our revenue primarily from the provision of cloud-based services, the licensing of our software applications, the provision of support and the provision of professional services.

Subscription and Support

A growing portion of our revenue consists of fees for our subscription services,
which are generally priced based on the amount of DWP that is managed by our
subscription services. Subscription revenue is recognized ratably over the term
of the arrangement,

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

Our support revenue is generally recognized ratably over the committed support
term of the licensed software. Our support fees are typically priced as a fixed
percentage of the associated term license fees. We generally invoice support
annually in advance.

License

A substantial majority of our license revenue consists of term license fees. Our
term license revenue is primarily generated through license fees that are billed
annually in advance during the term of the contract, including any renewals. Our
term license fees are generally priced based on the amount of DWP that will be
managed by our licensed software. Our term licenses have generally been sold
under a two-year initial term with optional annual renewals after the initial
term. However, we do enter into license arrangements that have an initial term
of more than two years and renewal terms of more than one year. 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.

In a limited number of cases, we grant a perpetual license to our software. Revenue from perpetual licenses is generally recognized upon delivery. We invoice our customers with a perpetual license either in full at the signing of the contract, or in several instalments.

Services

Our services revenue comes primarily from implementation and migration services performed for our customers, reimbursable travel expenses and training fees. The majority of our service commitments are billed and revenue recognized on a time and material basis when our services are provided.

Closed fiscal years July 31,

                                                            2022                                         2021                                   Change
                                                                    % of total                                 % of total
                                               Amount                 revenue               Amount               revenue                ($)               (%)
                                                                                     (in thousands, except percentages)
Revenue:
Subscription and support:
Subscription                              $     259,232                      32  %       $ 168,649                      23  %       $ 90,583                 54  %
Support                                          84,476                      10             83,709                      11               767                  1
License:
Term license                                    258,441                      32            303,309                      41           (44,868)               (15)
Perpetual license                                   190                       -                483                       -              (293)               (61)
Services                                        210,275                      26            187,117                      25            23,158                 12
Total revenue                             $     812,614                     100  %       $ 743,267                     100  %       $ 69,347                  9  %


Subscription and Support

We anticipate subscriptions will continue to represent a majority of new
arrangements, including customers migrating from existing term license
arrangements to subscription services, in future periods. Due to the ratable
recognition of subscription revenue, growth in subscription revenue will lag
behind the growth of subscription orders and will impact the comparative growth
of our reported revenue on a year-over-year basis. If we complete a higher
percentage of subscription arrangements in a given period, our short-term growth
rates will be negatively impacted. Due to the seasonal nature of our business,
the impact of new subscription orders in the fourth fiscal quarter, our
historically largest quarter for new orders, is not fully reflected in revenues
until the following fiscal year.

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Subscription revenue increased by $90.6 million, compared to the prior year,
primarily due to the impact of cloud transition and new subscription agreements
for InsuranceSuite Cloud entered into and provisioned since July 31, 2021.

Support revenue was relatively flat compared to the prior year. Support related
to subscription arrangements is included in subscription revenue, as support is
not quoted or priced separately from the subscription services. As customers
enter into a subscription agreement to migrate from an existing term license
agreement, the timing and amount of revenue recognized will be impacted by
allocations of the total contract value between the license, subscription, and
support performance obligations. As a result, we expect the increase in
subscription orders as a percentage of total new sales and customers migrating
from term licenses to subscription services will continue to reduce the growth
in, or result in lower, support revenue in the future.

Licence

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 recognition 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 as a percentage of total new sales and as customers
migrate from term licenses to subscription services instead of renewing their
term licenses.

Term license revenue decreased by $44.9 million, compared to the prior year,
primarily due to the impact of multi-year term license renewals and new deals in
the same period a year ago, and, to a lesser extent, term license customers
migrating to subscription services. 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 $2.5 million during fiscal year 2022 compared with
$24.4 million in the prior year.

Perpetual license revenue decreased by $0.3 million, compared to the prior year,
and accounted for less than 1% of total revenue in fiscal year 2022. We expect
perpetual license revenue to continue to represent a small percentage of our
total revenue. Perpetual license revenue may potentially be volatile across
periods due to the large amount of perpetual revenue that may be generated from
a single customer order.

