Campbell's Q4 2025 Earnings Call Transcript

Quartr
Provided by Quartr
September 3, 2025

Key Takeaways

  • Negative Sentiment: The company expects tariffs to total about 4% of cost of goods sold in fiscal 2026, and although it plans to mitigate roughly 60% via supplier collaboration, pricing, and productivity, the remainder poses a significant near-term headwind.
  • Positive Sentiment: Campbell increased its enterprise cost savings target from $250 million to $375 million by the end of fiscal 2028, having already delivered approximately $145 million in savings in fiscal 2025 through integration synergies and network optimization.
  • Positive Sentiment: The company will step up marketing investment to 9–10% of net sales and drive innovation in areas like premium and health-forward offerings, underscored by new products such as Milano White Chocolate cookies, Kettle Brand Avocado Oil chips, and Pacific flavored bone broths.
  • Positive Sentiment: Meals & Beverages outpaced its category in Q4, achieving 1% growth in in-market consumption—fueled by strong broth (+7%), consecutive gains in condensed soups, and high single-digit growth in Rao’s sauces, which grew share by 1.2 points.
  • Negative Sentiment: The Snacks segment remains under pressure, with a 2% decline in in-market consumption in Q4 despite sequential improvement; organic net sales fell 2%, and stabilization is only expected in the second half of fiscal 2026.
AI Generated. May Contain Errors.
Earnings Conference Call
Campbell's Q4 2025
00:00 / 00:00
Operator

Lots and lots of people to thank, but I won't do that right now. I'll wait to the very end. Deandra, Pedro, HJ, everybody, the whole team who's put all of this program together is phenomenal. Yesterday, our new Head of IR, Camille Melcharek, if you want to stand up, started yesterday. If it goes well, it's because everybody did a great job. If it doesn't, it's all his fault. Thanks everyone. My colleague, not my partner in crime, but my colleague here, Alphonse Valbrune, our Chief Legal Officer, will very briefly go through these items.

Operator

I have the easiest job in the house today. I just have to be sociable and listen to the great program and remind you that 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 Enfusion, Beacon, and Bistro, and their expected benefits are forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the risk factor 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 today's presentations, except as required by law.

Operator

For more information, please refer to the cautionary statement included at the beginning of our Investor Day deck, which you see here, which will be posted on our website. Lastly, all metrics discussed on this day are presented on a non-GAAP or adjusted basis unless otherwise noted.

Operator

Thanks, Alphonse. We'll walk through the agenda here. Clearwater in the market since we last met. We did this a couple of years ago in September 2023, and really proud of the results that have happened. Sandeep Sahai will cover that. Powering growth, Subi and Scott will step through that. Our new capabilities and the right to win, as well as technology, Shovik Das and Kirat will come up and speak about that. I'll finish with some information on financials and folks. With that, and with the legend, the myth, the knock-on music for Sandeep Sahai.

Operator

Only Jim can do that. I would have found that maybe a CRO could do it. It'd be fine. A CMO could do it. It'd be fine. We have the only CFO in the world, I think, who can put it out on that. Thank you all for coming. I really appreciate it. I know that there are many companies out that you can choose to follow. The fact that you choose to come and listen to us, invest in us, write reports about us, means a lot. Thank you. This is a super exciting time for all of us. We're trying to bring together Clearwater with Beacon, with Blackstone's Bistro, and Enfusion. I've always felt that you act when you're strong. The Clearwater platform has done really well in the past few years, as we will show you.

Operator

We really have strong expectations of what it will do next year, the year after that, and three years. When you have strength and belief in your core proposition, that's when you act. I don't think you act when you're sort of weak. We are really excited to bring these companies together. What's also true is it was really easy for us to say, oh, Clearwater has acquired Enfusion, let's just roll it in. Clearwater has acquired Beacon, let's just roll it in. I think we would do a disservice to those platforms if we did that. When it comes to hedge funds and asset managers, Enfusion was a leader in the market. When it comes to Beacon and the most sophisticated risk calculations, Beacon is a leader in their market.

