Clearwater Analytics (CWAN) - 2021 Q3 - Quarterly Report

Financial Performance - Total revenue for the three months ended September 30, 2021, was $64,489,000, representing a 21% increase from $53,355,000 in the same period of 2020[19] - Gross profit for the nine months ended September 30, 2021, was $134,576,000, up from $109,248,000 in the prior year, indicating a growth of approximately 23%[19] - Net loss attributable to Clearwater Analytics Holdings, Inc. for the three months ended September 30, 2021, was $8,314,000, compared to a net income of $0 in the same period of 2020[19] - The company reported a net loss per share of $0.05 for the three months ended September 30, 2021, applicable only for the period following the initial public offering[20] - Comprehensive loss attributable to Clearwater Analytics Holdings, Inc. for the three months ended September 30, 2021, was $8,322,000, compared to $0 in the same period of 2020[22] - Net income for the nine months ended September 30, 2021, was a loss of $8.228 million, compared to a net income of $25.134 million for the same period in 2020[28] - The net income for the quarter ending June 30, 2021, was a loss of $211, while the net income for the quarter ending September 30, 2021, was a loss of $11,056[24] Expenses - Operating expenses for the three months ended September 30, 2021, totaled $39,441,000, compared to $24,525,000 in the same period of 2020, reflecting a 61% increase[19] - Research and development expenses for the nine months ended September 30, 2021, were $50,991,000, up from $38,829,000 in the prior year, representing a 31% increase[19] - The increase in research and development expenses was primarily due to increased equity-based compensation and headcount growth to support new offerings[208] - General and administrative expenses increased to $29.6 million for the nine months ended September 30, 2021, up 84% from $16.1 million in the same period in 2020[213] - Total sales and marketing expenses for the nine months ended September 30, 2021, were $26.2 million, a 97% increase from $13.3 million in the same period in 2020[209] - Equity-based compensation in sales and marketing rose to $3.8 million, a 301% increase from $944,000 in the same period in 2020[209] Cash and Assets - Cash and cash equivalents increased significantly to $245,094,000 as of September 30, 2021, from $61,088,000 as of December 31, 2020[17] - Total assets rose to $326,608,000 as of September 30, 2021, compared to $115,559,000 at the end of 2020, marking an increase of approximately 182%[17] - Accounts receivable, net as of September 30, 2021, was $48.999 million, an increase from $32.882 million as of December 31, 2020[87] - Prepaid expenses and other current assets increased to $11.110 million as of September 30, 2021, from $7.550 million as of December 31, 2020[89] - Total property and equipment, net as of September 30, 2021, was $9.989 million, up from $8.849 million as of December 31, 2020[91] Liabilities - Total liabilities decreased to $84,221,000 as of September 30, 2021, from $460,167,000 at the end of 2020, indicating a reduction of about 82%[17] - The outstanding borrowings under the previous credit agreement of $432.7 million were repaid in full in September 2021[98] - The new credit agreement includes a $55 million term loan facility and a $125 million revolving facility for working capital and acquisitions[99] Revenue Recognition - The Company recognizes revenues from SaaS services over time, typically within 12 months, as customers benefit from implementation services prior to the "go live" date[45] - Deferred revenue consists of non-refundable fees invoiced during setup activities, with current deferred revenue expected to be recognized within the next twelve months[48] - Total revenue recognized for the nine months ended September 30, 2021, included $0.7 million from deferred revenue as of December 31, 2020[84] Client Base and Market Presence - There were no clients contributing more than 10% of revenue or accounts receivable as of September 30, 2021, indicating a diversified client base[52] - The company aggregates and normalizes data on over $5.6 trillion of global invested assets for over 1,000 clients[153] - The platform has an approximately 80% win rate for new clients over the past four years in deals that reached the proposal stage[153] Future Outlook and Strategy - The company expects to invest more in sales and marketing in international markets to enhance brand awareness and client acquisition[161] - Clearwater plans to expand its solutions and innovation to retain current clients and attract new ones, prioritizing technological advantages[163] - Clearwater's revenue model is based on a 100% recurring revenue structure, primarily charging clients based on the assets managed on its platform[165] Stock and Equity - As of September 30, 2021, total stockholders' equity was $242,387, with a members' deficit of $191,234[24] - The total additional paid-in capital as of September 30, 2021, was $373,314[24] - The total unrecognized compensation expense related to unvested options as of September 30, 2021, was $88.5 million, expected to be recognized over a weighted average period of 3.21 years[120] - The Company granted 10,140,898 stock options during the nine months ended September 30, 2021, with a weighted-average grant date fair value of $5.13 per share[119] - The Company adopted the 2021 Omnibus Incentive Plan, authorizing 45,369,737 shares of common stock for issuance[118] Economic Conditions - Clearwater's revenue is subject to fluctuations based on economic conditions, including market conditions and interest rate changes[165] - The company has recorded a full valuation allowance against U.S. deferred tax assets, indicating that realization of tax benefits may not be probable[142]