Clearwater Analytics Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 6, 2024

Key Takeaways

  • Positive Sentiment: Q3 revenue $115.8M (+22.4% YoY) and ARR $456.9M (+26.1% YoY) with 99% gross revenue retention underscore continued strong growth and client loyalty.
  • Positive Sentiment: Adjusted EBITDA beat guidance by $2.3M, delivering record free cash flow $48.1M (+55.6% YoY) and ending Q3 with net cash ~$290M, bolstering financial flexibility.
  • Positive Sentiment: Full-year 2024 guidance was raised to $445.5M revenue (+21% YoY) and $142.5M adjusted EBITDA (32% margin), while Q4 targets at least $120.2M revenue and $38.5M EBITDA, both reflecting ~21% growth.
  • Positive Sentiment: The board proposed terminating the Tax Receivable Agreement via a $72.5M payment to settle up to $614M in future liabilities, pending a shareholder vote to secure long-term cash flow benefits.
  • Neutral Sentiment: Clearwater has integrated Snowflake and is rolling out Gen AI tools for client reporting and internal workflows, with 10+ paying users to date, aiming to boost platform efficiency and insights.
AI Generated. May Contain Errors.
Earnings Conference Call
Clearwater Analytics Q3 2024
00:00 / 00:00

There are 14 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Clearwater Analytics Q3 2024 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. And now, I would like to welcome Joon Park, Head of Investor Relations, to begin the conference.

Speaker 1

Thank you, and welcome, everyone, to Clearwater Analytics' Q3 2024 financial results conference call. Joining me on the call today, as usual, are Sandeep Sahai, Chief Executive Officer and Jim Cox, Chief Financial Officer. In addition, Subhi Sethi, our Chief Client Officer, will also join the call introducing herself to investors. After their remarks, we will open the call to a question and answer session. I would like to remind all participants that during this conference call, any forward looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 expressions of future goals, intentions and expectations, including in relation to business outlook, future financial and product performance and similar items, including without limitation expressions using the terminology may, will, can, expect and believe and expressions which reflect something other than historical facts are intended to identify forward looking statements.

Speaker 1

Forward looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our filings with the SEC. Actual results may differ materially from any forward looking statements. The company undertakes no obligation to revise or update any forward looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement included in our earnings press release. Lastly, all metrics discussed on this call are presented on a non GAAP or adjusted basis, unless otherwise noted.

Speaker 1

The reconciliation to GAAP results can be found in the earnings press release that we have posted to our Investor Relations website. With that, I'll turn the call over to our Chief Executive Officer, Sandeep Sahai.

Speaker 2

Thank you, June. I'm pleased to report that Q3 2024 was a truly outstanding quarter for our company. We continue to make solid progress on the growth initiatives we've been working on, and it's very rewarding to deliver these financial results. Revenue for the quarter was $115,800,000 a 22.4% year on year increase. Our annualized recording revenue, ARR, grew by 26.1 percent year on year to $456,900,000 As I'm sure you'll agree, these are really strong growth numbers.

Speaker 2

Since the acquisition of the Wilshire assets is so new, we can measure its impact separately this quarter. So excluding the impact of the Wilshire ARR, ARR grew 24% year over year. The backbone of our growth story is our best in class gross revenue retention. For the last 22 out of the 23 quarters, our GRR has been 98% or higher. And for the last three quarters, we have recorded a 99% gross revenue retention.

Speaker 2

That is extraordinary. Next is the upside from AUM growth. After a long and sustained period where AUM expansion provided a gentle tailwind to ARR growth, it turned into a real headwind in 2022. You may recall the extensive work we did on the restructuring of our client contracts. We worked very hard to limit our downside while ensuring that we shared in the upside with our clients.

Speaker 2

It is very rewarding to see that effort bear fruit in this quarter and provide a gentle tailwind to our growth. New logos have long been a driver of growth, and we continue to see a significant runway in each of the markets we serve. The North American insurance, asset management and asset owner markets continue to be important levers for growth. Increasingly though, we see the international markets as an emerging engine for growth, and I'm very encouraged to report that we see continued and sustained expansion in both booking and pipeline. To support our growth in Europe and Asia, we have been very fortunate to add exceptional talent to our leadership ranks with 4 strategic hires.

Speaker 2

They include Adrian de la Grange as Head of Sales in France, Belgium and Luxembourg Alessandro Pavoni as Head of Sales in the UK and Ireland Amina Trozier as the new Head of Global Delivery for EMEA and Jose Salas as Head of Partnerships and Alliances for EMEA. We also opened a new office in Hong Kong, further reinforcing our commitment to that region. Selling within our current client base is the next big lever of growth. We have done several things to ensure sustained ARR expansion within those markets. Number 1, maintained a very high level of client satisfaction where our success is evidenced by our NPS, which is meaningfully higher than 60%.

Speaker 2

Number 2, we set up dedicated sales and relationship teams that focus exclusively on those key clients. And number 3, a majority of our new product innovations are directed at these key relationships. As a result of this, we have seen our revenue from current clients continue to expand. Overall, we feel really good about the disruptive power of our platform, the competitive position we have in our industry and therefore, our ability to grow. Talking about our platform, let's also discuss our approach to leveraging Gen AI for both efficiency and growth.

Speaker 2

We believe that Clearwater is at the forefront of using Gen AI. As you all know, generative AI models are only as good as the data on which they are trained. Our single instance multi tenant platform provides us with an outstanding and comprehensive investment management data set and that can help power our Gen AI work. Our technology teams are already integrating this critical technology to transform internal workflows, training them on the best in class reconciliation data we alone have access to, and providing our clients with the ability to interact conversationally with the data in real time. And finally, the next growth lever I'd like to talk about is inorganic growth through strategic partnerships and M and A to complement our organic efforts.

Speaker 2

While our programs in these areas are still in the early days, we're already starting to see benefits. Our recent alliance with Snowflake exemplifies this effort. Insurance firms, asset managers and asset owners can now seamlessly access all the investment data together. Think equities, fixed income, real estate, private equity, loans and private debt, allowing them to capitalize on new opportunities to grow their business. We could not have achieved these exceptional results without continued operational rigor and a strong commitment to continuous improvement.

