Clearwater Analytics Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
April 30, 2025
Skip to Participants
Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Clearwater Analytics First Quarter twenty twenty five 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 turn the conference over to June Park, Head of Investor Relations to begin the conference. June, please proceed.

Joon Park
Joon Park
Head of Investor Relations at Clearwater Analytics

Thank you, and welcome everyone to Clearwater Analytics' first quarter twenty twenty five financial results conference call. Joining me on the call today are Sandip Sahai, Chief Executive Officer and Jim Koss, Chief Financial Officer. 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, expectations for the acquisition of Infusion, Beacon and Bistro and their expected benefits 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.

Joon Park
Joon Park
Head of Investor Relations at Clearwater Analytics

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.

Joon Park
Joon Park
Head of Investor Relations at Clearwater Analytics

A 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

Joon Park
Joon Park
Head of Investor Relations at Clearwater Analytics

the call over to our Chief Executive Officer, Sandeep Sahai.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Thank you, June. I'm pleased to report that Q1 marked another quarter of strong execution and continued progress. Let me share some highlights that underscore our strong performance. Revenue for the quarter was $126,900,000 a 23.5% year on year growth.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

ARR was 493,900,000.0 up 22.7% year on year. Our adjusted EBITDA of $45,100,000 was 35.5% of revenue and up 40% year on year. Gross margin was 78.9%, very close to a long term target of 80%. In today's environment of heightened market complexity, our value proposition has never been more relevant. In times like these, institutional investors want to make ongoing adjustments to their global portfolios, which in turn requires a comprehensive view of their assets and the ability to perform advanced analysis at a much higher frequency.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Managing investments through disconnected legacy systems is no longer merely inefficient. It has become an existential risk. Data silos across legacy platforms, slow decision making, the mass critical risks and introduce unnecessary costs precisely when agility and transparency are most essential. Take regulatory reporting next. Confirming with the new NAIC mandate often requires extensive work.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And most of the industry is in various stages of planning and execution. But most of Clearwater's clients are already compliant. We made changes to our platform in a timely manner and it was immediately available to all our customers. And the effort required to comply was dramatically reduced. The single instance multi tenant model is simply superior.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

This is the last quarterly call focused almost entirely on Clearwater before these acquisitions. And it is therefore a good time to take stock and reflect on what we have achieved over the past few years and what lies ahead. Looking back, it is clear to us that these enduring financials are not just a matter of chance. We have been focused on improving the quality of our business very programmatically and methodically and have executed with rigor. Let's start with revenue growth.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

We have grown 20% plus for each of the last six years. Our platform is clearly disruptive and a win rate of 80%, GRR of 98% plus, NPS of 60% plus are all testimony to that fact. Our single instance multi tenant platform with a single security master is simply the right technology to address the complex global portfolios that our clients have. We believe that all clients will migrate to this architecture in the days and years ahead and are confident in our competitive position versus the legacy platforms most of our major competitors have. But we did not stop there.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

We launched a large commercial contract restructuring program in 2022 that aims to dampen revenue downside in times of AUM decline, while still retaining a majority of the revenue upside when there is an AUM tailwind. This was again apparent in Q1 of this year. Markets were very volatile, but ARR grew 22.7% year on year. Looking at growth and sustained growth powered by investment in innovation and the development of new functionality helped us become more responsive to clients while increasing TAM. Add to that superior client servicing and operations.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And finally, a balanced commercial model and you get sustained durable growth. Looking ahead now, we believe that this playbook can be applied almost in its entirety to both Infusion and Beacon. The finance and legal teams have already been integrated under common leadership and we will start work on this almost immediately. Let's discuss gross margin and unit economics next. Firstly, the key to consistently improving both of these metrics starts with a focus on client satisfaction and ensuring consistency and reliability in our operations.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Essential ingredients to earning the trust of our clients and in delighting them, We use NPS and CSAT extensively to track and measure progress at a team level, at an industry level, and at the company level. We use a metrics driven approach to measure productivity and drive constant improvement. Not rocket science, but relentless execution is what sets us apart. Second, and as importantly, we invest in technology to make our workflows and processes much more efficient. We developed a proprietary reconciliation tool, Helios, to modernize how we aggregate and process daily investment data from custodians, clients, asset managers and brokers.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And given the single security master and single data ingestion system, we have led the charge on generative AI. The financial expression of these programs have been very strong. Gross margin has grown from 75.1% in fiscal year twenty twenty two to 78.9% in Q1 of twenty twenty five, a three seventy basis point improvement. We discussed gross margin improvement at our Investor Day Conference in September 2023 and forecast a 50 bps per year improvement From 75.8% gross margin in the first half of twenty twenty three, just before the conference, we have grown gross margin by 300 basis points in less than two years, far exceeding the 100 bp improvement investors should have expected. We have taken that technology and piloted the use of Helios to drive efficiency across Infusions operations and the early signs are very positive.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Similar improvement in client onboarding. Our single security master has enabled us to reduce the average time to onboard a client to just five point five months, a remarkable achievement when you consider other similar platforms. Once again, we expect to bring these technologies and capabilities to Infusion and Beacon and drive meaningful gross margin improvement. To facilitate this, all operations and client servicing teams have been brought under one common leadership and will be operating as one integrated team. R and D and operations are increasingly seen as partners in growth.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And we were very excited to have reached our NRR target of 115 at the end of twenty twenty four, a full year ahead of our January 2026 goal. Finally then, let me discuss EBITDA expansion. Here again, we continue to meaningfully outpace the goals we set for ourselves. Q1 twenty twenty five generated 35.5% adjusted EBITDA, which was four twenty basis points better than Q1 of twenty twenty four, which in turn was four seventy basis points better than Q1 of twenty twenty three. That is extraordinary.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And when you consider the organic growth we have been driving while improving profitability, it should give you very high confidence in our ability to execute. None of this would have been possible without the infectious passion, active collaboration, and the striving for excellence that my partners in the leadership team have displayed over the last several years that we have been together. Our entire team works tirelessly to be client advocates and we have been fortunate to have built an extraordinary team across the globe. I could not be more thankful. Before we move on, I'd like to highlight some of the notable strategic wins from Q1.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

