Clearwater Analytics Q2 2025 Earnings Report

Clearwater Analytics EPS Results

• Actual EPS: $0.12
• Consensus EPS: $0.13
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: $0.10

Clearwater Analytics Revenue Results

• Actual Revenue: $181.94 million
• Expected Revenue: $174.16 million
• Beat/Miss: Beat by +$7.77 million
• YoY Revenue Growth: +70.40%

Clearwater Analytics Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 5:00PM ET

Clearwater Analytics (NYSE:CWAN) develops and provides a Software-as-a-Service (SaaS) solution for automated investment data aggregation, reconciliation, accounting, and reporting services to insurers, investment managers, corporations, institutional investors, and government entities in the United States and internationally. It offers investment accounting and reporting, performance measurement, compliance monitoring, and risk analytics solutions. The company's Clearwater Prism SaaS-based data and reporting platform for investment data delivers a range of product modules, including Prism reporting and statements, Prism connectors, Prism data ops, and Prism managed services. It also provides Clearwater JUMP that provides a modular front, middle and back office solution to investment managers, private banks, and insurer, as well as portfolio management and order management, unit-linked funds, tri-partite templates, and full trade life cycle solutions. In addition, the company offers Clearwater LPx, a full-service solution for private funds that delivers complete, timely, accurate, and consumable data for limited partnerships; and Clearwater MLx, a comprehensive mortgage loan investment solution that provides investors to drive growth and make informed decisions, oversight, and reporting capabilities for mortgage loan investments, as well as enhances risk reporting, servicer tracking, oversight, and accounting capabilities. The company was founded in 2004 and is headquartered in Boise, Idaho.

Clearwater Analytics Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong Q2 performance: Total revenue grew 70% YoY to $181.9M, ARR jumped 83.4% to $783.5M and core business posted 22% organic revenue growth, driving EBITDA up 74.3% with margins improving 70bps year over year.
• Positive Sentiment: Synergy and margin gains: Rapid integration of Infusion, Beacon and Bistro delivered $20M in expense synergies within weeks, achieving a 77.4% gross margin versus an expected ~76.5% blended figure and enhancing standalone profitability.
• Positive Sentiment: Integrating for growth: Teams were reorganized around four verticals (insurance, asset managers, hedge funds, asset owners) and a single-instance, multi-tenant architecture with one security master now supports a front-to-back platform vision validated by 450+ client engagements.
• Positive Sentiment: AI and efficiency levers: Helios reconciliation and planned generative AI initiatives are expected to drive further margin expansion and operational efficiency as they scale across the integrated platform.
• Positive Sentiment: Accelerating pipeline: Secured VKB (Germany’s largest public insurer) as a front-to-back platform win, launched a Bloomberg AIM partnership with 12+ active deals, setting the stage for continued cross-sell momentum and market disruption.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Clearwater Analytics Second Quarter twenty twenty five Financial Results 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'd like to welcome Michael Chen, Senior Vice President, Head of Corporate Development, to begin the conference.

[Michael Chen, SVP & Head - Corporate Development at Clearwater Analytics]

Thank you, and welcome everyone to Clearwater Analytics' second quarter twenty twenty five financial results conference call. Joining me on the call today are Sandeep Sahai, Chief Executive Officer and Jim Cox, 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 acquisitions 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.

[Michael Chen, SVP & Head - Corporate Development 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.

[Michael Chen, SVP & Head - Corporate Development 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 the call over to our Chief Executive Officer, Sandeep Sahai.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Thank you, Mike. We had a very strong second quarter. Firstly, the core business continues to perform very well, meeting and exceeding our expectations. Secondly, we're very pleased that the strategic rationale behind the acquisitions has been enthusiastically validated by clients, partners, industry analysts and employees. Thirdly, we have acted purposefully and decisively to integrate the companies and set ourselves up for the next phase of growth.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

And finally, our due diligence was comprehensive and there were very few surprises resulting in us delivering very solid financial results for the integrated company. Our total revenue grew 70% year on year to $181,900,000 with our core business contributing $130,600,000 representing a solid 22% year over year organic growth. ARR was $783,500,000 up 83.4% year on year. Core NRR stands at 114% with consolidated NRR at 110%, showing that our existing clients continue to expand the use of Clearwater. Our adjusted EBITDA of $58,300,000 was 32.1% of revenue and up 74.3% year on year.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

What makes this truly remarkable is that 32.1% is 70 basis points higher than our standalone profitability in 2024. Think about that for a moment. We integrated Infusion, which had meaningfully lower levels of profitability and yet we grew profitability 70 basis points compared to last year. What makes all this possible is the inherent disruptive nature of our platform and it's nice to see it continue to assert itself. The single instance multi tenant architecture with a single security master and a single data plane is disruptively better for both business functionality and efficiency.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

The network effect simply makes operations more efficient and each new client is inherently more profitable. And where does it show up in gross margin? Let me walk you through what we have achieved on gross margin this quarter because it simply tells the story. When we announced these acquisitions, analysts rightfully expected significant margin compression because we were integrating infusion whose gross margin was approximately 10% lower than us. And the math was really straightforward.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

If you assumed approximately 69% gross margin for infusion and close to 79% for the rest of the business, all consistent with analysts expectations, we should have delivered a blended gross margin of roughly 76.5% as an integrated company. We had committed a 400 bp improvement in the infusion business at the end of the first twelve months, at which point we were then expected to deliver a gross margin of approximately 77.8%. We delivered a gross margin of 77.4% in Q2 itself. That's remarkable. This was achieved in large part because gross margin of the core accounting and analytics business exceeded 80% for the quarter.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