Speaker 2

Our ability to invest in these growth initiatives while simultaneously improving gross margins is driven in large part by the steady incremental margin expansion that our operations teams have delivered. And to discuss our operations, I would like to introduce you to our Chief Client Officer, Subhi Sethi. Subhi leads our operations teams globally and is responsible for onboarding and ongoing customer service. Not only does our team do a great job delivering on a daily basis, but they're also true partners for our clients' growth. With over 25 years of experience leading operations teams for both large and midsize organizations around the world, Subhi has been instrumental in scaling our business and processes across the company.

Speaker 2

With Subhi at the helm, we have deepened client relationships, improved service delivery and enhanced our platform's capabilities. With that, I'll hand the call to Subhi to talk about operations and how her team contributes to this powerful engine that drives Clearwater forward.

Speaker 3

Thank you, Sandeep. Hello, everyone. It's genuinely a pleasure to be here with you today. As we take a look back at our quarter three performance, I'm excited to share that Clearwater's business model continues to shine brightly as a beacon of operational excellence. Serving clients across 5 continents, our more than 1400 relationships demonstrate our commitment to delivering exceptional performance.

Speaker 3

Every day, we dive into complexities of managing trillions of assets, from fixed income to mortgage loans, private credits and derivatives. It is a challenging but rewarding space, where we leverage advanced technology to reconcile data in real time and provide insights that help our clients thrive. Hence, our goal was to create an operating model that works seamlessly day in and day out, using technology not just to perform, but to outperform. Before we dwell further, I would like to take a moment to welcome 4 leading organizations to Clearwater, reminding us of the trust our clients place in our comprehensive solutions. 1st, the American Endowment Foundation recognized the power of our platform to consolidate intricate reporting across tens of thousands of donor advised fund accounts, providing comprehensive insights to both the foundation and their end clients.

Speaker 3

Their decision to select Clearwater demonstrates a commitment to precision, efficiency, and a transformative approach to data management, bringing their operations to a new level of excellence. 2nd, the American Civil Liberties Union made a forward looking decision in choosing Clearwater to simplify its investment management processes. Incorporating Clearwater LPX and Clearwater for Pool Funds, the ACLU is on a path to modernization, transitioning away from multiple legacy systems to a singular expansive Clearwater solution. This strategic move signifies the ACLU's commitment to leveraging advanced technology to enhance fund stewardship, particularly for private fund management. 3rd, the Alameda County Employees Retirement Association, or ACERA for short, selected Clearwater to achieve greater transparency into its financial data.

Speaker 3

Acera's initiative to adopt our automated reconciliation platform reflects their focus on data integrity and a scalable future as they expand their alternatives portfolio. Along with the understanding of the value proposition and efficiencies that Clearwater will deliver. Last but not the least, Lux Nordic Wealth Management is an asset and wealth management firm in Luxembourg that switched from legacy tool to Clearwater to leverage our platform's advanced order management, portfolio management, reporting, integrated client web portal and comprehensive asset class coverage. Clearwater perfectly aligns with Lux Nordic's wealth management focus and goals of elevating its market position and enriching its distinctive offering. I also want to celebrate some incredible milestones that reflect our operational philosophy.

Speaker 3

Employee Reassurance Corporation. We recently onboarded ERAC, a GE Aerospace company, onto our platform. I want to express my heartfelt gratitude to both teams for their hard work and collaboration. It is this kind of partnership that we truly value, and I am eager to see how they benefit from our best in class solution. Replacing cumbersome manual processes with streamlined workflows.

Speaker 3

They are already feeling the positive impact from enhanced analytics to lowered cost. A European Global Financial Firm In under 6 months, we welcomed another European Global Financial Services leader to our platform to provide effective risk and compliance oversight for their wealth management business. This achievement empowers them to enhance client service and boost productivity. And I couldn't be prouder of our team for making it happen so swiftly. Transitioning to our guiding principles, when I took on my role at Clearwater 4 years ago, I knew we needed to sharpen our focus on the principles that drive us forward.

Speaker 3

I would like to discuss the very DNA of our organization, which has been instrumental in propelling us forward. 1st and foremost, our global capacity. It ensures that we deliver effectively for our clients, no matter the client's location. To best illustrate this, let's discuss data injection and normalization. As you can imagine, data comes to us from 1,000 of sources globally at all hours of the day.

Speaker 3

By having centers in Noida, Edinburgh, and Boise, we effectively run a 24 hour operation when one team hands off to the other seamlessly, and the client gets reconciled portfolio within hours of us receiving the data. This would have been incredibly hard without these 3 centers. However, client servicing is usually local and that allows customers to get responses to their questions locally in near real time. Let's discuss leadership. As the company has become global, it was very important to build a leadership team that increased client proximity and included industry veterans who could build trusted relationships.

Speaker 3

I am happy to report that our leaders have deep industry expertise and experience in managing large client relationships. Domain expertise is another area we have focused very heavily on. Our teams are dedicated to understanding and addressing each client's unique needs, a skill that's both art and science, given the complexities of asset classes we deal with. For example, a mortgage loan reconciler will know exactly how many commands it takes to provide an accurate figure in the portfolio and similarly for derivatives. We've established systematic ways to monitor and measure number of commands on Clearwater systems with the ability to drill down and take action in real time.

Speaker 3

Our tiered delivery model aligns our delivery to the unique size and complexity of each client, demonstrating our commitment to bespoke services. And last but not the least, continuous improvement. This is where we truly excel and something which I'm very passionate about. For example, we used to resolve a client inquiry within 6 hours and using a continuous improvement mindset, this has been cut down to 2 hours. Today with Jenei, we're resolving queries in near real time.

Speaker 3

This leap forward means a client is just a click away from creating an account or understanding intricate calculations like book heat, the and I am happy to report that an increasing number of our inquiry volume has been deflected using Jenei. It has also made our team members incredibly effective and productive. These 5 principles aren't just words to us. They are the heartbeat of our operations and shine through in our exceptional outcomes. Our operational best practices empower our client with daily transparency and simplified processes, translating into an impressive 99% gross revenue retention rate, something we are incredibly proud of.

Speaker 3

Timeliness and accuracy are cornerstones of our service. Achieving auto reconciliation for over 90% of transactions with up to the minute data at their fingertips, our clients can make investment decisions with utmost confidence. Now changing gears, we not only deliver every day, but we also anticipate what's on the horizon. To give you a sense of our forward looking mindset, consider how we are gearing up for 2025 regulatory changes from NAIC. With 8 substantive guidance changes, 27 reporting changes, and the introduction of 24 new data elements.