Operator

We thought that when you're bringing leadership platforms together, you sort of come up with a new name which sort of embodies the best of all of them instead of it all becoming Clearwater. That's my pitch for this new logo. I hope you saw it outside. It was brilliant. When the banner goes up, it's a lot of fun. Who all are presenting today? Obviously, you got me here. You're going to hear from Subi Sethi. She's Chief Operating Officer. You're going to hear from Scott Erickson, who's the CRO. You're going to hear from Jim, as you've already done, as CFO. Shovik Das, who's our CTO, and Kirat Singh, who's the President of Risk and Alternatives. We also have from the executive team, Alphonse, whom you just saw, and we got Sandeep Landu. Sandeep's right there. This team hasn't changed a lot.

Operator

I think someone was asking me, wow, who are the new people in your executive team? I'm like, oh crap, we don't have any. We just have Kirat, which is great. This is a team which has, you know, was here about two years back when we presented to you. What I thought we would start with is what have we done since the time we met you two years back? I think it's very easy for Chief Executives or CROs and all of those roles to talk a big game about the future. I like to talk a lot about the past. What have we done? Did we do what we said we would do? I think you should judge teams based on what they have done and then the vision they lay out. We thought we would spend a few minutes just talking about the past.

Operator

The last time we met, we forecast a 20% revenue growth. What you should have expected was $364 million in 2023. You should have expected $437 million in 2024, and so on and so forth. What did we deliver? We delivered a 21% growth in that year, a 23% growth in 2024, and a 23% growth in the first half of the year. It's not about the future, what we will do. This is what we have done compared to what we talked about. I feel like there's $14 million of revenue extra last year. It becomes harder now because you've got the acquisitions, so it becomes harder to track. Yes, going back two years, you can look at this and say they did what we were expecting from them. The next thing which matters a lot to me is unit economics. Why does that matter?

Operator

It just shows you, are you selling at the right price or are you having to discount to sell it? Are you efficient in how you deliver this? It matters quite a lot when you think about unit economics. Are you doing a better job there or not? What you should have expected again was 76% in 2024, 76.5%, and 77%. What did we deliver? We delivered 170 bps versus the 50 bps people should have expected. This is not happenstance. It just doesn't happen. It happens because you execute it. You look at the two years, we delivered 240 bps on unit economics versus the 100 people should have expected. Granted, we didn't have generative AI as a big deal at that time, but the fact is this is solid execution in my opinion.

Operator

Then we talked about EBITDA, and a lot of you said 200 bps a year, that's a little too aggressive. A lot of you in this room here said, try and do 100. We said, no, we think we can do 200 because of the efficiency we expect to get. The point is, what did we deliver? In the first year, we delivered 300 bps against that goal of 200 bps. What did we deliver in two years? We delivered 650 bps versus the 400 you should have expected. The point is that I do think that the core business has done a lot better than we said it would do, and that is very strong execution when you look at this chart. Our gross revenue retention, 98%, 25 out of the 26 quarters.

Operator

We almost felt that one quarter we could have done something more, but it just wouldn't have looked cool. This just looks better. Yeah, there's a little bit of a variance, and there is some 99% in there too. This doesn't come easy. When you want to retain 98% or 99% of your client base every year, quarter after quarter, you got to have excellent client focus. You got to have client delight. It cannot be client satisfaction. I feel like when you look backwards, the other thing we focused on, many of you talked about these things as concerns, and you talked about the TRA. Again, not easy to get extinguished. It's not like the shareholders are waiting for us to say, why don't you just buy this and be done with it? It was a lot of work.