A big shout out to both the operations and technology teams on achieving this long term goal we had set for ourselves. And this was delivered in just two and a half years. What I find exciting is that we still have several impactful levers we can pull to improve our margins in the coming quarters. Looking ahead, we see a clear path to continued margin expansion as we realize additional operational efficiencies and perhaps more importantly as our generative AI initiatives continue to scale the platform. Helios, our proprietary data reconciliation platform, and the generative AI version of Helios should both have significant impact on our business.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Financially, this is already a very compelling proposition. And we have already delivered the synergies and margin improvement goals we had laid out for the entire first year. But as we have said before, these acquisitions were primarily driven by a vision for an integrated platform that would alter the investment management technology landscape for our clients. And while Clearwater and Fusion and Beacon were already market leaders in the industries they're focused on, our ability to jointly deliver this vision expeditiously is meaningfully higher. We began by working jointly across all three organizations Clearwater, Infusion and Beacon to develop a detailed and joint vision for the combined business.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

To validate this vision several members of our leadership team and I traveled to 14 cities across the world engaging over 450 clients in intimate settings to discuss what we were building and seek their feedback. The response was near unanimous enthusiasm for our vision and direction and clients immediately grasped the industrial logic of bringing these companies together. Equally important was ensuring that our entire organization was aligned. We met over 2,600 employees in person across our centers, close to 85% of our workforce to share our plans and build a shared vision for the integrated business. With this foundation in place, we moved decisively to reorganize the business around what's best for our clients.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

We integrated the GTM teams and restructured the business to serve four markets: insurance, asset managers, hedge funds, and asset owners. We then took the product and engineering teams from all three organizations and combined them to build integrated capabilities that can be taken to these vertical markets. And finally, the enabling functions were integrated on day one. These actions were done to serve our clients better and not to reach any specific synergy goal. But these actions allowed us to realize 20,000,000 in synergies, our full year one target within the first few days as an integrated company.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

But back to our vision for the platform we are building. We have the components to build a true front to back platform that will have exciting implications for our clients and the industry. The core tenets of the platform will be number one, it will have a single instance multi tenant architecture. This is the last upgrade our clients will ever need. Number two, the platform will share a security master across the entire investment lifecycle.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

When an event happens anywhere in the trade's life cycle, a trade, a corporate action, or a regulatory change, it will be reflected everywhere in the platform in near real time. Number three, managing cross asset class risk, risk across geographies, understanding cash flows at a comprehensive level, which will all be possible in near real time, vastly enhancing decision making capability. And finally, number four, integrating data ingestion, aggregation and reconciliation to work the way it should be. Doing it once and using it for all clients across all functions. Data quality will also be vastly enhanced.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

When we solve a problem for one client, every client will benefit. This integrated architecture eliminates the complexity and inefficiencies that plague organizations using multiple disconnected systems. While this will be truly disruptive, the availability of an integrated data set already powers and will continue to power our push into infusing generative AI into all aspects of the business. We will deliver next generation reporting, deeper portfolio insights, and operational efficiency, applying agentic AI and other capabilities that legacy systems simply cannot match. A good proof point of our joint offering was our recent signing of VKB, Germany's largest public insurer.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

We are replacing a leading legacy provider and delivering a disruptive solution for them. VKB will be able to modernize its operations while significantly enhancing the accuracy and timeliness of data across all asset classes. Our solution brings together components of Clearwater, Beacon and Infusion to deliver an integrated front to back platform. Since the announcement of this combination, we have received numerous client requests and RFPs for a front to back solution, something none of the standalone companies would have been able to deliver on their own. We also made progress on our partnership strategy and are very excited about the recently announced partnership with Bloomberg.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

When it comes to large asset managers, we expect to partner with them to deliver a full front to back solution. The collaboration creates a bidirectional integration between Bloomberg AIM and Clearwater that eliminates manual workflows and delivers a seamless front to back experience. While we have long supported other point to point connections, the Bloomberg collaboration offers true interoperability, greater automation, and a differentiated client experience. We're already working on over a dozen active deals where the joint solution is the key differentiator. In closing, we're not trying to build an incrementally superior platform.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

We have the intellectual property, client support, and engagement from our team to build the next generation investment management platform. In fact, we hope to build the nervous system of the future investment management industry. With that, I'll hand the call to Jim to dive deeper into our financial results.

[Jim Cox, CFO at Clearwater Analytics]

Thanks, Sandeep. I am excited to report another outstanding set of quarterly results as the momentum in our business continues and the strategic transformation of the acquired businesses is progressing faster than expected. We achieved record revenue of $181,900,000 up 70% year over year, which comfortably beat our guidance of 174,000,000 Our core Clearwater revenue continued to grow at 22%. What is impressive is how this growth came from both our traditional drivers, for example, our steady net revenue retention rate of 114 for the core business, as well as from newer drivers, including international insurance and global asset management. We've been investing in those areas and it is gratifying to see those successes.

[Jim Cox, CFO at Clearwater Analytics]

As it relates to the acquired businesses, I'm happy to state that those businesses performed very consistently with their forecasts for the second quarter. The outperformance in revenue relative to our guidance was a function of conservatism applied to the forecast process of the two newly acquired businesses. Given that both businesses were quite new to us, for our guidance, we had kept the nine days of April revenue of the infusion business as a hedge against any unanticipated surprises. And fortunately, the hedge proved entirely unnecessary. Annualized recurring revenue or ARR at the end of Q2 was a record 7 and $83,500,000 up 83.4% year over year.