Speaker 3

These changes are massive. While others are just getting started, Clearwater was the first to market with these updates, showcasing our commitment to innovation and leadership in the industry, and demonstrating how our technology adapts and remains invaluable. We adopted a tailored approach for approximately 600 insurance clients, successfully automating bond classification and data gathering. Our work empowered insurers to swiftly identify and reclassify bonds while offering customizable reports that enhance transparency and efficiency. Our proactive approach rooted in deep industry expertise cements our role as a trusted partner, continuously delivering tremendous value to both our clients and our shareholders.

Speaker 3

Let me take you through a recent example of how our clients closely work with us to deliver on value. In Q3, we launched a commercial paper issuance tool, making our first foray into the debt side of the corporate balance sheet. Historically, commercial paper has been issued and managed entirely manually, relying on faxes, telephone calls, and emails to execute. Our commercial paper issuance tool replaces these outdated manual methods with a suite of sophisticated modules that allow institutional investors to gain a real time panoramic view of their CP issuance program. Last but not the least, we believe what gets measured gets done.

Speaker 3

Every day our operations teams track key metrics including auto reconciliation rate, the number of data models and securities, the number of commands, the frequency of client inquiries and resolution rates among many others. We share these insights with our clients every day ensuring they're as informed as we are. Our remarkable 60 plus Net Promoter Score reflects our dedication to meeting and exceeding our clients' expectations. I would also like to talk about the importance of community and exchange of knowledge as demonstrated by our recent Clearwater Connect event. This occasion brought together nearly 600 operations and finance experts from around the world.

Speaker 3

Connecting face to face was a highlight for our team and truly underscored our commitment to reshaping the industry together. We also celebrated our Excellence Award winners and launched our inaugural Women in Finance Networking Breakfast, creating a space for connection and empowerment in our community. And now some closing thoughts. As we continue to navigate a changing financial landscape, please note Clearwater focus on operational excellence remains steadfast. We are here to support client growth and confidently tackle the challenges and opportunities ahead together.

Speaker 3

Now I'll hand the call over to Jim to dive deeper into our financial results. Thank you for your time.

Speaker 4

Thanks, Subhi. Welcome to the call and thank you on behalf of all of our shareholders for your leadership in delivering these tremendous results. I'd like to quickly discuss our Q3 results, provide Q4 guidance, and then spend the majority of my time sharing our perspective on the proposal we will be providing to shareholders to terminate our tax receivable agreement or what we call the TRA agreement. Our 3rd quarter results were outstanding and continued to build upon the impressive momentum from the first half of twenty twenty four. Our key metrics were exceptional across the board in Q3 with multiple record highs.

Speaker 4

We comfortably outperformed our revenue and adjusted EBITDA guidance in Q3 with a beat of $2,300,000 over the midpoint of our revenue guidance and an equivalent $2,300,000 beat over EBITDA guidance for the quarter. These results underscore the profitable economics driving Clearwater's strong performance and the efficacy of our growth initiatives. The strong EBITDA in part generated record high free cash flow of $48,100,000 in Q3. This represents an increase of 55.6% from last year's Q3. In addition to the strong EBITDA, positive working capital changes in the quarter also helped free cash flow as our days sales outstanding decreased to 80 days from 89 days in Q3 of last year.

Speaker 4

We ended Q3 with $336,700,000 in cash, cash equivalents and investments and total debt was $46,600,000 thereby resulting in net cash holdings of approximately $290,000,000 This strong cash generation puts us in prime position to make strategic investments or reward our shareholders. We increased our net revenue retention rate to 114 this quarter. This is a monumental accomplishment and frankly surprised us. It represents a notable increase from the 110 in net revenue retention we recorded last quarter. This meaningful increase is a reflection of our continued progress in growing with our clients.

Speaker 4

As approximately 9 points of the contribution to NRR 114 related to the onboarding of additional assets and cross selling new products to existing clients. Additionally, we believe the interest rate environment from the Fed rate cut in September led to an incremental increase in AUM on the platform of approximately 2% over the gentle tailwind we had observed in the June quarter. Finally, we achieved solid GAAP net income of $4,800,000 in Q3 versus a GAAP net loss of $2,300,000 in Q3 2023. The GAAP net income was driven in part by lower year over year equity based compensation expense. We heard from investors that the level of equity compensation and that achieving GAAP income was important.

Speaker 4

So it is rewarding to achieve profitability on both a GAAP basis as well as non GAAP basis throughout the 1st 9 months of 2024. For the full year 2024, we have again raised our revenue guidance to $445,500,000 representing an improved year over year growth rate of approximately 21%. This full year guidance incorporated both the outperformance in revenue in the Q3 and our view on Q4. For the Q4 2024, we expect revenue to be at least $120,200,000 representing a year over year growth rate of approximately 21%. This guidance does not assume any incremental market based AUM expansion in the Q4.

Speaker 4

For the full year 2024, we have also raised adjusted EBITDA guidance to $142,500,000 an increase of $2,500,000 from our prior guidance. This provides adjusted EBITDA margin of approximately 32% for the full year and a powerful 35% increase in EBITDA year over year. For the Q4 of 2024, we expect adjusted EBITDA to be $38,500,000 representing an EBITDA margin of again approximately 32%. Today, along with these stellar Q3 results, we are announcing that we have filed an 8 ks and related proxy statement related to the tax receivable agreement between the company and our pre IPO shareholders. In the proxy statement, we are asking our unaffiliated stockholders to vote on a proposal to terminate the tax receivable agreement by paying an aggregate of $72,500,000 to the TRA counterparties and certain pre IPO members of management.

Speaker 4

We will only terminate the agreement if a majority of the company's unaffiliated stockholders, a group that excludes all parties to the TRA and all TRA bonus holders who we refer to as TRA participants, as well as all named executive officers and those of our directors who are affiliated with the TRA participants vote to approve the termination. Said another way, we will not terminate the TRA unless a majority of the company's unaffiliated stockholders vote to approve the termination. The proxy statement has additional details and will encourage you to review it, but I'd like to underscore why the board and management believe the termination of the TRA is in the best interest of all shareholders. Let me start with some background. In connection with our IPO, the company entered into a TRA which provides for the payment by our public holding company to the TRA participants of 85% of the amount of any tax benefits that the company realizes, or in some cases is deemed to realize as a result of certain tax attributes.