Services Revenue

Services revenue increased $23.2 million, compared to the prior year. The
increase is primarily driven by an increase in the number and size of
subscription implementation and migration projects, but services revenue overall
continues to be impacted by contracts with lower average services billing rates
and increased investments in customer implementations, including fixed fee or
capped arrangements, to accelerate customer transition to the cloud. In these
arrangements when a project extends longer than originally anticipated, the
average billing rate we recognize may decrease, which can result in revenue
adjustments and lower gross profit.

We expect some level of variability in our services revenue in future periods.
As we successfully leverage our SI partners to lead more implementations, our
services revenue could decrease. We expect challenges related to COVID-19,
inflation, and our ability to hire additional services professionals will also
continue to negatively impact services revenue. As we continue to expand into
new markets and develop new services and products, we have, and may continue to,
enter into contracts with lower average billing rates, make investments in
customer implementation and migration engagements, and enter into fixed price
contracts, which may impact services revenue and services margins.

Revenue cost and gross profit

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

We allocate overhead costs such as IT support, information security, facilities and other administrative costs to all functional departments based on headcount. Thus, these overheads are reflected in the cost of products and in each functional operating expense.

Effective as of the beginning of fiscal year 2023, we are revising our
allocation methodology to more closely reflect the way our business is managed
and to be more comparable to other companies in our industry. The change will
result in facilities expenses, information technology infrastructure and
software expenses, and information security infrastructure and software expenses
being

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allocated to all functional departments based on headcount, while the remaining
expenses will be recorded within general and administrative expenses. The
expected impact is an increase in general and administrative expenses and a
decrease in cost of revenue and other operating expense categories. Prior period
amounts will be re-classified to reflect the revised methodology in our future
consolidated financial statements and accompanying notes.

Cost of Revenue:

                                                                      Fiscal years ended July 31,
                                                            2022                                         2021                                   Change
                                                                    % of total                                 % of total
                                               Amount                 revenue               Amount               revenue                ($)               (%)
                                                                                     (In thousands, except percentages)
Cost of revenue:
Subscription and support                  $     213,275                      26  %       $ 164,983                      22  %       $ 48,292                 29  %
License                                           8,754                       1             10,569                       1            (1,815)               (17)
Services                                        238,365                      29            199,502                      27            38,863                 19
Total cost of revenue                     $     460,394                      56  %       $ 375,054                      50  %       $ 85,340                 23  %

Includes stock-based compensation of:
Cost of subscription and support revenue  $      14,614                                  $  11,231                                  $  3,383
Cost of license revenue                             692                                        770                                       (78)
Cost of services revenue                         22,951                                     21,809                                     1,142
Total                                     $      38,257                                  $  33,810                                  $  4,447



Cost of subscription and support revenue increased by $48.3 million primarily
due to increases in personnel costs of $27.9 million as a result of our
continued investment in our cloud operations to increase operational efficiency
and scale, cloud infrastructure expense of $21.3 million for our growing cloud
customer base, higher amortization of previously capitalized software
development costs of $2.5 million, and higher royalties of $1.2 million. These
increases were partially offset by a decrease in amortization of acquired
intangible assets of $4.1 million and a decrease in professional services of
$0.6 million.

Due to our continued investment in cloud-based operations, increase in new
cloud-based customers, and increased usage from existing cloud-based customers,
the costs to provide our subscription and support services increased. We expect
our cost of subscription and support revenue to increase as we continue to
invest in our cloud operations to improve efficiencies and to continuously
improve and maintain secure environments, more customers migrate from term
licenses to subscription services, and we incur higher cloud infrastructure
costs as our cloud customer base and their usage grows. However, we believe that
the cost of subscription and support revenue will grow at a slower rate than
subscription and support revenue in future years as we achieve economies of
scale and other efficiencies. The short-term impact of these trends along with
mix within subscription and support revenue may result in a decline in
subscription and support gross margin even though subscription and support gross
profit increases in absolute dollars.

The $1.8 million decrease in our cost of license revenue was primarily due to a
decrease in amortization of acquired intangible assets of $1.5 million due to
certain acquired intangible assets being fully amortized and lower personnel
costs associated with the development of online training curriculum included
with the latest releases of InsuranceSuite of $0.8 million. These decreases were
partially offset by an increase in royalties of $0.5 million.

We continue to expect the cost of license revenue to decline over time as our term license customers transition to cloud subscription agreements.

The $38.9 million increase in cost of services revenue was primarily due to an
increase of $37.9 million in subcontractor and personnel expenses for
InsuranceSuite Cloud implementations and, to a lesser extent, increases of $0.6
million in software subscriptions and $0.3 million in web hosting services.