[Jim Cox, CFO at Clearwater Analytics]

On an organic basis, ARR was $513,000,000 an increase of 20% year over year. As for the progress on the acquisitions, we've been particularly pleased with the progress we've made with Infusion. This past quarter, Infusion delivered the highest bookings achieved in any quarter in their history And we welcomed 49 new clients with strong performance across all global regions of that business. And I look forward to seeing the momentum continue in the second half of this year. We also have seen incredible customer interest in Beacon as their risk capabilities cut across all of our client segments.

[Jim Cox, CFO at Clearwater Analytics]

Now let's turn to unit economics and profitability. We achieved non GAAP gross margins of 77.4%, which is impressive since Infusion historically had a materially lower gross margin profile than Clearwater's. We previously communicated we expect around 400 basis points of gross margin improvement from the infusion business, And we are pleased to report that we have delivered on almost all of this faster than we had expected, demonstrating the power of our integrated platform approach. In terms of EBITDA, we generated $58,000,000 of EBITDA representing a margin of 3274% year over year growth, which again comfortably beat our guidance of $53,000,000 by $5,000,000 This beat resulted primarily from the achievement of the $20,000,000 in expense synergies within this quarter. With the expense synergies achieved, we're now focused entirely on growth across all of our lines of business.

[Jim Cox, CFO at Clearwater Analytics]

In terms of retention metrics, our gross revenue retention rate at 06/30/2025 remained solid at 98% and the net revenue retention rate was 110. As these are point in time metrics, these results fully reflect the impact of both acquired businesses. Therefore, maintaining a 98 gross retention rate while including all acquired businesses is meaningful. Our NRR for our historical business for the quarter remained consistent with the first quarter at 114%. And as discussed in a prior call, we remain confident that the measures we are currently undertaking to improve retention metrics for infusion will enable us to achieve our company target of 115% on a consolidated basis over time.

[Jim Cox, CFO at Clearwater Analytics]

Turning to GAAP results, we recorded a GAAP loss in the quarter largely due to increased intangible amortization expenses and costs related to the acquisitions as well as increased interest expense. Even with these transaction expenses in Q2, operating cash flow was $47,100,000 from strong non GAAP earnings and effective working capital management. That strong cash flow enabled us to repay $50,000,000 of our revolver within the quarter, and we ended the quarter with total debt of $872,000,000 We continue to be committed to repaying our debt quickly and fully expect our leverage ratio to be very comfortably below four times by the end of this year. Now let's talk about guidance. We exceeded our guidance by $7,900,000 in the second quarter with $1,600,000 coming from our core business outperformance and $6,300,000 from our guidance for the businesses acquired in April.

[Jim Cox, CFO at Clearwater Analytics]

For the 2025, we expect total revenue to be $2.00 3,000,000 to $2.00 $4,000,000 representing a year over year growth rate of 75% to 76%. For the full year 2025, we expect total revenue to be between $726,000,000 and $732,000,000 representing a year over year growth rate of approximately 61% to 62%. In terms of EBITDA guidance, we expect third quarter EBITDA to be $65,000,000 representing an adjusted EBITDA margin of 32%. We also expect EBITDA to be two thirty two million to $237,000,000 for the full year 2025, representing an adjusted EBITDA margin of approximately 32% for the entire year. Now that the acquisitions have been completed, we can provide some additional guidance for those items below EBITDA.

[Jim Cox, CFO at Clearwater Analytics]

We expect interest expense to be about $16,000,000 per quarter in both Q3 and Q4. We expect depreciation and intangible amortization to be approximately $29,000,000 per quarter in both Q3 and Q4. And lastly, we expect equity based compensation expense to be between $34,000,000 and $35,000,000 per quarter in both Q3 and Q4. We look forward to providing a more detailed update at our second Investor Day on September 3 at the New York Stock Exchange. With that, I will pass it back to Sandeep for some closing remarks.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Thank you, Jim. The response from our clients, partners and employees has been incredibly exciting and I could not be more pleased with our quarter. We remain committed to executing in the three phases we had defined. In phase one, we want every team to execute as well as they did before the combination, just incrementally better. In phase two, we should start in earnest shortly.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

We will increase our focus on cross sell and launch products and offerings to fuel that. We will also start a review of the commercial model, both for individual components and platforms and for the integrated company. In phase three, we will bring the integrated platform to market as the key offering. Work has already begun, but as we have said earlier, this will be a multi year effort. Meanwhile, clients will benefit from a natively integrated but componentized front to back solution.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

We have accomplished a lot in a relatively short period of time and I want to thank our team for the hard work and dedication they have shown. None of this would have been possible without the unwavering commitment of the leadership team. Thank you. People across the industry are excited about what we are building, and we have been successful in attracting several senior leaders to Clearwater. I'm confident they will help power a growth in the years to come.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Thank you, and we look forward to answering any questions you may have.

[Operator]

Thank you. Our first question today comes from Michael Infante with Morgan Stanley. Please go ahead. Your line is open.

[Michael Infante, VP - Equity Research at Morgan Stanley]

Hi, guys. Thanks for taking my question. Jim, I just wanted to start on the organic ARR and maybe how you're thinking about the full year core ARR growth and maybe how that informs your confidence level of your ability to grow above 20% into next year. I think by my math that 5.13% figure is effectively in line with the last couple of quarters. So you need to see some acceleration in the back half of the year.