Speaker 4

One of those attributes is any increase in the tax basis of the net assets of C1 Holdings, which is our less than wholly owned subsidiary. That result from exchanges of C1 holding units that TRA participants make for shares of Class A common stock in our public holding company. In 2022, we recorded TRA expense of $11,600,000 In 2023, we recorded TRA expense of $14,400,000 Through the 1st 9 months of 2024, we have recorded $11,500,000 of TRA expense and expect the full year TRA expense to be approximately $17,000,000 absent any settlement. We have not yet paid to the TRA participants the TRA expense owed to them for 2023 or year to date in 2024. And as of September 30, 2024, we have liabilities of $28,800,000 recorded on our balance sheet related to the TRA liabilities incurred in the past.

Speaker 4

While the amount and timing of future TRA payment obligations is inherently uncertain and is dependent upon the amount and timing of future taxable income and our share price among other things. We estimate the potential sum of future TRA liability from past exchanges and hypothetical future exchanges as of September 30, 2024 to be $614,000,000 of which $417,000,000 relates to historical exchanges and $197,000,000 is related to future exchanges at the company's share price as if exchanged on September 30, 2024. In contrast, if termination of the TRA is approved by a majority of the company's unaffiliated stockholders, the company will settle all TRA liabilities. The unpaid $28,800,000 on the books as of September 30th, and all future estimated TRA obligations for a total of $72,500,000 We believe this transaction will have a number of benefits for the company. First, it will generate significant savings compared to the cumulative expenses we expect we will incur over the life of the TRA.

Speaker 4

2nd, once terminated, the company will not have to utilize cash to fund ongoing TRA obligations. This will positively impact the company's future operating cash flow and potentially the company's valuation to the extent the company is valued based on cash flows. Finally, terminating the TRA will eliminate the need to record a large liability when or if the company were to release the valuation allowance we currently maintain on our deferred tax asset balances. By eliminating the potential to record the liability, we believe the company has greater ability to complete strategic transactions and provide shareholders greater certainty about the company's future financial performance. The payments made to TRA participants are not conditioned upon those TRA participants continuing to hold any ownership interest in CIWAN Holdings or in the public company.

Speaker 4

Given the company's current strong cash position and the fact that certain of the TRA participants remain significant shareholders and hence are aligned with the interests of other shareholders, which may change in the future, we believe now is the right time to terminate the tax receivable agreement. For example, at the beginning of 2023, there were over 177,000,000 Class C and Class D shares outstanding of the company's common stock, which were held exclusively by TRA participants. That number reduced to approximately 115,000,000 Class C and Class D shares outstanding at the end of 2023. And today, there are less than 75,000,000 Class C and Class D shares outstanding. For these reasons, we believe it is a good and shareholder friendly use of resources to execute this TRA termination at this time.

Speaker 4

We hope you agree, And we are all very happy that we are putting the ultimate decision whether to proceed or not to you, our shareholders. With that, I'll turn it over to Sandeep to provide some closing thoughts.

Speaker 2

Thank you, Jim. We are very pleased with the Q3 results and inspired to carry our business momentum forward. As we have noted, our key metrics were exceptional across the board with multiple record highs. We're excited about the continued strides we are making across the business and remain steadfast in our mission to deliver the world's leading investment management platform for the

Speaker 5

Excuse me everyone as we recur with our speakers.

Speaker 4

Yes, are we ready for questions?

Speaker 5

Great. All right, everyone. We will now begin the question and answer session. First question comes from the line of Brian Schwartz with Oppenheimer. Your line is now open.

Speaker 6

Yes. Hi, thanks for taking my questions and congratulations on these results. Sandeep, just trying to dive into the booking strength that you're showing here this quarter. Did you have any outsized mega deals or did any markets have an outsized impact or was the booking strength pretty broad based across your core end markets?

Speaker 2

Yes. Thank you, Brian. So in getting ready for this call, I must admit we looked for that. We looked for geography and try to think of international grow faster, did the U. S.

Speaker 2

Domestic business grow faster or did we get a lot of deals from current products or new products. And frankly, what we found was it was very, very broad based. So there wasn't at all a situation where there was one deal or 2 deals. It was across industries. It was across geographies.

Speaker 2

Now new products continue to bring momentum to booking. I think we had said in quarter 1, if I remember correctly, that a quarter of our booking was from these new product innovations. And that is almost exactly that number even now. So again, it was new logos. It was back to base sales.

Speaker 2

Nothing really stands out, which I would point to.

Speaker 6

Thank you. And the follow-up question I have for Jim, the NRR result that you're reporting here is pretty close to your goal for 2026. So how should we think about that 115% ceiling? How hard is that ceiling? Or could that ceiling potentially be a soft ceiling?

Speaker 6

And there is potential that the back to the base motion could perform even better than what we were previously thinking with that goal that you gave us? Thanks again for taking my questions.

Speaker 4

Thanks, Brian. So I think that that's I think we continue to believe that NRR 115 in 2026 is a very achievable goal. I think we're obviously buoyed by these results. In particular, the fact that 9% of that kind of 14% was from new products and increased wallet share, from clients on our platform, that was 3% higher than last quarter. But remember, a lot of these new products are mature, not mature.

Speaker 4

They're maturing, they're not fully mature. And so to think about our ability to perform with respect to those consistently quarter after quarter after quarter, I think that we, you know, we'd like to see more consistency before we know there's a straight line. I think that we, we all laugh. As soon as we get close to achieving any of these metrics that we laid out last September, we start thinking, do we do we need to move to the next step? And I think we'll stay focused on delivering 115 consistently, reliably, durably.

Speaker 4

That's what we're really focused on is that durable reliable growth, and, focus on achieving that, next. Next question please.

Speaker 5

Thank you for your questions, Brian. Our next question comes from the line of Andrew Schmidt with Citi. Your line is now open.

Speaker 7

Hi, Sandeep, Jim, Subhi. Thanks so much for having me on the call here. I want to go back to NRR, obviously, a great result this quarter. And you mentioned onboarding of additional assets. It sounds like that was a nice surprise relative to expectations.

Speaker 7

If you could just talk about what drove those wallet share wins and to what extent that obviously still a lot of opportunity to gain wallet share to what extent that momentum can continue? Thank you very much.