A magnificent seven tech leader selected our Prism solution to integrate the investment data into their Snowflake cloud environment, supporting both immediate liquidity management needs and longer term plans to consolidate the investment operations infrastructure. In Europe, we secured a pivotal win with a leading German insurance company. The first step in replacing a competitor's middle to back office solution. This validates our expansion strategy and opens up significant market opportunity and TAM in Europe with potential replacements for firms managing over $5,000,000,000,000 in AUM collectively. A global asset manager expanded the partnership to include both LPX and MLX solutions to support the insurance clients' book of record accounting and regulatory reporting needs.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

These wins demonstrate our ability to solve very complex operational challenges across diverse clients, while also showing strong cross sell momentum for our Prism, LPX and MLX solutions, as well as our generative AI capabilities. Now though, let's look ahead. Our strategic acquisitions of Infusion, Beacon and Bistro position us to deliver what the market has long demanded and what is increasingly necessary to manage a complex global portfolio. The industry's first fully cloud native investment platform that seamlessly integrates the front, middle and back office operations. By combining Clearwater's trusted middle and back office infrastructure with Infusions industry leading front office platform, Beacon's next generation risk and quantitative analytics and Bistro's visualization capabilities focused on alternative assets, we aim to eliminate the fragmentation that has plagued our industry.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Our single instance multi tenant architecture is already disruptive in our industry. But what sets us apart now and in the future will be our ability to create a single security master and a single data plane for all asset classes, public and private. We believe that the business value of this will be completely transformative. Number one, the platform will provide a comprehensive global view of our clients assets, public and private. This is incredibly hard to do when you think about LPs, mortgages, loans, private credit, derivatives, structured products, etcetera, along with equities and fixed income instruments.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Number two, drill down to understand real exposure to a company, an industry, or geography. And most importantly, across asset classes. You must know what is in every CLO, every MBS, every LP investments, every real estate portfolio, and so on and so forth to generally understand real exposure. Number three, understand overall risk. Very tough to model because it is difficult to ensure that the assumptions are consistent across asset classes.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Risks across asset classes often compound and or cancel each other, making it important to understand overall risk, model cash flows, perform shock analysis, and scenario review across your entire portfolio. Number four, all of this will lead us to an event driven platform where actions taken anywhere in the trade life cycle are immediately reflected across the front to back platform. Fully integrated, our platform will deliver this and will completely revolutionize the industry. Integration does not happen overnight, but gives us high confidence of the fact that all these platforms use modern cloud technologies and are operating at scale. Secondly, and perhaps more importantly, large sophisticated clients already use these platforms together with one stellar example being Blackstone Building Bistro.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And while this vision is very exciting, we also want to deliver in the short and medium term. Given the complexity and time needed to launch new products, enter new markets and geographies, we have developed a roadmap for execution that has three phases. In Phase one, the focus will be on maximizing the potential of each standalone business as it relates to the 2025 goals. We want the GTM and operations teams to do what they were doing before these acquisitions, but do it incrementally better. For Clearwater, the ability to provide industry leading front office functionality, cutting edge risk and market leading alternative assets visualization should make the market proposition stronger and help growth incrementally.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

For Beacon, they will have the ability to take the platform to over 1,400 Clearwater clients and over 900 infusion clients. And that should help them grow incrementally faster. For infusion, a joint ability to invest in R and D and GTM for both hedge funds and separately for asset management and to take the solution to over 1,400 pre order clients should also help them drive incrementally higher growth. Phase two consists of a robust cross sell strategy across the combined organization. Building on the successful model we developed with our Wilshire cross sell team, we are creating a dedicated organization to capitalize on the need for a comprehensive platform for investment management across a client base.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

This approach will not only drive revenue growth, but also deliver enhanced value to our clients. In the third phase, we are going to bring a long term vision of one platform to fruition. The r and d operations and GTM efforts to drive all these phases will start in earnest right away. This includes developing a single security master on a unified data plane that will form the foundation for the industry's most comprehensive front to back platform. This integration is our goal and its success will be built on the momentum we generate from our immediate focus on standalone growth and cross selling initiatives.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

That's the strategic opportunity. But on the financial side, we think these transactions create an extraordinary opportunity for shareholders. We have issued shares that led to dilution of approximately 15%, but have added a little over 50% in revenue, though not at the same level of profitability. But we are very confident about our ability to execute and drive incrementally higher growth, higher gross margin and meaningfully improve profitability to get these businesses to financial metrics that are similar to ours. Taken together, all of these actions should power 20% growth, 50 basis point gross margin improvement and 200 basis point EBITDA expansion per year, all very consistent with our earlier guidance.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Finally, we begin this chapter as one integrated team, strengthened by the addition of executive and exceptional leadership and talent. I'm delighted to welcome Neil Pawar, former CEO of Infusion and Kiraat Singh, former CEO of Beacon to our leadership team. Their expertise and vision will be invaluable as we execute on ambitious roadmap. To the infusion and Beacon teams joining us, welcome to Clearwater. And to all our employees, thank you for your unwavering dedication and collaborative spirit that have established Clearwater as a global leader.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Together, we are doubling down on our commitment to innovation and operational excellence as we build the industry's most comprehensive cloud native investment management platform. The future has never been brighter for our clients, our shareholders and our entire Seawater team. With that, I'll hand the call over

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

to Jim to dive deeper into our financial results.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

Thanks, Sandeep. We delivered another excellent set of quarterly results in Q1 twenty twenty five, which continued the impressive trajectory that we enjoyed in 2024. We achieved revenue of $126,900,000 with year over year growth of 23.5, which comfortably beat our guidance by $1,900,000 and grew sequentially from Q4. This is impressive as we noted in our earnings call last quarter that $3,000,000 in incremental revenue from NAIC services originally expected to be recognized this quarter was recognized last quarter in Q4.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