[Michael Infante, VP - Equity Research at Morgan Stanley]

Just any commentary there in terms of the drivers would be helpful. Thanks.

[Jim Cox, CFO at Clearwater Analytics]

Yeah, thanks Michael. This is Jim. So agree with you that we expect to see that acceleration in the second half of the year. I think when you look at kind of not to talk about ARR but to talk about revenue, you know, kind of the sequential revenue growth in Q1 was pretty de minimis. We had an incredible Q4 twenty twenty four and it stepped up to 3%.

[Jim Cox, CFO at Clearwater Analytics]

When you look at kind of our expectations for the organic business to be roughly around 20%, you would expect that revenue, that sequential revenue growth in Q3 and Q4, obviously be faster than the 3% in this quarter. So feeling good about that. As you recall, ARR is a point in time metric and it's influenced by not only the booking of business, but also the timing of the onboarding of business. And so you can have some variability in that. But we feel really confident about what was a stellar Q2, a very busy but a very successful Q2.

[Michael Infante, VP - Equity Research at Morgan Stanley]

Helpful. Maybe Sandeep, just on the Bloomberg partnership, I know you guys are obviously really excited about the infusion asset and the cross sell capabilities inherent there. But can you just talk about your thoughts on having additional optionality with Bloomberg, particularly for your strategic asset management clients? Like how will it look functionally in relation to the integration of the infusion platform from a technology perspective? And I guess I was just a little bit surprised to hear that you already have like several active deals in the pipeline.

[Michael Infante, VP - Equity Research at Morgan Stanley]

So maybe whether or not you think it could be an acceleration driver late this year and into 2026. Thanks.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Yeah, absolutely, Michael. So first thing, I think we talk about asset management as a really broad field. So you obviously have hedge funds and you have small asset managers and you have medium sized asset managers and you have these really large asset managers. So I think those that segmentation matters. So Junk could do really well with a certain size of asset managers in Europe.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Likewise, Infusion can do really well with small and medium size and some larger asset managers. The second thing, Michael, is that we are an open platform. So we do interact with upwards of 20 different front office systems. But when it comes to the large asset managers, I think it's hard to argue that Bloomberg has a very, very strong position in that market. And so our expectation is when we get to these large global complicated asset managers, we would partner with Bloomberg and provide the middle office and the back office and provide a front to back solution.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Now we have had those opportunities in the past and it simply wasn't gonna be able to provide the full front to back. And therefore, there was a whole string of opportunities we could get after pretty quickly. And I suspect the same thing was true on the Bloomberg side, that if clients wanted a full front to back, they would have had to go find a partner to do the rest of it. Again, I I think it's a really strong partnership. It addresses a specific portion of the market.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

We are still very enthusiastic about what Infusion can do and build. But when it comes to these very large multi multi country asset managers, which are which are huge, I think that will still a long time coming, I think.

[Michael Infante, VP - Equity Research at Morgan Stanley]

Thank you, Bob.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Thank you.

[Operator]

Thank you. Our next question comes from Peter Heckmann with D. A. Davidson. Your line is open. Please go ahead.

[Pete Heckmann, MD & Senior Research Analyst at D.A. Davidson]

Hey, good afternoon. Thanks for all the color. I just wanted to follow-up on the ARR. I think you said $513,000,000 for Clearwater. And so just kind of disaggregating the remainder, would you say approximately maybe $2.20 to $2.25 for infusion and then the 45 for Beacon. Is that directionally correct?

[Jim Cox, CFO at Clearwater Analytics]

That's directionally correct.

[Pete Heckmann, MD & Senior Research Analyst at D.A. Davidson]

Okay. And in terms of I guess investments that you're thinking about making, I guess which parts of the infusion business you expect to focus your investments as you tackle the market on a combined basis?

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Yep. Peter, this is Sandeep here. So look, we are obviously very focused on reaccelerating the business at Infusion. I just wanna start by saying the platform is outstanding. When you talk to clients who use Infusion, I mean, they consider it to be a disruptive and outstanding platform.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

So really, what are we doing to help improve that? One is hedge funds and asset managers are similar, but they are different markets. And so the first thing we did was we took the product team and the engineering team and set up dedicated teams for hedge funds and dedicated teams for asset managers. So that was step one. We took all of the effort Clearwater was making in those markets and merged it with these teams.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

So they obviously have a much higher capacity. So that was the step one. Step two was setting up a sales team in much the same way. We want individual salespeople focused entirely on hedge funds and others focused on asset managers. Also, we empowered this team and we enabled this team.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

And I think that has already made a difference. I think like Jim said, they they had an outstanding q two. I do think the third thing is that we're able to introduce significantly enhanced capabilities, which can be used by hedge funds like risk, capability to deliver in Europe, client reporting. So just being able to bring those additional pieces makes their offering more comprehensive. So I do think there are some short term things which I just talked about.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Then there are somewhat longer things, which is how do you get the back to base motion more efficient? How do you get the commercial model to be more efficient? But those are still more to the coming. But I do feel that our first job was, is over the next two years, get their revenue growth back to 20%. And we think we have a really good, line of sight.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

But what we are not trying to do is do something jerky. We wanna do it the right thing, build the product, have a dedicated engineering organization, have a dedicated sales team and get growth, which is sustainable for the years to come. Donald, Jim, you add anything to that?