Speaker 4

Yeah. So wallet share really comes in 2 ways traditionally. Number 1 is with our large asset management clients, as they grow, we grow with them. In fact, that's one of our large value props. When we think about selling to their business, how can you grow and expand your business?

Speaker 4

That's one area. Another area can be through M and A and those sorts of transactions. And those were helpful as well as cross selling the new products that we have, including LPX, MLX, and those variety of products. One other thing just to give a little more color to folks, in Q2, we had said, hey, we see a gentle tailwind, a small tailwind in, from AUM, which would be that activity that we actually aren't selling necessarily for, but we see growth in those clients. That can be difficult to isolate the market impact of that.

Speaker 4

But we were able to kind of do some work and and we feel very confident that in September, we saw a 2% increase in that relative to what we saw in the June period. So I think that also helped on the NRR 115, just to be transparent with folks.

Speaker 2

Yeah. Andrew, I would just add that obviously we are spending a real amount of money on new product and innovation. And 40% of all that new product innovation goes into current clients. And so that is a back to sales motion and that obviously helps the NRR cost. And like Jim said, these aren't mature, so we can't be they aren't reliable growth levers, but we absolutely expect that to happen in due course.

Speaker 2

And which is why we've always said that quarter 1 2026 is when you want to try and achieve 115 reliably.

Speaker 7

Got it. Thank you so much for that. And then, I know, GenAI, the quick modules were a big focus of Clearwater Connect. It sounded like there's a little more clarity on how you want to monetize those. It seems like that could be a big opportunity when we think about 2025 cross sells versus 2024.

Speaker 7

Can you just talk about the opportunity there and any additional details on how you're planning to monetize AI functionality would be helpful. Thanks so much.

Speaker 2

Thank you, Andrew. And on that question, look, there are 2 parts to this. One is, does it make our platform and our operations much more efficient? On that, we have lots and lots of proof points. And I think Subhi, in her remarks, was talking about deflection.

Speaker 2

So a client wants to ask a question and they have a GenAI tool on their platform and they ask the question of the tool. Sometimes they're happy with the answer and sometimes they're not. But if they are happy with the answer, that question never comes to us. And therefore, we don't have to go out and invest people's time to respond to that question. So on the efficiency side, I think there are many use cases.

Speaker 2

And Sobe and her team have done a great job of using it to drive gross margin. The same thing happens in data and reconciliation. That can the GenAI tool give us ideas about how to reconcile. And if that is correct, then we accept it, and that saves a lot of time. On the other side, which is revenue growth, right?

Speaker 2

So that is the one we have talked about a little bit. And one of the big areas where we are trying to use this is insights, insights on our product. And I think Clearwater Connect, we talked about that and frankly was one of the most attended sessions because of the level of interest. At this time, we launched our product. Jim, when did we launch this?

Speaker 4

September 9.

Speaker 2

So we launched it in September and we have a little bit more than 10 clients who are paying customers. Now this is only for the corporate market, Andrew, and we expect that to take that out to the insurance clients at a later point of time. So we are excited about it, but if you asked me hey, is it giving you 5% of growth? No, it's not there at all. If you asked me, hey, is it contributing meaningfully to gross margin?

Speaker 2

Yes, it already is. Now both those levels are not like, oh, this is the end of what Jenny I can do. I think it's very, very early, in terms of being able to drive revenue or frankly even improve margins. So we are big fans of it. We continue to make a real amount of investment in it and, but we see benefit of that literally every quarter.

Speaker 7

Got it. Thanks so much, Sandeep.

Speaker 2

Thank you. Thank you, Andrew.

Speaker 5

Thank you for your questions. Our next question comes from the line of Young Kim with Loop Capital Markets. Your line is now open.

Speaker 8

Okay, great. Thank you. Congrats on another solid quarter. Jim, just going to continue the theme on the NRR here. Obviously, you saw 9% uptick or contribution from the new products and asset types and whatnot.

Speaker 8

How much of that 9% was driven by new product versus simply new asset types and more asset volume? I guess, we're trying to figure out how sustainable this strong uptick is going forward. So if you can give us like at a high level at least what you were expecting around the NRR to trend in the near term?

Speaker 4

Yeah. So I think the question of what's the trend, obviously NRR114 was a very strong trend, and sequentially strong. I think I mentioned there were a couple points from the AUM tailwind in September from that from that rate change, but I think that if we live in this in this range for the next quarter to 2, I think that we're comfortable in this range, give or take 1 or 2 points.

Speaker 2

Yeah. I think the only point I would add is that we've been historically never ever looked at the interest rate or the impact of that. We've always never either talked about it or discussed it or built it into our models. So I think if you stay around this range over the next 2, 3 quarters, I think that would feel good. But if the products continue to do more and more, that will make us feel more satisfied about the trend.

Speaker 2

Having said all of that,

Speaker 8

we have been very happy with the Yes,

Speaker 9

we should be happy about the 114.

Speaker 8

Yes, we should

Speaker 2

be happy about

Speaker 7

the 114.

Speaker 2

Yes, we're very happy with the 114, I would say.

Speaker 8

Yes, definitely. Thanks for that answer. Sandeep, if you can just talk about the mix between asset managers and insurance companies. Is that mix skewing towards 1 or the other? And if it is, is that changing your go to market and the overall go to market around the adoption around your newer products?

Speaker 8

Thanks.

Speaker 2

Yes. So we were just looking at that data and there really is within 1% of the earlier distribution. So no real change. I think the question was asked earlier about this really high quality ARR growth, which industry did it come for? Was there 1 or 2 deals which made the difference?

Speaker 2

And it's just been really broad based. Frankly, even on geography, we try to see is there something on the geography side which contributed unnaturally to it and not true. So yes, that movement of within insurance and asset managers and asset owners literally within a percent of what it was a year back.

Speaker 4

Yes, right. Thanks.

Speaker 8

Okay, great. Thank you so much.

Speaker 2

Thank you.

Speaker 5

Thank you for your questions. Our next question comes from the line of Rishi Jaluria with RBC Capital Markets. Your line is now open.

Speaker 9

Wonderful. Thanks everyone for taking my questions. Nice to see some pretty solid numbers across the board here. I want to maybe first start kind of better understanding, Jim, you called out the impact to AUM, AUA from the coming interest rate cut. If we think about maybe the potential for future interest rate cuts, I know historically it's obviously been a tailwind to overall ARR growth, AUM growth.