Operator

I understood as an investor that, yeah, I would not want this hanging out there as it would change optionality. A lot of you had questions about governance. We are on 10 votes to one. How did that work? How did that influence what the private equity companies do and don't do? That has changed. A lot of you talked about overhang. That is a two-sided story because the good news is, over the last several months, there have been 119 million shares. Let me just repeat that. 119 million shares that our sponsors have sold out. I thought this is a great thing. It gets rid of the overhang. You know, there's this daft thing called supply demand, which is really, I think, hurt us a little bit. The point is, there's less than 2% shares held by the sponsors now.

Operator

From a shareholder point of view, I think it has made the environment a lot more stable as you look out. It made the governance a lot more stable as you look out. I do think that this is something which you sort of take upon yourself. I say that Clearwater, I think, has executed over the last two and a half, three years. From the time of IPO, if you go back and look at what we said at the time of IPO, we have executed for the last four years. I feel that gives us the right to try and do something bigger than where we started, and we started with investment accounting. We believe we have some degree of right to go after the entire investment lifecycle. It does not mean that the market for investment accounting is going away.

Operator

Is that a $4.5 billion market, a total addressable market, or is it $5 billion? How does it matter? We were at $500 million. What does it matter? Many, many clients do want to see the entire investment lifecycle in one spot. No one, no one can provide that today. I think Clearwater Analytics has a chance. We will talk about that. After this, I will switch into what our thinking is about the business and what we think the vision for our business is. I just think we have to level set first. When you think about investment management, what is changing? Point number one, all of us can quickly agree on. Alternatives are growing dramatically. Somebody may say, oh, what is the big deal? It is massively opaque compared to equities and fixed income and bonds. You think about bank loans, private credit, private debt, derivatives.

Operator

These are much more opaque instruments to understand and trade in. That is a change which is occurring on a daily basis. How do we know? Not by reading reports. It is on our platform. We have $10 trillion on our platform, and we can see what people are buying, what they are selling, what is the trend line. This is a trend which is not going away. The second one is global portfolios. With all the fun we have on the political side, this changes every day. This country is good. This is bad. Guess what? You have to understand your portfolio and the risk on your portfolio if you are going to act with any degree of confidence. Number three, I think, is the speed at which you have to make these changes. Legacy stuff just cannot keep up.

Operator

You really cannot say, oh, these three countries are going to be doing well for the next six months. No, no, no. They could be good today, bad tomorrow. Crypto could be good today, bad tomorrow, really bad the day after tomorrow, and really good the fourth day. People who have a full comprehensive view can act with confidence. If you do not, you get slowed down. Gen AI, how can you not talk about Gen AI when you have a technology presentation? You can talk about Gen AI. I will just go into this a little quickly and perhaps talk about it. Look, alternative assets should just change. We should not call them alternative anymore. They are now making up 25%, 30%, 40% of people's portfolios. At that point, they are not alternative. They're just like fixed income, or they're like equities.

Operator

The problem with this is if you process $1 billion worth of bonds and you process $1 billion of private credit, it takes 7x the effort. A business leader may say, you know, my portfolio was $10 billion, it's still $10 billion, and the amount of work and the cost associated with that could be 7x depending on the mix of assets they invest in. Alternatives are something which is growing. There isn't another way to look at that. If you look at people investing globally, U.S. investors now invest 40%, 39.2% of their assets abroad, and that is changing on a daily basis. You have to be able to handle that. Just to switch gears, I've been talking at a high level, and you're like, fine, this makes sense. Just think about one area, say fixed income.

Operator

Fixed income, you've got to have portfolio construction, portfolio management, order execution, accounting, and you have to do all of these steps through regulatory reporting, compliance reporting, and you have different systems for each one. You could do this, but this is not the problem. The problem is you've got asset class after asset class after asset class, and in each one of these, you have to do exactly the same thing. You've got to do portfolio construction, portfolio management, order execution, accounting, compliance, and that's why it gets so complicated. People spend days and days trying to understand what they have, what the risk is. This summer, a $40 billion European multi-asset manager gave us this quote: Every new asset or jurisdiction, same asset, different jurisdiction, we enter brings new manual workarounds. We're juggling over a dozen systems, and I can tell you a dozen is low.