Annualized recurring revenue or ARR at the end of Q1 was a record $493,900,000 representing strong year over year increase of 22.7% from the $402,300,000 in Q1 of the prior year. Now let's turn to unit economics and profitability. Our robust margin expansion is anchored in our consistent incremental improvement in gross margin, which in Q1 was at a record high of 78.9%. For comparison, our gross margin was 76.5% for fiscal year twenty twenty three, when at our September 2023 Investor Day, we committed to improving gross margins by 50 basis points per year. In Q1, we are two forty basis points better in one point five years, not five years as we committed.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

This dramatic improvement was achieved not with a silver bullet, but with grit and the achievement of many efforts to incrementally improve both the economics and the efficiency of our operations. Teams across operations, sales and development have collaborated across many programs. Each of these individual programs contributed to incremental improvements to achieve these results and it is gratifying to see the team's successes reflected in our numbers. We've continued our stellar EBITDA margin expansion path by delivering $45,100,000 in EBITDA in Q1 with an impressive year over year growth rate of 40% and a record EBITDA margin of 35.5%. Now I'm going to turn to GAAP results.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

We achieved a GAAP net income for the fifth quarter in a row with GAAP net income of $6,900,000 in Q1. We have seen the scale of this business accrue benefits to both shareholders and clients. For example, in the first quarter alone, we spent $37,400,000 on R and D. This is more than double the amount we spent on R and D when we became public in 2021. Yet, as a percentage of revenue, R and D has become 21.6% of revenue on a non GAAP basis.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

This reflects leverage of more than three twenty basis points since we became public. Free cash flow in Q1 was $23,000,000 which represents a year over year increase of 168% from our prior year's Q1 of 8,600,000.0 Total cash and cash equivalents at the end of Q1 was $282,900,000 with net cash of $237,600,000 Our net revenue retention rate was 114% in Q1, which was a step down from the prior quarter's NRR of 116, as the AUM growth within our clients was less of a tailwind. However, the key elements to drive to NRR 115 remain strong with new product growth, low churn and price increases remaining steady. In terms of gross revenue retention rate in Q1, it remained at a solid 98%. In Q1, equity based compensation and the related payroll taxes was $27,600,000 which represented 21.7 of Q1 revenue.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

This metric has become meaningfully lower as a percentage of revenue and as a percentage of EBITDA as we have scaled. Before we turn to the future and guidance, please forgive me for a moment of reflection. When I joined Sandeep in 2019, I don't think either of us envisioned we would find ourselves in this moment today. Between adding private investors in 2020, to going public in 2021, to navigating COVID, and to all the inevitable market excitement in between, we and all of us at Clearwater have experienced so many changes. During this time, we've added so many great people along the way and all of us have learned how to get better time and again, even when we thought we were already pretty good.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

There may have been exciting moments along the way, but none of them are more exciting than the opportunity that lies in front of us today. We can give you our assurance that we will remain ever focused on clients and our employees and on our shareholders as we have been all along this journey. With these acquisitions completed, we can also assure shareholders that we will not pursue further M and A activities until the benefits of these acquisitions are truly apparent to investors, clients and employees and we have sufficiently deleveraged the business. Now, let's turn to guidance. Q1 will be our last reporting quarter in which we are showing our historical business results, as we close the Infusion transaction on April 21 and the Beacon transaction today.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

As a result, we have provided guidance for Q2 twenty twenty five for our historical business and summarized the expected contribution from the acquired businesses. For the entire year, we are providing combined consolidated guidance for the full year 2025. For everyone's context, Infusion's preliminary revenue for Q1 twenty twenty five was $54,500,000 as we expected, which is a 13% increase over Q1 of twenty twenty four. For the second quarter of twenty twenty five, before considering the impact of Bistro, Infusion and Beacon acquisitions, we expect revenue to be $129,000,000 representing a year over year growth rate of approximately 21%. In addition, we expect a combined revenue contribution from the date of acquisition of Infusion and Beacon of $45,000,000 to the quarter and a total expected revenue of $174,000,000 in the second quarter of twenty twenty five.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

This represents total year over year growth of approximately 63%. In terms of adjusted EBITDA guidance, for the second quarter of twenty twenty five, before considering the impact of the acquisitions, we expect EBITDA to be $45,000,000 representing an adjusted EBITDA margin of 35% or approximately three sixty basis points higher than our prior year Q2. Additionally, we expect the acquired businesses to contribute approximately $8,000,000 in EBITDA in Q2 at an EBITDA margin of 18%. On a consolidated basis, the EBITDA margin is 30.5% or approximately two fifty basis points higher than 2024. Additionally, in Q2 below EBITDA, we expect $6,000,000 of one time cash costs related to transition activities and $16,000,000 of one time equity based compensation expense resulting from the double trigger of awards granted at the legacy companies.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

We expect interest expense for Q2 to be $15,000,000 For the full year 2025, on a combined basis, we expect revenue to be between $720,000,000 to $728,000,000 representing a year over year growth rate of approximately 59% to 61%. We also expect EBITDA to be $230,000,000 to $235,000,000 for the full year 2025, representing an adjusted EBITDA margin of approximately 32% for the year. For the full year, although we are still finalizing our purchase accounting work, we currently expect depreciation and amortization expense to be in the range of $100,000,000 to $120,000,000 We expect the combined company will have equity based compensation expense of approximately $139,000,000 including the $16,000,000 of one time costs I described in Q2. This equates to equity based compensation expense of approximately 19% of revenue. This is slightly less than the 20% of revenue in Clearwater's initial full year guidance.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

We expect net interest expense to be approximately $40,000,000 for 2025. Share count for the year is expected to be approximately $3.00 3,000,000 shares. And although we will pay a limited amount in cash taxes, we will continue to utilize a non GAAP tax rate of 25% for 2025. With that, I'll turn it over to Sandeep to provide some closing thoughts before questions.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Thank you, Jim.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Before we open the call for questions, let me leave you with this thought.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

We are working backwards from a future where fragmented investment systems will be as obsolete as paper ledgers. A future where the world's most sophisticated investors will see, analyze and act on their entire portfolio, public and private, simple or complex to a single pane of glass in near real time. Q1 strong results are meaningful and foundational for what we are building, which goes much beyond an integrated platform. We are eliminating an entire category of problems that the investment industry has accepted as unchangeable for over a decade.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

That's the future we see. That's the future we are building. And that's the future we will deliver. Thank you.