Speaker 9

Under the new pricing model, the subscription plus model, how should we be thinking about the sensitivity? And you don't have to give an exact number, but conceptually, right, a 50 bps cut or 100 bps cut, what sort of tailwind would that have on ARR over kind of the duration of the contract. Maybe help us understand that sensitivity. And then I've got a quick follow-up.

Speaker 4

Well, I think I'd summarize so I can't give you the exact specifics, but just for those of us who haven't been as familiar with the story forever, when we first went public, we were 100% AUM and we went up and down. After 2022, we pivoted to what we call the base plus model, limiting our downside and also modifying to some extent the upside. So it's a little bit of a new model for us. And then what I've always said in the past is it also depends on the interest rate change impact also depends very much on the duration and how our clients' portfolios are changing. And as a result of our insights tool, we're able to see that at least on the corporate side, throughout the summer, our clients moved from shorter duration into much longer duration.

Speaker 4

And so you have to look at the long end of the yield curve. I'll contrast that by saying back in 2022, under the old model, when there were roughly 500 basis points of change where interest rates went up by that amount, that became a headwind of about 500 basis points. So we think directionally, it's far less than that. But that was a very significant move where the entire rate curve pivoted. So look, I think it's a tailwind.

Speaker 4

Obviously, we're happy with, interest rate cuts because it is a tailwind. It's, it hasn't been that meaningful. We focus on the underlying growth drivers of winning new clients, doing more for our clients and driving that. And that drives a durable, reliable 20 plus percent growth algorithm for us. But, look, we're happy about it, and it's a bit of a tailwind.

Speaker 4

And I we think under our new contract structures, the positive impact of that is somewhat less than the than what we saw back in 2022.

Speaker 2

And Rishi, we are not giving you a straight answer with numbers because let's say the interest rate goes down by 50 basis points. That doesn't translate into anything except that what does it do for bonds? Does it take the price up by X percent? What do they do for bank loans? What do they do for derivatives?

Speaker 2

What are the so you have to look at all the asset classes and see what the impact on the price of that security or asset class was and then what are the distributional platform and therefore effectively how much does AUM go up. But to the other part of your question, we would capture most of it. So when you think about the contract structure, if it went up, let's say by 1%, we would capture most of it, right? But how much exactly the impact of a 50 basis point cut is on all of these asset class pricing, that's just hard to sort of play out.

Speaker 9

Understood. That's helpful framework to kind of think about. And then in your prepared remarks, you both talked about wanting to preserve flexibility for both partnerships and M and A. Obviously, M and A has pretty successful, especially over the past couple of years with Jop and Wilshire and a few others. I want to ask a little bit about partnerships though.

Speaker 9

Really excited to see that Snowflake partnership in the past week. It seems really exciting. Just kind of going forward, especially as you leverage more GenAI analytical capabilities, how do you think about your ability to work with other vendors and have partnerships similar to what you have with Snowflake and ultimately just add more value for your clients? Thank you.

Speaker 2

Yes. So I'll answer one part and maybe Subhi can talk about Snowflake more specifically. But look, we were one of the big reasons of wanting to go to AWS was that. As once you have it on our platform, which very many people can use and access, then you can open up the platform. As you might know from before, we are very committed to an open architecture.

Speaker 2

We think closed architectures do not drive the market and we feel an open architecture where you can work with other technologies in the industry is the powerful way to think about it. And that applies to auto management systems, portfolio management system, risk management systems. And so a lot of our energy in 2025 would go into really establishing deep relationships who can help us grow, but we want to be part of that ecosystem. We don't want everything end to end necessarily, to be on Clearwater. But if a client wanted that, they would have that option.

Speaker 2

So we would be able to provide Jump, we will be able to provide Wilshire and our own risk technologies and obviously our accounting platform. So Sumit, could you just talk a little bit about Snowflake and what that does for clients?

Speaker 3

Sure, Sandeep. As far as Snowflake partnership is concerned, Rishi, it enables our clients to kind of access Clearwater data through the entire Snowflake link, which means that in case if our client is looking for a single pane of a reporting solution and a single pane of glass, you know, they can run this, you know, their data through that and our partnership enables us to kind of the point which Sandeep was alluding to on the open architecture and create a one common view about how their portfolio is looking like, what is their risk looking like, how is their performance looking like. So that has that we believe will give us an update for our clients and solve, you know, different reporting solutions and different pane of glass for for our clients, which honestly speaking, our clients every day ask us from. That's their biggest pain point. Needless to say, Snowflake is also a great client for us.

Speaker 3

So that partnership works both ways. So I'm very happy to say that.

Speaker 2

Well said, Subhi. Thank you, Rishi.

Speaker 9

All right. Wonderful. Thank you so much.

Speaker 5

Thank you for your questions. Our next question comes from the line of Michael Insante with Morgan Stanley. Your line is now open.

Speaker 10

Hey guys, thanks for taking my question. Apologies for beating a dead horse here on the interest rate dynamic. I just want to make sure I understand the 2 point benefit relative to the 50 basis point Fed funds kind of like why conceptually was it so strong like I would imagine a cohort of your insurance clients aren't able to pivot their books as aggressively towards the front end of the curve whereas the asset management and corporate clients are? So maybe just any high level views on why the AUM impact was so pronounced?

Speaker 2

Yes. I think the thing you got to think about is don't index too much on the 50 basis points. Index on what did that do to the price of municipal bonds? What did that do to the price of corporate bonds? What did that do to bank loans?

Speaker 2

And so you got to think about the price of assets. And asset pricing moves because of the interest rate, but also sometimes the expectation of a change of the interest rates. So all of that combines to give you a change in the price of the asset. And if the asset price goes up by 2%, let's say, we would capture much of that as growth in ARR because our billing to them is based on obviously we limit the downside, but the upside is shared. So it did go up by a certain percent, we would capture that.

Speaker 2

So there's no there isn't a mathematical way to calculate the one or the other. What it does is increases the price of assets and that reflects in the AUM and that reflects in the ARR. I don't know, Michael, if that's clear or not, but we're happy to sort of obviously answer try and provide more clarification.

Speaker 10

No, that's helpful. And maybe just a quick follow-up. On the implied 4Q revenue outlook, any sort of puts and takes just in terms of why the guide to the slightly slower growth rate in Q4? It looks like the prior year comp is a little bit easier than what you faced in 3Q. And obviously, the overall demand environment and the new product strength is really starting to kick into high gear here.