We had 696 cloud operations and technical support employees and 755 professional
service employees at July 31, 2022 compared to 600 cloud operations and
technical support employees and 657 professional services employees at July 31,
2021.

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Gross Profit

                                                                    Fiscal years ended July 31,
                                                           2022                                       2021                                  Change
                                               Amount               margin %              Amount             margin %               ($)                (%)
                                                                                   (In thousands, except percentages)
Gross profit:
Subscription and support                  $     130,433                    38  %       $  87,375                    35  %       $  43,058                 49  %
License                                         249,877                    97            293,223                    97            (43,346)               (15)
Services                                        (28,090)                  (13)           (12,385)                   (7)           (15,705)               127
Total gross profit                        $     352,220                    43  %       $ 368,213                    50  %       $ (15,993)                (4) %



Our gross profit decreased $16.0 million compared to the prior year. Gross
profit was impacted by a decrease in term license revenue due to the impact of
multi-year term license arrangements entered into in fiscal year 2022 being
significantly lower than the impact of multi-year term license arrangements in
the same period a year ago and, to a lesser extent, a decrease in services gross
profit due to the investments that we are making in our customers' transition to
subscription services. These decreases were partially offset by an increase in
subscription and support gross profit due to the increase in subscription
revenue, which has a lower gross margin compared to license revenue.

Our gross margin decreased to 43% in fiscal year 2022, as compared to 50% in
fiscal year 2021. Gross margin was primarily impacted by the increase as a
percentage of total revenue of subscription and support revenue, which has a
lower gross margin compared to license revenue.

We expect subscription and support gross margins will fluctuate as our
subscription revenue increases and we continue to invest in our cloud
operations. However, as we gain efficiencies and increase the number of cloud
customers, we expect subscription gross margins to improve over the next several
years. In addition, the impact of our investment in customer migrations and
implementations, challenges related to COVID-19, and inflation may continue to
negatively impact services gross margin going forward. We expect license gross
margin will fluctuate based on changes in revenue due to the timing of delivery
of new multi-year term licenses and the execution of multi-year term license
renewals, as cost of license revenue is expected to be relatively consistent
from period to period in the future. Overall, we expect gross margins to decline
in the short-term primarily due to the mix between license revenue and
subscription and support revenue.

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Functionnary costs

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

We allocate overhead costs such as IT support, information security, facilities and other administrative costs to all functional departments based on headcount. Therefore, overhead costs are reflected in the cost of products and in each functional operating expense.

Effective as of the beginning of fiscal year 2023, we are revising our
allocation methodology to more closely reflect the way our business is managed
and to be more comparable to other companies in our industry. The change will
result in facilities expenses, information technology infrastructure and
software expenses, and information security infrastructure and software expenses
being allocated to all functional departments based on headcount, while the
remaining expenses will be recorded within general and administrative expenses.
The expected impact is an increase general and administrative expenses and a
decrease in cost of revenue and other operating expense categories. Prior period
amounts will be re-classified to reflect the revised methodology in our future
consolidated financial statements and accompanying notes.

                                                                        Fiscal years ended July 31,
                                                              2022                                         2021                                   Change
                                                                      % of total                                 % of total
                                                 Amount                 revenue               Amount               revenue                ($)               (%)
                                                                                      (In thousands, except percentages)
Operating expenses:
Research and development                    $     249,665                      31  %       $ 219,494                      30  %       $ 30,171                14  %
Sales and marketing                               194,611                      24            160,544                      22            34,067                21
General and administrative                        107,391                      13             93,759                      13            13,632                15
Total operating expenses                    $     551,667                      68  %       $ 473,797                      65  %       $ 77,870                16  %

Includes stock-based compensation of:
Research and development                    $      36,134                                  $  29,524                                  $  6,610
Sales and marketing                                32,960                                     25,820                                     7,140
General and administrative                         29,660                                     25,855                                     3,805
Total                                       $      98,754                                  $  81,199                                  $ 17,555



Research and Development

Our research and development expenses consist primarily of personnel costs for our technical staff and consultants providing professional services.

The $30.2 million increase in research and development expenses was primarily
due to increases of $21.7 million in personnel costs associated with higher
headcount, $4.3 million in cloud infrastructure costs for our development
environments, $3.1 million in acquisition consideration holdback costs
recognized over a service period relating to the HazardHub acquisition, and $1.2
million in software subscription costs.