Operator

At this time, we will begin our Q and A session. Our Our first question comes from Kevin McVeigh with the company UBS. Kevin, your line is now open.

Kevin McVeigh
Kevin McVeigh
Managing Director at UBS Group

Great. Thank you so much. And let me congratulate you obviously on the transactions, but also the execution. I'd imagine there was a lot of focus on the deals and to be able to put the core numbers up really, really impressive. I think you gave a lot of really, really helpful context.

Kevin McVeigh
Kevin McVeigh
Managing Director at UBS Group

As we're modeling, I don't know if this is for Jim or Sandeep, was there any way to think I know that 20% is longer term, but and 25% is pretty clear, but any sense of how we should think about maybe twenty six percent and twenty seven from just a top line perspective and then just the pacing of the margins?

Jim Cox
Jim Cox
CFO at Clearwater Analytics

Sure thing. Kevin, this is Jim. I hope you're doing well. Thanks for that. Me start.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

Hey, If it's okay with 2025, just so that everybody is grounded in the same because I know there's lots of moving pieces here. But simply the way we've done our 2025 guidance is this. We've always said Clearwater grows 20%. We're committed to that rate. We also then said, hey, we're going to grow Beacon twenty percent, just like that.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

If you can see infusion in Q4 and in Q1 grew about 13%. And so those are the components that we use to come to our guidance. Obviously, we will continue that longer term commitment to the 20% top line growth remains. Sandeep described the three phases that we will step through as we're looking for an incremental improvement. And so I think as we look to those levels, we would expect that infusion business to move from that 13% up a few percent each year as we drive to that 20% top line rate.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

In addition, I think it's impressive when you look at 2025 and you look at the full year EBITDA guide that we are able to grow that as a consolidated entity. And so I think when we talked about the acquisition in January, we talked about the incremental improvement in the infusion business, EBITDA margin growing. And we've also always talked about consistently thinking about 200 basis points improvement in EBITDA margin in our business historically, and how that is our mantra. And I think we feel very comfortable with the idea that we can expand the larger kind of consolidated enterprise at that same EBITDA margin expansion over that period. Sunil,

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

go Yes. I would just add here Kevin that to be very specific about the infusion growth rate. I think we had said before the acquisition that it's starting up at about 13% and we expect to reaccelerate growth through 20% in two years. So, obviously, the transaction just closed ten days back. And so we expect to get some improvement this year, but very little.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

We expect to see some real acceleration, if you will, in 2026. And by the time we get to Q2 of twenty twenty seven, we expect that to be growing at the pace we grow. So just in terms of scaling it and how this might go in the outer years, that's how we think about it.

Kevin McVeigh
Kevin McVeigh
Managing Director at UBS Group

Very, very helpful. Sandeep, I know you talked about kind of the three phases of the execution, the first one being the go to market of Beacon clients to Clearwater and infusion and then infusion of Clearwater. Can you just remind us how does Bistro fit into that? And does that come across the same optionality of BEACON? Or just how do we think about Bistro within the mosaic of BEACON and infusion?

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Yeah. Thank you, Kevin. Simply put, when you think about BEACON, it is visualization of alternative assets. And I'm sure you'll agree that a lot of the inefficiency in the world in this world comes from processing and dealing with alternative assets. And so, Beacon will do is, Bistrok and we will do is provide that capability across asset management, hedge funds, insurance companies and other asset owners.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

So we see that as a horizontal capability, which is applicable to all of the vertical markets we operate in. And while on that subject, Kevin, we think of Beacon almost as the same thing. Risk and analytics is not restricted to any one of these industries and we expect it will be horizontal. We'll take it to the 1,400 clients of Clearwater. We will take it to the 900 plus clients of infusion and frankly to their own market segments, which is energy and other areas.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

So, we expect these two capabilities to be horizontal going forward.

Kevin McVeigh
Kevin McVeigh
Managing Director at UBS Group

Thank you so much.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Thanks, Kevin.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

Go ahead. Our next question. Operator, can you queue the next question please?

Operator

The company Oppenheimer. Your line is now open.

Brian Schwartz
Managing Director and Senior Analyst at Oppenheimer & Co. Inc.

Yes. Hi. Thanks for taking my questions this afternoon. Sandy, wondering if you can give us maybe a heads up on what you're seeing in terms of demand out there. Obviously, it seemed like the macro impacted the business in 1Q.

Brian Schwartz
Managing Director and Senior Analyst at Oppenheimer & Co. Inc.

But what are you seeing now since the tariffs and the market turmoil took hold this month? And then with Jim, did you put in any potential macro risk into the guidance? And then I have a follow-up.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Yeah. Thank you for the question, Brian. So I don't think we saw very much in Q1. We literally on the day today looked at April to see churn, to see booking, to see items which may reflect a slowdown. But when you think about revenue though, our revenue is very well protected from the downside.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

So, the prices of asset classes gone down generally speaking, I think that's true. But has the revenue gone down like it did in 2022 or any other time? Not so. So I think the overall revenue growth of the company was solid in Q1. I think we looked at churn, we looked at hedge funds, we looked at each of these markets.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Obviously, Q1 is solid what we are saying and Q1 is April is very preliminary. But we have seen nothing here which affects the revenue of the business. Obviously, earnings is a completely different story and earnings outpaced any kind of guidance you provided. And so that's how we think about Q1 and April very preliminary. I don't know Jim whether you can talk to me

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

second question.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

On the guidance, I think it's the framework that we just described as far as thinking about those businesses and the relative contributions of those based on the information that we have today. I would say, on the margin, right, NRR is down slightly in Q1 from Q4. But all of the things that are entirely in our control, churn, price increase, cross sell of product, upsell was a little bit lighter and that can be because asset growth is a little less and that tailwind of AUM was a little bit less as well to contrast from Q4 to Q1. But it was

Jim Cox
Jim Cox
CFO at Clearwater Analytics

I would characterize it as less of a tailwind rather than a hit.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

I think that's a fair point, which I don't think I stressed enough was there was a tailwind and that helps revenue of 1% to 2%. And that tailwind just did not show up like we expected. And that's why we're always cautious about guidance because who knows what the tailwind is going to be. But we are much better protected against headwinds.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And that's what you saw in Q1 is there was prices went down, but guess what the revenue growth was still totally solid. But is it down 1% compared to what it would have been with a good tailwind? Yes, think that's fair.