Operator

We've had clients who've got 100 systems across the globe for investment accounting, and none are built for today's regulatory complexity. I think he said it, which is why they wanted the name on it. He said, we are not just inefficient, we are exposed. We don't understand our risk. That is the problem our industry faces. People may agree with it, disagree with it, it doesn't matter. This is what they face. Alternatives are growing, globalization is growing. Guess what? You have to understand it. From a technology side, let's talk about tech for a little bit. You have to do all these steps for, let's say, equities. You've got to do pre-post trade compliance. Can you do this trade or not? You've got to do an order management system and a portfolio management system, IBOR. You've got to look at your whole portfolio.

Operator

You've got to look at risk and performance, and you look at client reporting. The trouble is, if you look at any of the competitors today, they have different systems for each one of these things. You could buy a software from them which does pre-trade and OEMS PMS. You would have a different system for accounting and a different system for risk and performance. If I can just stay with this for another second here, the trader only needs seven things about a bond. That's what they need, and they'll trade. It comes to the middle office, and they can't do it with just seven. They need 21 more things. They redo those seven because these two systems don't talk. They come to the accounting people, we want 40 more fields, which tax a lot, which we got 40 more things we need. We build it ourselves.

Operator

We create a brand new security master, so to speak. Therefore, just to talk to this one and this one, every one of them are different when it's the same security. It is the same exact security, but every one of these systems will model it differently. Everyone will get data differently. This is on equities. As all of us know, it's not just about equities. It's fixed income and alternatives. The chart wasn't big enough to show you that it's not alternatives. It is derivatives, mortgages, private credit, private debt. Best of luck making sense of all of this together in one spot. How do you do it? This is also not the story. The story is actually this. The same asset in the U.S. is completely different from that asset out in Europe. In Asia, best of luck.

Operator

Try trading in Japan and then Hong Kong and Taiwan and Malaysia. Everyone's got their own systems. This is why people have dozens and dozens and dozens of systems. This just doesn't compute. It makes no sense. If you talk to technology executives, I think everybody will accept this, that this is a real core issue. It's not complicated to know this, that if it's the same security, why can't we have one model for it? The trading people just use seven of that model. The next group uses 10 more, and the accounting uses 14, but it's the same one singular model for a given security. You've got mortgages, it's one security. You've got bank loans, one security. Some of the private equity sponsors are here. What about their reporting? This is whatever they want. They'll just send you a 15-page document. Best of luck figuring that out.

Operator

Everybody looks at that and makes their own summaries and their own data points. Why can't we come up with something which says private equity should report like this? When you're buying it, when you're investing in it, what is different? The fee may be different and all that. OK, that's simply configurable. Reporting on performance should not be this big an issue. Data system, all of us don't have to go ingest the same damn data, reconcile the whole data. If it was all easy, I would have let it go. We have hundreds, hundreds of people doing data reconciliation. Every customer does it separately. It makes no sense. Accounting changes. It changes every day. Regulatory reporting, you could have 600 changes in a given year across the globe. Everyone has to make that change. Really?

Operator

We look at Salesforce, you look at Workday, you look at all of these modern SaaS platforms. They make a change one time, it ripples to everybody instantaneously. It's not like they're sending a damn patch to change it. It just is an archaic way our industry works, we think. I'm sort of winding down a little bit and talk about why we did this. I want to talk about this concept of capability. I think you'll hear us say, oh, we do front office, we do some risk, we do some of everybody. Go to the website. Everybody does everything. Really? There is a notion we have of no capability, limited capability, at market and above market. If we don't stress it like that, you're just going to get everybody saying they can do OEM SPMS, I have all of it. The question is, how good is it?