Our research and development workforce was 972 at July 31, 2022 against 853 at July 31, 2021.

We expect our research and development expenses to increase in absolute dollars
as we continue to hire and dedicate internal resources to develop, improve, and
expand the functionality of our solutions and migrate our solutions to the
cloud. Research and development expenses may also increase if we pursue
additional acquisitions.

Sales and Marketing

Our sales and marketing expenses primarily consist of personnel costs for our
sales and marketing 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

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about five years. Selling and marketing expenses also include travel expenses, professional services for marketing activities and amortization of certain intangible assets acquired.

The $34.1 million increase in sales and marketing expenses was primarily due to
increases of $26.9 million in personnel costs due to higher headcount to sell
and market our services and products; $5.3 million in travel expenses as
in-person prospect and client interactions have resumed; $1.6 million in
marketing and advertising expense associated with Connections Reimagined, our
annual sales conference which was a hybrid event held in November 2021, compared
to two fully virtual events in fiscal year 2021; $0.3 million in professional
services; and $0.2 million in web hosting costs. These increases were partially
offset by a decrease of $0.4 million due to certain acquired intangible assets
being fully amortized.

Our sales and marketing workforce was 475 at July 31, 2022 against 426 at July 31, 2021.

We expect our sales and marketing expenses to continue to increase in absolute
dollars as we continue to invest in sales and marketing activities and resume
business travel to support our growth and objectives.

General and administrative

Our general and administrative expenses include management, finance, human resources, legal, development and corporate strategy functions, and consist primarily of personnel costs, as well as professional services.

The $13.6 million increase in our general and administrative expenses was
primarily due to increases of $9.6 million in personnel costs due to higher
headcount, $4.8 million in software subscription and web hosting costs, and
$3.0 million of bad debt expense related to a contract termination as a result
of United States government sanctions on Russia. These increases were partially
offset by a decrease of $3.7 million in professional services.

Our general and administrative staff was 478 at July 31, 2022 against 406 at July 31, 2021. General and administrative staff includes information technology, information security, facilities and recruitment staff whose expenses are spread across all functional departments.

In addition to the impact of revising our allocation methodology mentioned
above, we expect that our general and administrative expenses will increase in
absolute dollars as we continue to invest in personnel, corporate
infrastructure, and systems required to support our strategic initiatives, grow
our business, and meet our compliance and reporting obligations.

Other Income (Expense)

                                    Fiscal years ended July 31,
                                        2022                  2021                Change
                                       Amount                Amount           ($)          (%)
                                              (In thousands, except percentages)
Interest income               $        6,277               $   7,395      $  (1,118)       (15) %
Interest expense              $      (19,446)              $ (18,711)     $    (735)         4  %
Other income (expense), net   $      (17,099)              $  12,619      $ (29,718)      (236) %


Interest Income

Interest income represents interest earned on our cash, cash equivalents and investments.

Interest income decreased by $1.1 million in fiscal year 2022, primarily due to
lower yields on invested funds and lower funds available for investment. This
decrease was partially offset by imputed interest income realized upon the
conversion of a strategic investment from convertible debt to preferred equity.

Interest charges

Interest expense includes both stated interest and the amortization of debt
discount and issuance costs associated with our Convertible Senior Notes. The
amortization of debt discount and issuance costs are recognized on an effective
interest basis. Stated interest expense is consistent in the comparative periods
as the outstanding principal and stated interest rate have not changed.

Interest expense for fiscal years 2022 and 2021 consist of non-cash interest
expense related to the amortization of debt discount and issuance costs of $14.4
million and $13.6 million, respectively, and stated interest of $5.0 million in
both periods.

Effective at the beginning of fiscal year 2023, we are adopting the FASB ASU No.
2020-06 (see Note 1 "The Company and Summary of Significant Accounting Policies
and Estimates" to our consolidated financial statements included in this Annual
Report

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on Form 10-K) which will eliminate the equity component of our senior convertible bonds. This will reduce interest expense in future periods due to the elimination of debt discount amortization.