Kevin McVeigh
Kevin McVeigh
Managing Director at UBS Group

And the follow-up question I had was just on the consolidated guidance. I'm just thinking about how fast you can get going on achieving the top line and cost synergies. If I look at the consolidated guidance and just considering the acquired companies ARR, the upside that you did in Q1, it doesn't seem like you're baking in much synergies with these acquisitions. So the question is kind of coming back to how fast do you think you can get going on working to achieve both the top line and the cost synergies for the deal rationale? Thanks again for taking my questions.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Yes. Thank you, Brian. Look, think there are two different things. One is revenue growth, which is what is really important and we think we reaccelerate in two years. So that's number one.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

On the cost side, I think we said we will improve gross margin 400 basis points in year one and another 400 basis points in year two. And we will take out $20,000,000 in cost synergy. Sitting as we do right now, we feel very, very confident that we can deliver on all of those three items. And so we see nothing having changed from the time we provided you with our thoughts about these acquisitions. I do want to also add that many of these synergies related to G and A have already been acted on and they were acted on earlier this week.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And we expect them to play out over Q3 and Q4.

Operator

Our next question comes from Michael Infante with the company Morgan Stanley. Michael, your line is now open.

Michael Infante
Michael Infante
Vice President - Equity Research at Morgan Stanley

Hi. Thanks for taking our question. Nice results. Jim, I just wanted to ask if I run the pro rata calcs based on the acquisition close dates of infusion and BEACON even if I assume roughly even seasonality throughout the year, I'm getting to roughly $170,000,000 of inorganic for the full year. If you sort of back that out from the midpoint, I'm getting to call it 23% organic for Clearwater, which seems a touch high in relation to the 2Q guide of 2021.

Michael Infante
Michael Infante
Vice President - Equity Research at Morgan Stanley

Is there any nuance you would add just from a seasonality perspective for Infusion or Beacon and or whether or not you're baking any cross sell synergies into that number? Thanks.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

Yes. I'm just grabbing my numbers to try and look. I have a little bit more in the inorganic than your one I think I heard you say 170. I was trying to pull up my numbers here. It's a little bit more than that, but that organic number sounds consistent with what we were looking at, at the beginning of the year and including the good Q1 that we had.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Yes. Michael, I

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

would just add that, like we said, the first deal closed ten days back and the second one is literally closed in the morning today. These teams are going to be integrated immediately, because we do believe that risk can be sold horizontally and you can sell even the front office horizontally to all of our client base and you can sell V store horizontally. So, we'll integrate them really quickly. At that point, it will be hard to tease out exactly what growth comes from where. But we do feel that our guidance is solid.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And obviously, the Clearwater numbers are very ground up. We do a very rigorous process. I think we spent a lot of time with Infusion to make sure we understand it. And the same with Beacon. So it has been built ground up.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And when it comes to is really, if you model 20% or slightly better for both Beacon and Clearwater and you model the 13% for infusion, well, that's where you'll roughly come up.

Michael Infante
Michael Infante
Vice President - Equity Research at Morgan Stanley

Got it. That's helpful.

Michael Infante
Michael Infante
Vice President - Equity Research at Morgan Stanley

Sandeep, I asked last quarter on infusion pricing. I wanted to ask the same question again. I know it's only been part of the company for nine days now. But any incremental detail you could share just in terms of your conversations with customers and or Neopolar just in terms of how you're thinking about pricing and contract structures and whether or not that might be playing into your assumptions for a few points of growth acceleration at infusion next year? Thanks.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Yeah. Thank you, Michael. Listen, I had a whole paragraph for you. We go to the script. I actually spent a whole paragraph making sure I addressed your point.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

But what I would tell you is this, one is super high receptivity at infusion to come up with a commercial model, which is similar to what we have done. So that's question number one. So if you talk about Dean Pavar and his desire to build a more stable commercial model sky high. So that's number one. Number two, what we did was we took the entire finance organization and the legal organization, which drives these initiatives from all three businesses and brought it under Jim right away.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

I mean that transition has already occurred. The point being, let's go out and drive that centrally and sort of purposefully. But I do want to caution on one thing. The last time we did it, we went through a four month exercise to build a model, which is going to work and endure. What we don't want to do is get 8% this year and then 2% next year.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

We don't want to do that. We want a consistent 4% to 5% growth from price, which I think is durable. But if you grow price 8% to 9%, I don't think is durable. And so we want to build the model correctly. So do we think it adds to growth in Q2 and Q3?

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

We don't. Do we think it might add to booking in Q4? Yes. Do we think it will add to revenue in Q4? I don't think so.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

So would you see impact in 2026? Yes, we do believe that. But this is a big initiative for us. We want to get the commercial model right. We don't want this constant movement up and down.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

We have done it before. We think it can be executed. And I've got to tell you, the infusion team is completely behind that.

Operator

Our next question comes from Rishi Jaluria with the Company RBC. Rishi, your line is now open.

Rishi Jaluria
Rishi Jaluria
Managing Director at RBC Capital Markets

Wonderful. Thanks so much for taking my questions. Nice to see the deals closed. Maybe one for you Jim and one for you Sandeep. Jim just to kind of go back to the numbers.

Rishi Jaluria
Rishi Jaluria
Managing Director at RBC Capital Markets

It sounds like you're supporting the idea that organic growth or core Clearwater growth will remain above 20%. Just can you give us a sense for what would the inorganic contribution? I know Bistro is immaterial, but from Beacon and Infusion be for the year just so we can all align our numbers. Because if I just take kind of your Q2 guide and then take consensus for Q3 and Q4, I'm going come up with a number that's much lower than 20% organic. So maybe just can you walk us through that?