[Pete Heckmann, MD & Senior Research Analyst at D.A. Davidson]

Great. That's helpful. Thanks.

[Operator]

The next question comes from Young Kim with Loop Capital Markets. Please go ahead.

[Yun Kim, Managing Director at Loop Capital Markets LLC]

Okay, great. Thank you. Sandeep, I know you talked about the cross selling opportunity that will be a multiyear journey, but is there any near term opportunity to cross sell into the each other's customer base? I mean, does that before you even start, does that require an integrated platform to to be delivered first?

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Yes. So I think that the largest and most immediate cross sell opportunity comes from risk. I think Jim spoke about it just so immediately applicable to all the hedge fund clients our company has or the asset managers our company has or the insurance clients our company has. So I feel like that is sort of very immediate. But the more exciting ones are the ones which are more front to back.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

So when you look at, I think we put out a press release on VKB, which is Germany's largest public insurer. And they have chosen us to replace an integrated fund to back platform. Now that is nothing Clearwater could have delivered or Infusion could have delivered or Beacon could have delivered. But our ability to bring all three platforms and get that very significant win, I think is sort of a proof point and a testimony to what the joint company can do. So I feel really good about our ability to cross sell, but I also feel good about this front to back capability, which is both very incremental to what what we were doing earlier.

[Yun Kim, Managing Director at Loop Capital Markets LLC]

Okay. Great. And, Jim, obviously, it won't be a conference earnings conference call on Clearwater without talking about NRR. How should we think about the combined NRR trend post acquisition? Do you expect the infusion NRR to be somewhat variable in the near term?

[Yun Kim, Managing Director at Loop Capital Markets LLC]

How much visibility do you have in that? And I mean, how should we expect that infusion NRR to trend, especially off of a commentary that you had a record bookings there?

[Jim Cox, CFO at Clearwater Analytics]

Yes, so we had obviously the core NRR stayed very consistent, but as a consolidated business we've described it as that we calculated it at 110. So if you recall a couple years ago when we started on this journey of talking about NRR 115, you know we were about at that same spot And so I think we're on a similar journey with all of across all of all of the businesses. What are the elements of that journey? One is really considering the commercial structures that we have in place and thinking about the durability and reliability of those commercial arrangements. And we've done that at Clearwater, and we plan to do that across the entire portfolio.

[Jim Cox, CFO at Clearwater Analytics]

The second big element that we talked about with NRR one hundred fifteen a couple of years ago was doing more for our clients and adding additional products to drive more growth. Obviously, today, across the combined business that we are today, we have a lot more irons in the fire than we did two years ago when we were able to make this journey to 01/2015. And so we feel a lot of confidence about the cross sell that you just talked about being able to drive to that growth. It's frankly the music is the same music. The lyrics are a little different, but I think it's going to be a great song.

[Yun Kim, Managing Director at Loop Capital Markets LLC]

Okay, great. Thank you so much.

[Operator]

Our next question comes from Alexey Gogilev with JPMorgan. Please go ahead.

[Alexei Gogolev, Executive Director at JPMorgan Chase]

Hello everyone. Congrats with great results. Jim, maybe it would be helpful for everyone if you were to provide similar guidance that you did during previous quarter, organic versus non organic for both 3Q and maybe for full year?

[Jim Cox, CFO at Clearwater Analytics]

Yes, I think we're looking at it as a consolidated number, but let me take you through. We're not going to give you the specific details for that, but let me give you kind of how we thought about the guide, if that's all right. Alexi, so really, you know, we've always consistently said we think, you know, Clearwater grows about 20% year over year and that's what we've focused on historically consistently. We think about those pieces. Secondly, when you think about infusion it was at about a 13% growth rate time of acquisition.

[Jim Cox, CFO at Clearwater Analytics]

So if you think about that, you think about that as kind of a 3% sequential quarter over quarter growth rate. And then Beacon, you know, look, it's an incredible business. It's a large deal business, and so it can be a little bit lumpy. But we also think of that as a 20% growing business. And you kind of put those pieces together and that gets you into that kind of range for the full year view, Alexi.

[Jim Cox, CFO at Clearwater Analytics]

I think I'll remind you, right, as a core business, we had 25% growth in the 2024. So that's a little bit of a tough comp on that, but we're really focused on, you know, core Clearwater growing around that 20% for the full year.

[Alexei Gogolev, Executive Director at JPMorgan Chase]

And Jim, in light of that last comment about the high base of last year, can you repeat what you said just earlier today answering the question about acceleration of growth that you anticipate in the second half of the year? Was that in relation to ARR or revenue growth?

[Jim Cox, CFO at Clearwater Analytics]

Yeah, as we look at revenue and you just look at sequential revenue growth throughout the year, Alexi, you can see our sequential revenue growth from 2024 to Q1 was de minimis, right? And we accelerated that to, I believe sequentially, it's about 3%. And obviously, as you from Q1 to Q2, as you look to Q3, and then from Q3 from Q2 to Q3, and then Q3 to Q4, you see that that sequential revenue growth rate continues to reaccelerate. Otherwise, right, you couldn't get to a 20% year over year growth rate if you, it's just mathematics. Like you do accelerate sequentially on a quarter over quarter basis.

