Clearwater Analytics (CWAN) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $126.9 million, representing a year-on-year growth of 23.5% [4][29] - Annualized recurring revenue (ARR) reached$ 493.9 million, up 22.7% year-on-year [5][30] - Adjusted EBITDA was $45.1 million, accounting for 35.5% of revenue, with a year-on-year growth of 40% [5][31] - Gross margin improved to 78.9%, up from 75.1% in FY 2022, exceeding expectations [13][30] Business Line Data and Key Metrics Changes - The company has maintained over 20% revenue growth for the past six years, with a win rate of 80% and a gross revenue retention rate (GRR) of over 98% [9][10] - The launch of a commercial contract restructuring program in 2022 has helped dampen revenue downside during AUM declines while retaining revenue upside during AUM growth [10] Market Data and Key Metrics Changes - The company has secured significant wins in Europe, including a leading German insurance company, which validates its expansion strategy [18] - A global asset manager expanded its partnership to include additional solutions, demonstrating strong cross-sell momentum [18] Company Strategy and Development Direction - The strategic acquisitions of Infusion, Beacon, and Bistro aim to create a fully cloud-native investment platform that integrates front, middle, and back office operations [19][20] - The company plans to implement a three-phase roadmap focusing on maximizing standalone business potential, cross-selling, and developing a unified platform [23][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute and drive growth despite market complexities [5][16] - The company is focused on client satisfaction and operational efficiency, which are seen as key to improving profitability [12][31] Other Important Information - The company expects to achieve a 20% growth rate, with a 50 basis point gross margin improvement and a 200 basis point EBITDA expansion per year [27] - The integration of operations and client servicing teams under common leadership is expected to enhance efficiency [14] Q&A Session Summary Question: Thoughts on future growth rates and margin pacing - Management reiterated a commitment to 20% growth for Clearwater and Beacon, with expectations for Infusion to improve from 13% growth [46][47] Question: Demand outlook and macroeconomic impact - Management noted that Q1 revenue was solid and that they have not seen significant negative impacts from recent market turmoil [58][60] Question: Synergies from acquisitions - Management confirmed expectations for$ 20 million in cost synergies and improvements in gross margin over the next two years [66] Question: Organic growth expectations - Management provided guidance indicating that organic growth for Clearwater would remain above 20%, with contributions from acquisitions factored in [84][87] Question: Insights on Infusion's pricing and customer conversations - Management indicated a strong receptivity to developing a stable commercial model for Infusion, aiming for consistent growth [79][80]