Rishi Jaluria
Rishi Jaluria
Managing Director at RBC Capital Markets

And then I've got a follow-up for Sandeep.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

Sure. So I think what we said was there was $45,000,000 of combined contribution, right, in and that's basically two thirds of the second quarter, right? So if you lay that out, can then expand that into Q3 and Q4. So take the pro rata from the intra quarter into a full quarter and start to look at that in those areas.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Yeah. But Rishi, think if you look at I think revenues Rishi Go ahead.

Rishi Jaluria
Rishi Jaluria
Managing Director at RBC Capital Markets

Go ahead.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

I was just going to say if you look at the revenue for 2024 for Clearwater and for infusion that's obviously fully publicly available. And we've given you guidance of what Beacon was.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

You just take those metrics and say 20% growth for Clearwater, twenty percent growth for Beacon and the 13 ish percent growth for infusion and that's the guide. I think the quarterly thing will shake out a little bit because we aren't in that book today. Like I said one deal closed in the morning today. So the quarterly may move up and down a little bit. But I do think at a full year level, we feel really good about our guide here.

Rishi Jaluria
Rishi Jaluria
Managing Director at RBC Capital Markets

Okay. Got it. No, that's helpful. And then Sandeep for you. One of the things that I think gets me really excited about the Infusion deal along with everything else that you stated is really the ability for Clearwater over time to get deeper into equities, right?

Rishi Jaluria
Rishi Jaluria
Managing Director at RBC Capital Markets

And it feels like that's especially given your large asset manager customer base feels like a big opportunity that you can go after. Maybe can you walk us through kind of your roadmap over time? I understand it's not going to happen this year, probably not going to happen next year. But for you to really get deeper on the equities book of portfolio, especially for your largest asset management clients and maybe what that can look like in terms of the growth driver for now the combined Clearwater? Thank you.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Thank you, Rishi. That's a big piece, right, Rishi. When you think about the work Infusion does, it's very different profile from what we do. We think about what hedge funds trade in and what asset managers trade in. You're right, equity is a much bigger component than in the general accounts of insurance companies.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

So, we get that expertise where the technological needs are very different. It's near real time. It is very low latency. So the technology and the platform requirements are also different. What this does for us is it brings all the intellectual property you need under one roof.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

But that doesn't mean it's done. What it does mean is all of these are cloud native modern technologies under one roof. Do clients already use it together? Lots of clients use it together today. So people have Clearwater and infusion, Clearwater and Beacon and so on and so forth.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

So even without us being together, clients have been able to pull this together. So we feel very confident about that. The final vision though is, can you create a single security master, which is across all asset classes and across all functionality? If you do that, I believe that's a holy grail of investment management tech. Single data ingestion system, single aggregation system, single reconciliation system, but a singular data sorry, singular security master, which is used by the front office, is used by risk, is used for regulatory reporting, is used for accounting.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

That I feel we have a legitimate and more than legitimate right to try. And all the intellectual property, while not integrated, is under one roof. Now, we don't want get over excited about trying to take all of energy and put it behind that. And that's why we had that three phase approach of let's sell things incrementally and better. So we protect and do well on 2025.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And then in the medium term cost sell much more aggressively and therefore improve 2025 and 2026. But yes, we do expect after that for this full front to back platform. And if we can get there, I think it will completely revolutionize how people think about investment management technology.

Operator

Our next question comes from Andrew Schmidt with The Company Citi. Andrew, your line is now open.

Andrew Schmidt
Andrew Schmidt
Equity Research Analyst - FinTech, Software & Payments at Citi

Hi, Cindy. Hi, Jim. Thanks for all the details. It's good to hear the progress report card here. Maybe just dig into Infusion for a moment and just the hedge fund end market.

Andrew Schmidt
Andrew Schmidt
Equity Research Analyst - FinTech, Software & Payments at Citi

If you could just talk a little bit about what you're seeing in the market? This kind of tabs on to a prior question around just the environment. But what you're seeing in the hedge fund end market in terms of just client health, hedge fund starts and things like that? And then perhaps a corollary to that, Sandeep, you mentioned Phase one some tactical blocking and tackling, current run rate of the business plus some improvements. If you could put some finer points on what those sort of near term improvements you can make in the infusion business that would be helpful.

Andrew Schmidt
Andrew Schmidt
Equity Research Analyst - FinTech, Software & Payments at Citi

Thank you so much.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

Sure. So maybe just for context, just to be transparent with everybody. If you go back to Q1 of twenty twenty four, Infusion had about $4,000,000 of churn in Q2. They had between $3,500,000 and $4,000,000 in Q3. They had 3,000,000 in Q4 at $2,500,000 of churn.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

And in Q1, they had $3,000,000 of churn. So again, looking at a full quarter basis, that profile is identical. I'd also say we just checked in to see how April looked and April looks, I would say consistent with the normal pattern. And so we haven't seen anything with regard to that. I think the things to think about with infusion and a real focus for the team that they are increasingly becoming more and more successful with is not only winning in the new hedge fund market, but hedge fund conversions.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

And when we dig under the covers and look at some of the good work that they did in Q1, there are a number of hedge fund conversions as well that went through in that quarter.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Would just add that if you look at the work Neil Pavar and his team have done, they migrated away from very small hedge funds. And frankly, if you look at the volatility, it comes from the very small hedge funds. They come in and out of the market. So I think that migration makes their business somewhat stickier, which is why you have seen the churn level off completely. Now, just like you, we have been looking also trying to see what does Q1 look like, what does April look like.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And it's completely consistent with everything we saw in 2024. So we feel, we're very watchful, but we don't see anything yet, which would say to us that something has changed or something is trending in a certain way. So the question I think the other question was, what can we do to help infusion grow incrementally faster? And the most simple thing is Clearwater obviously has 1,400 clients. Many of them need a front office system and a middle office system.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Most people would agree infusion is best in class. And so could you take that and sell it to those clients? I think that would increase their growth incrementally. Is it x percent is hard to tell today. But yes, that we see as a major component of growth.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

That's one. The second thing is Infusion has traditionally invested a lot lower in R and D. And they always have to make a choice. Do you invest in hedge funds? Do you invest in asset managers?