[Alexei Gogolev, Executive Director at JPMorgan Chase]

Okay. I think Alexi, and Sandeep.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Yeah, I was just gonna add one thing that, when you talk about revenue that already, you have to consider the booking that's already happened, the ARR growth that's already happened because the bookings in Q3 and Q4 have impact on ARR, but not really that much impact on the revenue. So we obviously have confidence that there acceleration on a Q on Q basis.

[Alexei Gogolev, Executive Director at JPMorgan Chase]

Thank you, Sandeep. And just a quick question for you. Like you've highlighted that no negative surprises now that you had the time to look over the assets that you acquired, integration is going well. I think one of the comments that was made by Jim just now that with the synergies announced the focus will now be on growth. Can you maybe elaborate a bit more like what sort of investments may be required? How will that impact margin expansion opportunity near term?

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Yeah, so I just wanted to stress that I don't think there is any change to the margin expansion opportunity. I think we talked about R and D investments and what we feel happens is that we take all of the people who are working on asset management and move them over to this other team, which is building products for those two markets. So I don't think there's necessarily a massive increase in R and D. Don't think there's a massive increase in sales. I do think operations will continue to drive gross margin expansion.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

And so I feel that at the company level, we will obviously have more details at the Investor Day, but at a company level, the opportunity to expand margin, you know, in the second half or really into next year, I think, don't change very much. Now, Alexey, as you know, you've seen enough companies like ours. We have a really strong leadership team which has operated such such a song before, just to borrow from Jim, which I found super interesting, is that three and a half years back when we met and we talked about this company going public, we were in this situation. And so we know what to do with the commercial model. We know what to drive, how to drive the margin expansion.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

We know how to drive, you know, efficiency in r and d. So we feel like we've seen this movie before. It's a little bit different, but not that different at all. And going into these acquisitions, that was a hypothesis. And when we went into the detail, we found, yep, this is almost true.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

So we feel really good and confident. I do wanna make one last point is we did not wanna find 20,000,000 of synergy on quarter one. We wanted to find it over the first year but we did what was right for the business, what was right for the clients. It just so happened that in doing the right things we were able to get 20,000,000 in a synergy. And so that's how we think about it.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

We think the market opportunity is there. We have done like Jim said, we have found the synergy, margin expansion. So it's all about the growth and that's where we are fully focused on.

[Alexei Gogolev, Executive Director at JPMorgan Chase]

Thank you, Sandeep.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Thank you. Thank you, Alexey.

[Operator]

Our next question comes from Michael Turrin with Wells Fargo. Your line is open.

[Michael Turrin, MD & Equity Research Analyst at Wells Fargo]

Hey, great. Thanks. Appreciate you taking the questions. I'll just ask a bit of a multi parter upfront. If I'm hearing what you're saying correctly, Jim, it sounds like the inorganic portions of the business came in a bit better than you're expecting.

[Michael Turrin, MD & Equity Research Analyst at Wells Fargo]

I'm curious from a guidance mentality, if you still kind of hold the same pattern given it's early, and just observing those businesses or if that causes you to nudge any assumptions forward a bit? And from a higher level, I'm just curious, is there any lessons you've learned from the prior pricing model transition that the company went through that you may be able to apply to bringing infusion to market and maybe adjusting the pricing model or some of the strategy there as well. So first is kind of more in the near what's happening question and the second is just kind of high level how you're thinking about the strategy of the pricing model going forward. Thanks very much.

[Jim Cox, CFO at Clearwater Analytics]

Thanks, thanks. So you know really the over performance in the acquired businesses recall let me just go back right we we last announced earnings on April 30 we closed the Beacon transaction on April 30 and we had closed the infusion transaction on April 21 And so they were both very new. So what we did vis a vis Q2 was we just kept those nine days of infusion revenue from April 22 to the thirtieth. We kind of just kept them to the side just in case there was a surprise. And there wasn't.

[Jim Cox, CFO at Clearwater Analytics]

And so that's that's what that over performance. And you see that then flow into the increase in the full year guide. And so that's that element. The other piece is, has there been a change in the philosophy about the guidance? I think we continue to feel more confident about it, but it is still very early days.

[Jim Cox, CFO at Clearwater Analytics]

And, you know, I'm pretty old. And so, you know, I still get surprised. And so I think we've used a consistent methodology that we used this year that we've used sorry, this quarter that we've used in prior quarters in trying to think through that. On the pricing model and the changes around that, I think that so patterns that I think we've seen in the past that we will continue to see is, is, that I think I think there is alignment across the entire organization. About evaluating this and thinking about what are the right scalers?

[Jim Cox, CFO at Clearwater Analytics]

How do we think about aligning best? So I think there's there's a lot of alignment within the organization that remains consistent. And the second thing, there's really three things. One is within the organization there's one. The second thing is that we learned last time is we try things and it's interesting what I think is a good idea.

[Jim Cox, CFO at Clearwater Analytics]

What clients like is really what matters and aligning around clients to that. And third, I would say that our early conversations with clients is there there is an alignment around delivering more value for them. Sandeep, anything to add?

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Yeah, would just add that you have to think of it as a commercial model change and not as a pricing model change. It isn't just about price. If it was price, you could go in and say, okay, we are increasing price 5%, whatever. But it is about how do you create solutions? How do you create packages with customers' value?

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Then how do you think about annual price increase? So I think the one thing we did learn last time was do it deliberately, do it right, then it's very easy to execute, and clients will buy it. But if you go in randomly with a sledgehammer, I I don't think that's the right way to do it if you want sustained improvement in the commercial model. So we're approaching it the same way. Is there any of the commercial model changes already?