Speaker 10

So just any high level commentary there would be helpful. Thanks.

Speaker 4

Yeah, Michael. I think that, this is Jim. If you look at our history of what we do, we think it's very important for us to deliver on, on what we guide. And that's been our history. And I think we, we feel that way.

Speaker 4

In fact, I said at least, the revenue number for Q4, for the guide there. So I think I think we feel confident, but I think after such great results in Q3, I think we feel comfortable with where we sit in looking at Q4. And we'll talk about 2025 after we report Q4.

Speaker 2

I just want to add, I don't think we could interpret that as we see any weakness or we see any softness or comfort. We just feel at this point, it's a good guide.

Speaker 10

Thank you, both.

Speaker 2

Thank you.

Speaker 5

Thank you for your questions. Our next question comes from the line of Peter Heckmann with D. A. Davidson. Your line is now open.

Speaker 10

Hey, good afternoon. Most of my questions

Speaker 11

have been answered, but I was wondering if you could comment a little bit about the longer term roadmap and the functionality that you're looking to either build or acquire as you increasingly target that 4 basis points in Investment Management Technology spend?

Speaker 2

Yes. Thank you, Peter. So this is my dream level because we're sitting here building out the planning for 2025. I just have to sort of firstly say that I don't think directionally very much is changing. Are you going to see us continue to make a real amount of investments in alternatives?

Speaker 2

Yes, we are. Are you going to see us continue to build out a jump offering to provide a high quality auto management system and a portfolio management system? Yes, we will. Do you expect to see us continue to do more work on the risk and compliance space? Yes, we will.

Speaker 2

We obviously bought Vultur for that and are we going to continue to build that? Yes, we will. So I do think a lot of it is about being able to provide clients an end to end solution should they want it. But I think it's really important for us to be thinking about ourselves as an open architecture. Historically, companies which have tried to build closed systems don't work.

Speaker 2

What succeeds over time is really what our open systems. So again, opening up our platform to allow partnerships with multiple auto management systems, multiple risk systems, multiple regulatory reporting systems, all while having one data plane and one security master is what we are building. So are we building a little bit more for the international markets? Yes. That is more nascent than here.

Speaker 2

Are we building more for asset owners? Yes, we are. And so but those are just tweaks, I think, based on what we think about the market. But in the GTM, I think little will change. We'll obviously invest more resources as we continue to grow.

Speaker 2

We'll invest some more money in R and D. Do we continue to expect to invest 60% of all R and D dollars on growth? Yes, we will. Are we happy with the innovation? We are actually never happy, but we are quite satisfied with where we are and we expect all these new innovations to mature more through all of 2025 and get us to a much more durable position by the beginning of 2026.

Speaker 2

Arun, Jim, would you add anything to that? Perfect. Yes.

Speaker 11

Okay. That's all I have for the TV. Have a great rest of the day.

Speaker 2

Thank you, P.

Speaker 5

Thank you for your questions. Our next question comes from the line of Aleksey Gugulev with JPMorgan. Your line is now open.

Speaker 12

Thank you. Hi, Sandeep, Jim, Subhi. Also congrats with very strong results. Jim, I had a follow-up question on the guide. It sounds like you're suggesting that your 4Q guide may be conservative and it does imply on EBITDA margin that you're looking for lower EBITDA margin in 4Q versus 3Q.

Speaker 12

So I was wondering if there is anything that you anticipate in the Q4, maybe some elevated expense. And in addition to that, are you still committed to deliver 200 bps of EBITDA margin expansion next year?

Speaker 4

Let me start with that last thing, Alexey. 100%, we are committed to delivering at least 200 basis points of margin expansion next year on wherever we end here, in 2024. Now let's talk about Q4. Last quarter, we talked about investing a bit in the second half of this year to fortify our growth rate, not only in 2024 2025, but to make the investments now while already delivering on the 200 basis point improvement in 2024, exceeding that in 2024 and using some of that expansion and the efficiency that Subhi and her team have driven to make incremental investments that are going to fortify that growth in the future. Sandeep mentioned four names in his prepared remarks, just on the international go to market side.

Speaker 4

We continue to see that we're adding more folks on the go to market side, including in Q3, we added Flor, our Chief Marketing Officer. And, but I would also say that we are looking for adding multiple people in the go to market and product side in that expertise. I think we're very happy with how we've built out the partnership program, and that's enabling us to do some of the things that Sandeep talked about. And so we're looking at Q4 as an opportunity to build to that. I would say also the revenue beat in Q3 flowed straight through to the EBITDA beat in Q3.

Speaker 4

And when you normalize for those, you'll see that that, you know, the guide there was 32%. And so, so I think we feel, look, it's a privilege to have optionality to think about investing for the long term. And that's how we've approached the Q4.

Speaker 12

Great. And then second question, either to Sanjeep or to Sohi. This Snowflake integration that you recently announced, could you elaborate a bit more on potential financial impact? Do you think you could see any leverage on OpEx from this integration, perhaps maybe lower R and D expense?

Speaker 2

Yes, this is Sandeep. Look, eventually, absolutely. I think right now, we deliver files, if you will. What am I saying, Sabi, do you want to just take this question?

Speaker 3

I think that, this is Sabi. There are 2 places or probably directionally where we would have a a way where we would see a positive impact. Number 1 being how when the new data sources or new platforms or new technologies come in, how do you integrate this? So there was a little bit of a setup effort which was required to be able for us to kind of make sure that the data flows. So that over a period of time we see going down and having a positive impact.

Speaker 3

The second being on the cycle times of onboarding. As we kind of onboard new assets and as we onboard new books and as we onboard the new data sources, I think that itself has a cycle time of its own and thereby impact revenue recognition. So I anticipate as we continue to strengthen this partnership and the volume goes there, you will see a nice uptake or in the implementations and onboarding cycle times and thereby revenue recognition.

Speaker 2

Yes. Now, Rakesh, I think I would just say that, look, I think we did it 1st and foremost for client delight. We want clients to be really happy about it. Secondly, we're going to save us money, yes. I think what Jim said is true on both counts.

Speaker 2

I think he said that we're committed to doing 200 basis point improvement next year on EBITDA, but also we had committed to improving gross margin 50 basis points. And we're committed to doing that too. So I feel it helps in gross margin, but really the reason for doing it was our clients are going to be meaningfully happier when they set up new assets and during onboarding.