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

But what Clearwater will be able to do right away is pool our resources, the resources we were deploying behind asset management pool them together, put it under the joint leadership of Neil Pavar. And I think that will help quite dramatically their bandwidth to focus incrementally on growth. And so we expect them to grow faster. Does it happen tomorrow? No.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

But we do think like we said, we expect that in two years, they should be at the growth rate of 20%. And we absolutely expect to meet that. Thank you.

Andrew Schmidt
Andrew Schmidt
Equity Research Analyst - FinTech, Software & Payments at Citi

That's extremely helpful. Thank you so much. Thank you both. Maybe I could just ask about the new foundation, the single security master, obviously hugely beneficial, an important part of this the process here. If you can talk about just the R and D intensity associated with building that out.

Andrew Schmidt
Andrew Schmidt
Equity Research Analyst - FinTech, Software & Payments at Citi

And then on the flip side, when you do get that live in the future, can you deprecate technology assets and drive higher level of scale when we think about that new combined security master? Thank you so much.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Yeah. Thank you. So, I would just say yes, yes and very loudly so. I think those are exactly right. But I do think that we should just consider for a second what the architecture of Clearwater is.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

It is a single security master system today. Then you're to ask yourself what's the architecture of Infusion? And it is a single security master, a different security master, but architecturally a single security master. And then you got to think about Beacon. So the benefit we have is each of these systems are architected as a single security master.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Use the same security master for front office applications for OEMs and PMS and then risk and then accounting and then regulatory reporting. And what you do is, you completely get rid of this notion of reconciliation. And all of us on the call know that. We have teams after teams after teams of people reconciling within an asset class between front office, middle office, middle office and back office and it goes on and on. And then you put in other asset classes and other countries and best of luck.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Reconcile and reconcile and reconcile. So I think the single security master would completely change the game of how people think about investment management technology. So, yeah, we are very excited about it. We think that architecturally we are set up to do it, but it doesn't mean it's gets done in six months. I think it takes time.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

One last point on the R and D. We have the joint integrated company has 1,000 people in R and D. And so we think there's a lot of synergy there, but we don't expect at a dollar level to reduce R and D expense. But we do expect us to be able to fund these initiatives without adding too much of cost.

Andrew Schmidt
Andrew Schmidt
Equity Research Analyst - FinTech, Software & Payments at Citi

Very helpful. Thank you so much, Sandeep.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Thank you.

Operator

Our next question comes from Alexey Gogulov with the company JPMorgan. Alexey, your line is now open.

Ella Smith
Ella Smith
Analyst at JP Morgan

Good evening, Sandeep and Jim. This is Ella on for Alexia. Thank you for taking our question.

Ella Smith
Ella Smith
Analyst at JP Morgan

So first, I was hoping to like everyone else on the call ask about the Infusion acquisition, which brings significant equities exposure to you. How do you intend to manage this new risk as it relates to your pricing?

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Thank you for the question. But remember this, we think a lot about AUM when you talk about just cold clear water. Infusion doesn't price for that at all. So they aren't subject I think to the vagaries of the market going 5% up and 5% down. But I do think, Ella, that the commercial model needs to be rethought.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

I think the commercial model, we don't think is best in class right now. I think the infusion platform is completely best in class. And there's really no reason they shouldn't have a commercial model, is best in class. But we do expect to launch that effort very quickly. But we do think it takes us four months before we go to the market with it.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And then it will take a little bit of time to get people to convert to it. But we will switch all new clients to that new commercial model right away. And I think clients will like it. I don't expect clients to be resistant to it, because we hope it aligns to how they run their business. So look, feel it is a journey, but it's a journey we've been on before.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

So we feel pretty confident about

Jim Cox
Jim Cox
CFO at Clearwater Analytics

And Elliot, if can refer you to the deck we put out when we closed the infusion transaction, I think you'll see the client segments within that deck. And I think something that was really compelling to me and frankly, I should have understood it, but it really popped out at me was after the consolidation, all right, we have about half of our revenues are asset owners and half are asset managers. And of those asset managers, twenty three percent are hedge funds. So it's about it's less than a quarter of our exposure across all that to hedge funds. And yet we still have that incredible blend of both asset owners and asset managers.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

And I think it uniquely positions us from a financial stability perspective, but also from a strategic perspective when we think about being able to see both sides of the market.

Ella Smith
Ella Smith
Analyst at JP Morgan

That's really clear. Thank you both. And as a really quick follow-up, I want to ask about Bistro. How is that embedded in your guidance? And how do you think about its forward growth or opportunities since you acquired it as a no revenue asset?

Jim Cox
Jim Cox
CFO at Clearwater Analytics

Yes. Thank you for reminding everybody of that. It was an asset acquisition and there aren't revenues associated with it. Sandeep described how it is a horizontal it is provided as a horizontal use case. And so I think as continue to build that out, we'll look for evolution there.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Yeah. I would just say a little bit, there aren't any good solutions in the market, which is goes across alternative assets or the complex assets. But there really isn't a platform, which you can look at private credit return, private debt and all of these asset classes together. And we think about the biggest player in the world in this area, it's Blackstone. And they built it, but they built it using some of the technology of Clearwater and some of the technology of Beacon, and they developed on top of that to build something which could be used by by by their desks across the company.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

So I think it is a very unique asset. And for us to build it would have taken a long time, but more importantly, our access to that domain expertise would be really hard to get. I mean, they use it on a daily basis. So we are going to stay abreast of everything that happens in that market. And I think that alternative assets is such a big part of the whole story that it will really help accelerate growth for all three companies including Clearwater, Infusion and

Ella Smith
Ella Smith
Analyst at JP Morgan

Thanks a lot. Thank you, Jim and Sandeep.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Thanks, Our

Operator

next question comes from Dylan Becker with the company William Blair. Dylan, your line is now open.