Operator

Do you have 20 clients who will stand up and say you're better than market or you're at market? If you look at Clearwater Analytics Holdings Inc., I think what we did well was the middle back office. We are, I think most people would quickly agree, by far the next generation disruptive platform there is. Nobody went to Boise looking for an accounting software, let's be really clear. People went there because that platform was disruptive and it solved a massive problem. Did we do some OEMs? Yes, a little bit. Did we do some PMS? Yes, a little bit. If you asked us to put a check mark, we may have said, yep, we do all of these. The capability of it was very limited when you look at somebody like Enfusion, which is a leader in the front office systems. Are they the best at everything?

Operator

They're not. Do they do accounting? Yes. Very little accounting, very little compliance and regulatory reporting. Both of us are missing this massive issue around risk. Why does risk matter? As you get more and more opaque, as you increase the amount of derivatives you trade, and the bank loans you trade, and the commodities you trade, understanding risk becomes more and more important. Just think about it. If today you wanted to take down your exposure to Germany, you first have to understand your exposure to Germany. Equities are not that hard. When you look at a derivative, you have to see what's underlying. If you have an LP, you have to see what's underlying. You've got a pool of mortgages, what's underlying. How do you know that? They're based in different systems around the world, and you can't pull it all together to get a comprehensive view.

Operator

What Clearwater, I think, can do is really build this architecture, which I would like to suggest that many other companies can't even start to try. Enfusion is a single-instance, multi-tenant, modern platform. Clearwater is a single-instance, modern cloud platform. Beacon is on the cloud, single-instance platform. All three of us were built like Salesforce is built, or Workday is built. I would challenge you all to think about, in your own mind, just think about our competitors. How many of them actually have a single-instance, multi-tenant platform? Are they on the cloud? Yeah. It's like saying, I'm taking a walk. Are you on the cloud? Is it single-instance, multi-tenant? If you don't have it, what is the problem with it? You've got to continue to upgrade separately. You've got to do your own data ingestion. You've got to make your accounting changes differently.

Operator

People say cloud, and they're sort of trying to associate that with single-instance, multi-tenancy, which is just not true. If you have a single security master for all asset classes across every country, then you could put a single accounting engine around it, which Clearwater already has. Then you can put a layer of AI around it and put this around it. Clearwater already has this architecture. Enfusion already has this architecture. Beacon already has this architecture. It doesn't mean that it's really easy to do this, bring all three companies together. It is really hard. I don't want to stand here and say just because we bought these three pieces, guess what? We're all done. Not at all. Because between these three, we represent the same asset in different security masters. You've got to merge all three security masters and make it one.

Operator

If you can do that, I believe you will transform the entire industry. You make something, a trade happen, it will immediately show up event-based in the middle office. It will immediately show up in the risk calculation and in the client reporting. There is no translation. The efficiency and speed, there's no reconciliation. It's the same system. We believe this has a chance to completely transform how the industry does work. That's why we believed you had to do these deals. Kirat is here. He's going to talk a little bit later. I've bought him more lunches than I care to imagine. Hey, why don't you come partner with us? Why don't you do this? You'll be like, go away, go away. Finally, I think he got sick of me. He said, OK, fine. We'll do something.

Operator

The point is, this is not easy to put together, this intellectual property. I think we have. Is it open? We already connect to 25 other order management systems today. Single security master, Clearwater has. You get the network effect. I'm sure you guys know the network effect. By definition, my data is going to be better than all of my clients. Why is that? Because we manage the entire data ingestion and aggregation and reconciliation process. When a client finds something wrong with their data, they can't fix it. They have to call me. They call me, though. I'll investigate it, and I may fix it. If I fix that data, it fixes it for all of our clients at that same time.

Operator

Just by definition, when you think about it, anything our 1,400 clients find on the accounting side, we will fix, and it'll fix it for everybody at that same time. It doesn't wait for the end of month. It doesn't wait for the end of quarter. It's done every day. It's just fundamentally a superior way of thinking about the business. I do think that many of you generate alpha because you think you have the right models better than the more generically applied risk models. Our platform allows, the Beacon platform allows extensibility. You can bring your own models. You can test it against the models that are already there. It allows you, it stays open. An open architecture is really important. Eventually, though, it becomes a marketplace for other regulatory changes, analytical engines.