Other income (expenses), net

Other income (expense), net includes foreign exchange gains and losses resulting
from fluctuations in foreign exchange rates on monetary asset and monetary
liability balances that are denominated in currencies other than the functional
currency of the entity in which they are recorded. Our monetary assets and
liabilities denominated in currencies other than the functional currency of the
entity in which they are recorded consist primarily of trade accounts
receivable, unbilled accounts receivable, trade accounts payable, and
intercompany receivables and payables. We currently are entering into
transactions in the following currencies: the Argentine Peso, Australian Dollar,
Brazilian Real, British Pound, Canadian Dollar, Chinese Yuan, Danish Krone,
Euro, Hong Kong Dollar, Indian Rupee, Japanese Yen, Malaysian Ringgit, Mexican
Peso, New Zealand Dollar, Polish Zloty, Russian Ruble, South African Rand, and
Swiss Franc.

Other income (expenses), net for fiscal year 2022, represented an expense of $17.1 millioncompared to the income of $12.6 million during fiscal 2021, primarily due to fluctuations in foreign exchange rates during these periods, partially offset by a gain realized on the sale of a strategic investment.

Provision for (profit) income taxes

We are subject to taxes in the United States as well as other tax jurisdictions
and countries in which we conduct business. Earnings from our non-U.S.
activities are subject to local country income tax and may also be subject to
U.S. income tax.

                                               Fiscal years ended July 31,
                                                2022                  2021                          Change
                                               Amount                Amount                ($)                  (%)
                                                                (In thousands, except percentages)
Provision for (benefit from) income taxes $     (49,284)          $  (37,774)         $  (11,510)                   30  %
Effective tax rate                                   21   %               36  %



We recognized an income tax benefit of $49.3 million for fiscal year 2022
compared to an income tax benefit of $37.8 million for fiscal year 2021. The
increase in our income tax benefit for fiscal year 2022 was primarily due to an
increase in pre-tax net loss, an increase in research and development credits,
and a decrease in valuation allowance, partially offset by decreases in tax
benefits such as tax deductions from stock-based compensation, the tax impact
from the tax status change of certain foreign subsidiaries from prior year, and
the release of uncertain tax positions from the prior year.

As of July 31, 2022, we had unrecognized tax benefits of $11.8 million that, if
recognized, would affect our effective tax rate, as certain unrecognized tax
benefits have a valuation allowance.

The effective tax rate could differ from the statutory U.S. Federal income tax
rate of 21% mainly due to state taxes, tax deficiencies related to stock-based
compensation, research and development credits, foreign earnings taxed in the
U.S., change in valuation allowance and certain non-deductible expenses,
including, but not limited to, executive compensation limitation.

Comparison of the years ended July 31, 2021 and 2020

Refer to Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations located in our 10-K for the fiscal year ended July 31,
2021, filed on September 24, 2021, for the discussion of the comparison of the
fiscal year ended July 31, 2021 to the fiscal year ended July 31, 2020, the
earliest of the three fiscal years presented in the consolidated financial
statements.

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Non-GAAP Financial Measures

In addition to the key business metrics presented above, we believe that the
following non-GAAP financial measures provide useful information to management
and investors regarding certain financial and business trends relating to our
financial condition and results of operations. Management uses these non-GAAP
measures to compare our performance to that of prior periods for trend analysis,
for purposes of determining executive and senior management incentive
compensation, and for budgeting and planning purposes. We believe that the use
of these non-GAAP financial measures provides an additional tool for investors
to use in evaluating ongoing operating results and trends and in comparing our
financial results with other software companies because it provides consistency
and comparability with past financial performance and assists in comparisons
with other companies, many of which present similar non-GAAP financial measures
to investors. However, our management does not consider these non-GAAP measures
in isolation or as an alternative to financial measures determined in accordance
with GAAP.

The non-GAAP financial information is presented for supplemental informational
purposes only, should not be considered a substitute for financial information
presented in accordance with GAAP, and may be different from similarly-titled
non-GAAP measures used by other companies. The principal limitation of these
non-GAAP financial measures is that they exclude significant expenses and income
that are required by GAAP to be recorded in our financial statements. In
addition, they are subject to inherent limitations as they reflect the exercise
of judgment by management about which expenses and income are excluded or
included in determining these non-GAAP financial measures. We urge investors to
review the reconciliation of non-GAAP financial measures to the comparable GAAP
financial measures included herein and not to rely on any single financial
measure to evaluate the Company's business.