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

None. We don't even expect that in q through q three. So we'll do it deliberately. We'll do it well, and then really have impact on it next year, and another six months after that into 'twenty seven, and you will see the full impact of it.

[Michael Turrin, MD & Equity Research Analyst at Wells Fargo]

Thanks very much.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Thanks, Mike.

[Operator]

The next question comes from Dylan Becker with William Blair.

[Dylan Becker, Research Analyst - Technology, Media & Communications at William Blair]

Maybe Santee, kind of sticking on that thread around the commercial model angle. Obviously, you guys did something similar a handful of years back now, and you did it fairly swiftly as well. I know we're kind of just talking in the ideation phase here, but I'm sure you guys have done some thorough diligence on the matter. Wondering, yes, it sounds like customers are receptive to it, but kind of the early feedback you're seeing and hearing and maybe some of the learnings of that prior swift change that gives you kind of conviction in the success of that potential shift over time?

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Yeah. Thank you for the question. Look, last time we took four, five months to design it correctly, and then we went and implemented it. But because it was designed well, I think we could execute very quickly. And we expect to do the same thing.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

But before we get there, we wanna make client servicing excellent. So that's sort of a pillar of this. We wanna make the platform performance excellent, and that's a pillar of it. And use that time, the same five, six months while you're trying to make these two excellent to design the entire commercial model, take it to market on the back of meaningfully better client servicing, meaningfully better performance of the platform. And then everything becomes a little bit easier.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

So again, we wanna do this deliberately, do it right, insofar and do it very quickly. I don't know, Jim.

[Jim Cox, CFO at Clearwater Analytics]

Very, very accurate. You know that's when we talk about commercial alignment what we've learned is people are very they love the solution. People are interested in doing more and so aligning around those proof points and doing that is obviously it's a win win.

[Dylan Becker, Research Analyst - Technology, Media & Communications at William Blair]

Perfect. Okay. That's very helpful. And maybe Sandeep as well, sticking with you on the VKB opportunity, encouraged to see kind of that buy in around this unified vision given how early we are kind of in the implementation phase. I wonder if you could give us some additional color on kind of how that agreement came to be.

[Dylan Becker, Research Analyst - Technology, Media & Communications at William Blair]

It sounds like that's helping fuel already incremental kind of pipeline activity as well. But how you're thinking about that as potentially kind of being a lighthouse example, not just in the the German insurer market, which I think is is fairly large, but also more more broadly across the rest of the business here.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Yeah. I I would just start by noting that that the German insurance market is massive. Some would say it's half the size of The US, just the Germanic world itself. So it is significant in that sense, number one. Number two, it's hard to just replace accounting.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Just given the competitive posture in in not just Germany, but across Europe, if you're gonna do it, you gotta replace the entire solution front to back. And I think once we went back to clients with, hey, we can bring all three of these and that can deliver a next generation cloud software, which you never have to upgrade again. Yeah. I think it struck a nerve, and we could not be both pleased. I gotta tell you.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

But that's why we did a press release. We were very pleased. It's a lot of work. I don't wanna pretend like these three products will just automatically work together. But is it will it be a massive proof point in that market?

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

I absolutely believe that. So very enthusiastic and very, very happy with this early win, if you will.

[Dylan Becker, Research Analyst - Technology, Media & Communications at William Blair]

Great. Thank you.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Thank you. Thanks so much.

[Operator]

Next we have Patrick Molley with Piper Sandler. Please go ahead.

[Patrick Moley, Director & Senior Research Aanalyst at Piper Sandler Companies]

Yes, good evening. Thanks for taking the question. A lot of detailed questions asked, so I'll ask maybe a bigger picture question. But there's been a lot of talk recently about tokenization of real world assets. You have the Chairman of the SEC talking about wanting to push this country towards moving more assets, real world assets onto the blockchain.

[Patrick Moley, Director & Senior Research Aanalyst at Piper Sandler Companies]

So just curious how you think about tokenization and the impact that it could have on your business and then maybe what it could mean for the moat that your single security master gives you in the event that we do see, you know, real world assets being put on the very publicly available blockchains. Thanks.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Yeah. So so, look, firstly, I think this trend will continue. Right? So that is number one. Number two, just the investment in all kinds of alternative assets is simply gonna continue.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Third, the investments around the world is gonna continue. Fourth, the volatility, which is given where we are in the world today, is gonna continue to increase. So I absolutely believe that that plays into our hand of being able to give you a comprehensive global view of your portfolio. Now will this happen very quickly? Do you expect 20% of real estate assets to be on a tokenization?

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

I think that takes time. Are we gonna try and lead that? Absolutely. Because if you're trying to create a token based solution, who has it in one place is what you're ask. Which provider today has the highest number of AUM on a single instance platform?

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Where would you go to try and set this up? And I think we have our inside view on not just tokenization there, but across private credit and private debt. And so we feel we're in a really good position for exactly the same reason we are in a great position on generative AI. It's because all of our data, all, is in one logical database. Everything we have done in terms of reconciliation for the last fifteen years is all on that same logical database.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

And therefore, our ability to learn from it, I think, is sky high versus other platforms where every client has their own database and their own security master. So I do think that all of these trends should help the modern technology players, and we believe we are disruptively the most modern player.

[Patrick Moley, Director & Senior Research Aanalyst at Piper Sandler Companies]

Okay, that's great color. That's it for me. Thanks.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Thank you.