Operator

If someone has a great engine out in Switzerland, they can bring it in and sell it off our platform. I just wanted to, you know, I get excited about talking about this. I do want to stress that it's not there yet. It's not like right away we have everything working together, one security master, one accounting. It's not there. What one of the largest asset managers, this is a quote from him, and I think it sums it up really nicely. I called him to get permission to put this up. What he has written, I think, completely encapsulates what I think, which is I'm intrigued to see what you guys can do to build a game-changing platform. It is the holy grail. I haven't seen anyone bring this home yet.

Operator

It says, you have the intellectual firepower and some key capabilities, so you've earned the right to try. That's all that is. I do think you'll hear from my colleagues about we have the pieces of intellectual property to try and build, or the industry has tried to build many, many years back. A whole business model does not sit on that happening two years from now or one year from now. As Scott and Subi will come here and talk, we want to continue to do what we are doing just a little bit better. There was nothing wrong with the Clearwater story. We were growing at 20%. Our gross margin, we said 50 bps. It was improving much faster than that. We said EBITDA 200 bps. It was much faster than that. If we can just go back to doing what we were doing, just incrementally better.

Operator

Why better? Because we lost some deals because of risk. Now we have risk. We lost some deals because we didn't have the front office. Now we have that. Can we just do what we were doing just a little bit better? The same thing for the other parts of the business. If we can do this, it will alter how this industry operates. I do think we could be the Salesforce. It took time. Now we think Salesforce has always been there for some of you who are older. Far too many of you are very young. For those of you who are older, you'll remember. People used to say, oh, Salesforce is only for 10% shops, small shops, but not for the large enterprise class companies. That went on for 10 years. Today, I don't think you'll hear someone say, oh, why not go back to Civo?

Operator

I think this is the last few slides. It's technological, you know, just the architecture we just talked about. You're going to hear from our Chief Technology Officer too, so I feel weird. If we just go to look at the bottom, it's cloud-native. What does that really mean for you? It is the last upgrade you will ever need. When is the last time you upgraded Salesforce? Every day. It just does. When is the last time you think about our competitors? Every six months, every one year, every two years. Six-month, one-year program to migrate to this new, whatever it is, version. My question is, between that version and this version, who the hell is minding the shop here? What happened to the regulatory changes that happened in the middle here? What happened to the accounting changes? What happened to the new asset classes which have come up?

Operator

It is the last upgrade you will ever need, any of these three platforms. It's a single security master, one integrated source of truth. The network effect, our data is always, by definition, going to be better than all of our clients put together. We future-proof regulation and compliance. We make these changes every day. We deploy literally thousands of times a year. There is no notion of I'm one version behind or two versions behind or something fancy like that. That's when I was much, much younger. That doesn't happen anymore. You know, just we talk about architecture. I just wanted to say this. Every other industry, just think about every other industry. They operate like that. They operate like single-instance, multi-tenancy where people make the changes and you log in and do your work. What's wrong with us? Everyone has their own security master.

Operator

They don't talk to each other. Nothing works. What the hell? Sorry, I didn't mean that. You know, it's not OK. This level of inefficiency is not OK. I just think ours is one of the few industries where the transition is still in the early days. I feel by far Clearwater Analytics is leading that change here. I do think that, you know, talk about generative AI. I think people talk about generative AI. All of us have the same LLMs. You have to know that. Obviously, you know that. Everybody uses the same LLM. If I sold software to you and you and you and you, and all of you had your own instance and you were doing your own data, how do I learn from all of you? I don't even have access to your instance. I don't have access to your instance.