The following table reconciles specific items excluded from GAAP in the calculation of non-GAAP financial measures for the periods indicated below (in thousands, except per share and per share data):

                                                                    Fiscal years ended
                                                                         July 31,
                                                                              2022                   2021
Gross profit reconciliation:
GAAP gross profit                                                       $     352,220          $     368,213
Non-GAAP adjustments:
Stock-based compensation                                                       38,257                 33,810
Amortization of intangibles                                                     7,659                 13,175
COVID-19 Canada Emergency Wage Subsidy benefit(1)                                   -                 (1,975)
Non-GAAP gross profit                                                   $   

398 136 $413,223

Income (loss) from operations reconciliation:
GAAP income (loss) from operations                                      $    (199,447)         $    (105,584)
Non-GAAP adjustments:
Stock-based compensation                                                      137,011                115,009
Amortization of intangibles                                                    14,081                 19,965
  COVID-19 Canada Emergency Wage Subsidy benefit(1)                                 -                 (3,396)
Acquisition consideration holdback (2)                                  $       3,067                      -
Non-GAAP income (loss) from operations                                  $   

(45,288) $25,994

Net income (loss) reconciliation:
GAAP net income (loss)                                                  $    (180,431)         $     (66,507)
Non-GAAP adjustments:
Stock-based compensation                                                      137,011                115,009
Amortization of intangibles                                                    14,081                 19,965
COVID-19 Canada Emergency Wage Subsidy benefit(1)                                   -                 (3,396)
Acquisition consideration holdback(2)                                           3,067                      -
Amortization of debt discount and issuance costs                               14,391                 13,617
Changes in fair value of strategic investments                                 (1,538)                     -
Tax impact of non-GAAP adjustments                                            (29,105)               (37,379)
Non-GAAP net income (loss)                                              $   

(42,524) $41,309

Tax provision (benefit) reconciliation:
GAAP tax provision (benefit)                                            $     (49,284)         $     (37,774)
Non-GAAP adjustments:


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Stock-based compensation                                                        37,826                  (20,979)
Amortization of intangibles                                                      3,936                   (4,220)
COVID-19 Canada Emergency Wage Subsidy benefit(1)                                    -                     (135)
Acquisition consideration holdback (2)                                             847                        -
Amortization of debt discount and issuance costs                                 4,049                   (2,555)
Changes in fair value of strategic investments                                    (471)                       -
Tax impact of non-GAAP adjustments                                             (17,082)                  65,268
Non-GAAP tax provision (benefit)                                        $   

(20,179) $ (395)

Net income (loss) per share reconciliation:
GAAP net income (loss) per share - diluted                              $        (2.16)         $         (0.79)
Non-GAAP adjustments:
Stock-based compensation                                                          1.63                     1.39
Amortization of intangibles                                                       0.16                     0.25
COVID-19 Canada Emergency Wage Subsidy benefit(1)                                    -                    (0.04)
Acquisition consideration holdback (2)                                            0.03                        -
Amortization of debt discount and issuance costs                                  0.17                     0.16
Changes in fair value of strategic investments                                    0.01                        -
Tax impact of non-GAAP adjustments                                               (0.35)                   (0.45)

Dilutive non-GAAP shares excluded from the calculation of net earnings per share under GAAP

                                                         -                    (0.03)
Non-GAAP net income (loss) per share - diluted                          $   

(0.51) $0.49

Stocks Used in the Calculation of Non-GAAP Earnings (Loss) Per Share: GAAP Weighted Average Stocks – Diluted

                                      83,569,517               83,577,375

Dilutive non-GAAP shares excluded from the calculation of income (loss) per share under GAAP

                                                                -                  805,747
Pro forma weighted average shares - diluted                                 83,569,517               84,383,122


(1) Effective the second quarter of fiscal year 2021, the COVID-19 Canada
Emergency Wage Subsidy benefit has been included as a non-GAAP adjustment. Prior
to the second quarter of fiscal year 2021, this program was unavailable.
Beginning with the first quarter of fiscal year 2022, we have not and do not
expect to receive a subsidy under the COVID-19 Canada Emergency Wage Subsidy.
(2) Effective the first quarter of fiscal year 2022, acquisition consideration
holdback that is earned and recognized as expense over a post-acquisition
service period has been included as a non-GAAP adjustment. Prior to the first
quarter of fiscal year 2022, there was no acquisition consideration holdback in
any periods presented.