[Operator]

Our next question comes from Brian Schwartz with Oppenheimer. Please go ahead.

[Camden Levy, Director - Equity Research at Oppenheimer & Co. Inc.]

Hi, this is Camden Levy sitting in for Brian Schwartz. Thank you for taking our questions. Sandeep, one for you. You've already seen success achieving productivity savings via generative AI, but are you working on productizing AI for revenue monetization to give the business another growth driver? And then I have a follow-up for Jim.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Yeah, so we are very passionate about generative We think it changes everything about our business, of our clients' business and how they do business, how they do research, how they execute trades, how they find new ideas of investments. We think it changes all of that. I do think the easiest place for people like ourselves is in driving meaningful efficiency improvement, which is what you've seen. You've seen us really be better at efficiency when it comes comes to generative AI. The transformation into revenue production or generating real growth on the revenue side is slower.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

I think many, many clients are talking and discussing and seeing POCs, but I think the movement to actual revenue growth is a little bit lighter. Now if we go to our sales team, they'll tell you, if we can do operations much faster, that helps the sales process and therefore the pipeline moves faster. So in that sense, is it accelerating revenue growth? Maybe. Yes.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

But I I think real generative AI led products, I still think are in the coming. Now, do we feel you'll see something in '26? I think so. Do you think you'll see something in '25 in the second half? We are very much hope you will start to see clients adopt generative AI as a core technology.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

So look, we are very bullish on it. We feel whatever we invest, we get the money back in the current year and then it endures because you're getting margin improvement. Guess what? The margin improvement then comes for every year out in the future. So we are big, big believers in it.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

We feel we have a massive competitive advantage because of single security master. So yeah, we're gonna continue to push, but I just gotta tell you, we think it'll change the world.

[Camden Levy, Director - Equity Research at Oppenheimer & Co. Inc.]

Perfect. Thank you. And then just one question for Jim. Last quarter lower customer AUMs was a headwind on the comparable. Did that headwind reverse and turn into a tailwind for NRR on the core business in the quarter?

[Camden Levy, Director - Equity Research at Oppenheimer & Co. Inc.]

And then how are you thinking about that moving forward? Is that layered into your expectations and guidance for the rest of the year? Thank you.

[Jim Cox, CFO at Clearwater Analytics]

Yes, sure. It's very quickly, it was neutral quarter over quarter and we expect it to be neutral.

[Camden Levy, Director - Equity Research at Oppenheimer & Co. Inc.]

Thank you for taking our questions.

[Operator]

Thank you. And our next question comes from Maura Hager with Goldman Sachs. Please go ahead.

[Maura Hager, Equity Research Associate at Goldman Sachs]

Hi. This is Maura on for Gabriela. Thanks for taking the question. Just one from me. With alternatives now making up a larger portion of customers' portfolios, Do you feel you're where you need to be post the Beacon and Bistro acquisition?

[Maura Hager, Equity Research Associate at Goldman Sachs]

And just given the strategic partnership with Blackstone, how are you thinking about the development in this asset class for customers?

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Thank you for the question. Look, was hoping somebody would ask the question. It is our largest area of investment by far. I think that you can do accounting for it, but having the partnership with Blackstone and being able to bring Bistro to a client base, I think, is a little bit game changing. But I do think being able to visualize it is not enough.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

I think what really turns the dial here is Beacon. Being able to give you near real time cross asset class risk exposure on the trade you're thinking of doing, I think is game changing. I mean, people go look at risk for equity separately from fixed income and separately for every individual alternative asset class. And then they try and sigma to figure out what's really happening and the ability to combine what Clearwater does with the BISS two visualization, but also the Beacon real time near real time risk cash flow generation I think is will really help the industry as it invests more and more into these opaque asset classes. So very excited about it.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

A lot of investment going in it and huge interest from a client base just across the client base on this offering here.

[Maura Hager, Equity Research Associate at Goldman Sachs]

That's great. Thanks for the color.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Thank you so much.

[Operator]

Thank you. We have no further questions. So I'll hand back to management for closing comments.

[Jim Cox, CFO at Clearwater Analytics]

Thanks everyone for your interest in C1. Look, we're really excited about our prospects and excited to share more about our longer term strategy, our targets and lay out some of these milestones related to these acquisitions at our Investor Day on September 3 at 1PM Eastern at the New York Stock Exchange. If you'd like to register to attend in person, reach out to the good folks at investorsclearwateranalytics dot com. And note, the swag has already been ordered if you're looking for a new t shirt or sweatshirt. Cheers. Thanks everybody.

[Sandeep Sahai, CEO & Board Member at Clearwater Analytics]

Thank you all. Thank you.

Participants

Executives

• Michael Chen, SVP & Head - Corporate Development
• Sandeep Sahai, CEO & Board Member
• Jim Cox, CFO

Analysts

• Michael Infante, VP - Equity Research at Morgan Stanley
• Pete Heckmann, MD & Senior Research Analyst at D.A. Davidson
• Yun Kim, Managing Director at Loop Capital Markets LLC
• Alexei Gogolev, Executive Director at JPMorgan Chase
• Michael Turrin, MD & Equity Research Analyst at Wells Fargo
• Dylan Becker, Research Analyst - Technology, Media & Communications at William Blair
• Patrick Moley, Director & Senior Research Aanalyst at Piper Sandler Companies
• Camden Levy, Director - Equity Research at Oppenheimer & Co. Inc.
• Maura Hager, Equity Research Associate at Goldman Sachs