Dylan Becker
Research Analyst at William Blair

Hey, Sandeep, Jay and June. Thanks for

Dylan Becker
Research Analyst at William Blair

taking the question. I'll just

Dylan Becker
Research Analyst at William Blair

ask one for the sake of time. You kind of hinted at it, but Sandeep, you guys have obviously undergone kind of a similar transition throughout the core Clearwater business over the last five years and now executed or outperformed kind of expectations there.

Michael Infante
Michael Infante
Vice President - Equity Research at Morgan Stanley

I guess I wonder how that kind of breeds confidence in your ability to run the same playbook?

Dylan Becker
Research Analyst at William Blair

And if there are any parallels that you would make as kind of the starting point we look at today relative to where Clearwater was five years or so ago?

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Yes. I think thank you for the question, Dylan. Everything we have seen till now, super high confidence. We have moved very quickly to integrate all the operations under Subhisheti, who's our new Chief Operating Officer. And we should be able to play the exact playbook again.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

And if you think about and look at the integrated margin and how we got from there two and a three years back to where we are today, we think we can play we can just execute on that same playbook. The advantage this time will be two things. One is, the technology of Helios already exists, so you don't have to build it. And we know how to drive it. So, our level of confidence in driving gross margin improvement is really high.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Our ability to execute on the synergy is really high. And so we believe that we will do what we have guided to or spoken about at the time of acquisition, super high confidence in that. I don't know, Jay, whether

Jim Cox
Jim Cox
CFO at Clearwater Analytics

you think Thanks, Dylan. Thanks, Dylan.

Dylan Becker
Research Analyst at William Blair

Thanks,

Operator

Our

Operator

next question comes from Michael Turrin with the company Wells Fargo. Michael, your line is now open.

David Unger
David Unger
Equity Research at Wells Fargo

Hey, thanks for taking our question. It's David Ongren for Michael Turrin tonight. Just one from us. I think we all know that Clearwater has very strong win rates and revenue per quota carrying rep metrics. Just wondering how should we think about win rates and sales efficiency as you work through the integration going forward?

David Unger
David Unger
Equity Research at Wells Fargo

Thank you.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Yes. I would just say that if you look at the launches of hedge funds and you look at the conversion, Infusion win rates are really high. They are a really disruptive platform. And when people go out and look for a platform, I think they are the platform of choice. Now, I think as we get into the business more, I think we will evaluate where exactly their losses, where did they lose, why did they lose.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

So I think a little bit early for us today to say what do we think about the long term trend there. But obviously, they've been a public company and they have won very, very consistently. So look, we feel really confident about it, but I don't think we are really in a position today to be able to dive into all of it. I don't know Jim, if you'd add anything.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

The only thing other thing our experience has taught us that cost selling, we have great win rates. Cost selling win rates are even higher. And I think that's not a controversial thing across all businesses. And this the combination the strategic combination of all of these firms together enable that cross sell motion much more strongly than we had two weeks ago.

David Unger
David Unger
Equity Research at Wells Fargo

Great. Thank you.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Thank you.

Operator

Our next question comes from Kim with the company Loop Capital Markets. Yoon, your line is now open.

Yun Kim
Managing Director at Loop Capital Markets LLC

Okay. Great. For the sake of time, I'll just ask one quick question to Jim.

Kevin McVeigh
Kevin McVeigh
Managing Director at UBS Group

For modeling the Fusion business, I think it would help us if you can give us some insights into what the renewal seasonality is like within that business.

Yun Kim
Managing Director at Loop Capital Markets LLC

Is it heavily geared towards Q4, which implies that some of the uptick in revenue should come in Q4 rather than in linearly through Q3, Q4?

Jim Cox
Jim Cox
CFO at Clearwater Analytics

That's right. That's right. Two triggers within their business is one is there's an annual element to it in the renewal cycle. And as more of their business was won in fourth quarters year over year over year, there's more business in Q4. They also had a cadence where at the beginning of the year, they would make certain changes.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

And so that Q4, Q1 timeframe is step change.

Yun Kim
Managing Director at Loop Capital Markets LLC

Okay, great. Thank you so much.

Operator

At this time, there are no more questions registered in queue.

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

Just want to say just thank you for your continued interest. And we look forward to meeting many of you over the next few days and weeks. And on the next call in about a quarter from now. Thank

Sandeep Sahai
Sandeep Sahai
CEO and Board Member at Clearwater Analytics

you.

Jim Cox
Jim Cox
CFO at Clearwater Analytics

Take care.

Operator

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

Executives
    • Joon Park
      Joon Park
      Head of Investor Relations
    • Sandeep Sahai
      Sandeep Sahai
      CEO and Board Member
    • Jim Cox
      Jim Cox
      CFO
Analysts
Powered by Quartr

Key Takeaways

  • Financial results: Q1 revenue of $126.9 M (+23.5% YoY), ARR $493.9 M (+22.7%), adjusted EBITDA $45.1 M (35.5% margin, +40% YoY), and 78.9% gross margin close to the 80% target.
  • Acquisition integration: Closed Infusion, Beacon and Bistro deals and launched a three-phase plan to maximize standalone growth, drive cross-sell and build a unified front-to-back platform with a single security master.
  • Unit economics & efficiency: Investments like the Helios reconciliation tool and generative AI drove gross margin improvement from 75.1% to 78.9%, cut client onboarding to 5.5 months, and achieved net revenue retention of 115% a year early.
  • Strategic wins: Secured marquee contracts including a “Magnificent Seven” tech leader for the Prism solution on Snowflake, a leading German insurer middle-back office replacement, and expanded LPX/MLX deployments with a global asset manager.
  • 2025 guidance: Forecasting consolidated revenue of $720–$728 M (+59–61% YoY) and adjusted EBITDA of $230–$235 M (~32% margin), with Q2 revenue of $174 M (+63%) and a 30.5% EBITDA margin.
AI Generated. May Contain Errors.
Earnings Conference Call
Clearwater Analytics Q1 2025
00:00 / 00:00

Transcript Sections