Cash and capital resources

Our main sources of liquidity are as follows (in thousands):

                                           July 31, 2022       July 31, 

2021

Cash, cash equivalents and investments $1,163,675 $1,346,591
Working capital

                           $      915,185      $    1,054,971


Cash, cash equivalents and investments

Our cash and cash equivalents are comprised of cash and liquid investments with
remaining maturities of 90 days or less from the date of purchase, primarily
commercial paper and money market funds. Our investments primarily consist of
corporate debt securities, U.S. government and agency debt securities,
commercial paper, asset-backed securities, and non-U.S. government securities,
which include state, municipal and foreign government securities.

As of July 31, 2022, approximately $44.9 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.

Share buyback program

In October 2020, our board of directors authorized and approved a share
repurchase program of up to $200.0 million of our outstanding common stock. The
share repurchase program was completed in the second quarter of fiscal year
2022. During the fiscal year ended July 31, 2022, we repurchased 322,545 shares
of common stock at an average price of $116.11 per share for an aggregate

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purchase price of $37.5 million. During the fiscal year ended July 31, 2021, we
repurchased 1,488,991 shares of common stock at an average price of $109.17 per
share for an aggregate purchase price of $162.5 million.

Cash flow

Our cash flows from operations are significantly impacted by timing of invoicing
and collections of accounts receivable, annual bonus payments, as well as
payments of payroll, commissions, payroll taxes, and other taxes. We expect that
we will generate positive cash flows from operations on an annual basis in the
future, although this may fluctuate significantly on a quarterly basis. In
particular, we typically use more cash during the first fiscal quarter, which
ends October 31, as we generally pay cash bonuses to our employees for the prior
fiscal year and seasonally higher sales commissions from increased customer
orders booked in our fourth fiscal quarter of the prior year. Additionally, our
capital expenditures may fluctuate depending on future office build outs and
development activities subject to capitalization.

We believe that our existing cash and cash equivalents and 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 efforts,
investments in cloud infrastructure, cybersecurity, and operating costs, and
expansion into other markets. We 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.

The following summary of cash flows for the periods indicated has been derived
from our consolidated financial statements included elsewhere in this Annual
Report on Form 10-K (in thousands):

                                                                   Fiscal 

years ended July 31,

                                                                   2022                    2021

Net cash provided by (used in) operating activities ($37,940) $111,587
Net cash provided by (used in) investing activities $312,212

$64,191
Net cash provided by (used in) financing activities ($37,335) ($159,387)

Cash flow from operating activities

Net cash used in operating activities increased by $149.5 million in fiscal year
2022 as compared to fiscal year 2021. The increase in operating cash used was
primarily attributable to a $110.9 million increase in net loss 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 along
with an increase of $38.6 million in cash used by working capital activities.
Changes in working capital include payments of $69.1 million related to our
fiscal year 2021 corporate bonus and accrued vacation balances in countries in
which we adopted a non-accrual vacation policy in the first quarter of fiscal
year 2022, which was $47.8 million higher than the bonus payment during the same
period a year ago. A portion of the fiscal year 2020 bonus, which would have
been paid in the first quarter of fiscal year 2021, was accelerated due to the
COVID-19 pandemic and paid in fiscal year 2020.

Cash flow from investing activities

Net cash provided by investing activities increased by $248.0 million in fiscal
year 2022 as compared to fiscal year 2021. The increase in cash provided by
investing activities was primarily due to decreased net purchases of
available-for-sale securities of $293.9 million and lower capital expenditures
and capitalized software development costs of $7.1 million. These were offset by
$43.8 million paid as purchase consideration for the acquisition of HazardHub
and a $9.2 million net increase in amounts paid for strategic investments.

Cash flow from financing activities

Net cash used in financing activities decreased by $122.1 million in fiscal year
2022 as compared to fiscal year 2021. The decrease in cash used was primarily
because our authorized share repurchase program was completed in the second
quarter of fiscal year 2022, which resulted in our repurchase of $123.9 million
less of our common stock during fiscal year 2022 compared to the same period a
year ago, and a decrease in proceeds from option exercises of $1.8 million.

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Commitments and contractual obligations

Our estimated future obligations include leases, royalties, purchase obligations, debt and taxes at July 31, 2022. See Note 9 “Commitments and Contingencies” and Note 11 “Income Taxes” to our consolidated financial statements included with this Annual Report on Form 10-K for more information.

Off-balance sheet arrangements

Through July 31, 2022, we did not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities, which would have been
established for the purpose of facilitating off-balance sheet arrangements or
other contractually narrow or limited purposes.

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