Speaker 12

All clear. Thank you.

Speaker 2

Thank you. Thanks, Alex.

Speaker 5

Thank you for your questions. Our next question comes from the line of Gabriela Borges with Goldman Sachs. Your line is now open.

Speaker 13

Hey, good evening. Thanks for taking the question. Sandeep and Jim, I wanted to ask you a little bit about your 2025 planning process. More specifically, I'm thinking back to Investor Day and the targets you put out there right now, all the progress that you've highlighted in the prepared remarks, not just this quarter, but over the last handful of quarters. I think the easy answer here on what are your priorities in 2025 is just more of the same, but I'm wondering if there's maybe 1 or 2 priorities that have incrementally surfaced to the top given all the progress that you've made over the last year.

Speaker 13

Thank you.

Speaker 2

Thank you, Gabriel. Look, I think that's a really good observation. I do feel very differently from the Investor Day about our operations. It works very well and this is not me just seeing it. If we look at the gross margin for this year, it's 110 basis points ahead versus we had talked 50 basis points ahead.

Speaker 2

We had talked about EBITDA being 200 basis points ahead and it's 290 basis points ahead. So I feel a lot more confident about our ability to continue to scale. And that I think gives us a bit of a license to be more ambitious about who Clearwater could be. And so what you I think Jim also referenced that a little bit and said, look, we have $290,000,000 of net cash and that gives us optionality. So I think what has changed in our thinking is in 2025 and beyond that, how do we pivot to take a more aggressive position, if you will, in the market.

Speaker 2

Why would we want to do that? One is our clients are really happy. So when you have an NPS like we do and they have real pain, it sort of gets them to think about what else can Clearwater do. So I do think on the margin, you will see us be more aggressive on opportunities of partnership, opportunities in M and A and frankly, opportunities of using technology like Gen AI to continue to improve our performance even faster. So focus on growth, but with somewhat more aggression on what we might meet tomorrow or day after.

Speaker 13

That makes sense. Thank you. That's all from me.

Speaker 2

Thank you, Dovry. Thanks.

Speaker 5

Thank you for your questions. Our next question comes from the line of Dylan Becker with William Blair. Your line is now open.

Speaker 10

Hey, Sandeep, Jim, Subhi. Appreciate the question here. I'll just ask one for the sake of time. But maybe, Sandeep for you, wondering if you could talk to the momentum you're seeing with upmarket insurers. I think you called out another large win in the quarter.

Speaker 10

There's obviously a substantial opportunity to drive adoption here. But maybe thinking about the nuances here and the progress you're making in that segment of the market as they maybe have a growing propensity to expand to spend and expand, excuse me.

Speaker 2

Yes. So look, I think we get excited when we take a large client, a large insurer who thinks about onboarding in the 2, 3, 4 year timeframe. And we can bring them live in a year or 12, 14, 15 months. And so that's exciting and that's why we announced it because you can take really a significant insurer and bring them on board that quickly. And so that's why we pointed out, look, I think there continues to be real opportunity in that market.

Speaker 2

There is pain as you all know. There is more pain from alternative assets as they continue to invest more and more in alternative assets. And that's why you'll always see us talk about we are building more and more there. But at the basic platform, it just works. The basic platform works.

Speaker 2

It does well. It scales well. So really why are we spending all of this money on R and D? Well, this is the reason that I do think alternative assets continues to grow and our ability to service them well is important. And so I think on the margin, I think large insurers is a big target area for us.

Speaker 2

We continue to win there and we hope to continue to win there over the next 2, 3, 4 years.

Speaker 10

Great. Thanks, Andy. Congrats guys.

Speaker 5

Thank you for your question. Our next question comes from the line of Michael Turan with Wells Fargo. Your line is now open.

Speaker 11

Hey, great. Thanks for having me on. And I'll keep it to 1 as well, just given the time constraints. But you've gotten a number of questions just on the retention characteristics and the uptick. I wanted to just spend some time more specifically on the base plus business model, which the team did a remarkable job of executing on in a tougher environment previously.

Speaker 11

So maybe you can just help level set for us scenarios that the base price model now enables? Is it still AUM based change on top of the more stable base? I think just given we're now seeing trend lines improve, want to go back to various scenarios there, understand if the upside scenario is still as robust as it was in the prior model and maybe just spend some time revisiting that to encapsulate some of the commentary throughout? Thanks.

Speaker 4

Yes. Thanks, Michael. So I think it has been successful. We obviously implemented it in a time when we were worried about, assets going down and it stabilized the business during that period of time. We still capture the upside as far as AUM.

Speaker 4

So we have, that is what the plus is for. As assets grow, we have that basis. I think the other thing that we did that has turned out to be far more strategic is that we also defined what we sold at the time of sale to the client. And that has enabled us to really enter into this multi product, upsell program. You know, if you go back 5 or 10 years, we just built everything onto a platform and just added it and rolled forward.

Speaker 4

And so I think when you see some of the upside, of course, there's a tailwind from AUM, but there's also, you're also seeing the tailwind through the cross sell of these new products. And it helps everyone because, because we're commercializing these products discreetly, we're able to understand the ROI and really invest in doing more for our clients. We've been able to turn things from what was a burden collectively for all of us into an opportunity, for both of us and both our clients and for Clearwater. And I'll just use one small example of this. NAIC, Subi described it all, where this was a significant change.

Speaker 4

And we've been able to enable our clients to kind of execute with very little burden on their behalf to this change, to this significant regulatory change for them. And guess what? They're very comfortable paying for that service and for us to solve that problem for them. So that's kind of a small example of a real nice win win.

Speaker 2

Okay.

Speaker 11

That's great detail. Thank you. Thanks.

Speaker 12

Thank you

Speaker 5

for your question, Michael. That concludes today's call. Thank you for your participation and enjoy the rest of your day.

Speaker 4

Do you want to say some last one? Go ahead. We're still on. Go ahead.

Speaker 2

Hello. Yes. Mr. Ongek, I just wanted to thank the Clearwater team. These results were extraordinary, but they are not generated by Jim or myself or just Subhi.

Speaker 2

It is the team which does that. I also want to take a moment to thank the Board Special Committee, which did extraordinary work in bringing the TRA termination proposal to our shareholders for ratification and a vote. So thank you all, and thank you for your interest in Clearwater.

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