Operator

Clearwater, all of our clients, they operate on one platform. Every time we reconcile data, it's stored as to why. We have 10 years and 15 years of data on what happened, what you bought, what you sold, what we reconciled, why it worked, didn't work. Our ability to use LLMs is off the charts, which is why you saw the gross margin numbers, which I'm ecstatic about, or what we have achieved. It's not because we just worked harder. Our architecture allows us to do that. Look, we're going to talk about growth here. I think I've talked a lot about the strategy. We have talked about the margin. We talked about cash flow. Sorry, Jim's going to talk about cash flow. As an integrated company, the point is our total addressable market has doubled. It is $23.3 billion. Some people are debating whether it's $21 billion.

Operator

What does it matter? Whether it's $21 billion or $25 billion, big deal. We are talking about $730 million this year. It doesn't really matter to me. I do think it gives doubles insurance for us. Insurance was $2.8 billion. It becomes a $6.3 billion market. I think most people would agree, just sort of the absolute leader in that spot. Hedge funds are $3.2 billion. When you do the math about their current ARR, they should have a really, really good runway here. Let's talk about Enfusion and Beacon. Then I will switch back to, damn, it went too fast. Update this back. All right. Think about Enfusion. There are two things I wanted to say about Enfusion. What you've heard is, oh, it's not a good market. Oh, the growth is slowing down. I've followed Enfusion for at least eight years.

Operator

Every year, not most years, every year, they grew faster than us. Every year, Enfusion grew faster than us. In 2020, 2021, 2022, 40%, 34%, it was always, always grew faster than us. In the last two years, it's just sort of fallen off a cliff. We think we have a good sense for why that occurred. I think we have made a lot of changes to our company over the last three years. I think they need to make the changes. If you look at the amount of change that has gone on in Enfusion over the last two and a half years, it's been huge. At the senior most levels, at the next level, I'm not surprised that the growth fell. They took all of the R&D, much of the R&D, and tried to pivot away from hedge funds into asset management.

Operator

When you pivot away and you give this up, growth is going to stall. It doesn't come for free. I feel that our ability to change the trajectory of the business is really high. The question is, is the market good enough? Yeah, the hedge fund volatile? No. The smallest hedge funds are volatile. The ones which have less than $20 million and $50 million, big deal. That's not what the market we should be addressing anyway. The hedge fund industry by itself is pretty stable. Growth at 5%, faster than us. Insurance assets don't grow at the same pace. There are zero reasons, zero reasons we should not be able to take this and transition this to a growth and a margin trajectory which is sort of similar to ours. I feel there's been an issue around how to invest, what you've invested in.

Operator

If you take all of your sales teams and you sort of have them do a little bit of this, a little bit of this, a little bit of this, it will fail. It will fail. You've got to have dedicated teams after hedge funds. Not just that, you've got to have dedicated teams for inception and for conversion. You've got to have dedicated teams for asset managers. What does asset managers mean? You have to have dedicated teams for less than $20 billion, dedicated teams for mid-market asset managers, and large strategic asset managers. We have this five-point plan. We like these plans, as you guys know. One is we have already changed this to have a dedicated team going after hedge funds. They have their own product team. They have their own engineering team. They have their own sales team, their own marketing focus.

Operator

They wake up and they focus on hedge funds. The second thing is they have to grow NRR. We can be pretty proud about our own NRR. Three years back, we were quite depressing NRR. We led that whole movement, and we got to do it again. It's a little bit of déjà vu, but we feel like we have run the script before, and we can do it again. We have a commercial model change. We feel there's a way to change the commercial model, just like we changed the Clearwater commercial model in 2022. We've done it in the public markets. A lot of people said it's going to be hard. It was hard. We've done it. We know how to do it. The wrong way to do it is to say, oh, it's going to take your price up 10%. You can do it one year.

Operator

You can't repeat it. We have a good repeatable process, which is yielding results for Clearwater. We'll do that. GTM investments, I think we have a lot of room in our EBITDA. Our ability to go make these investments is high. I think the last one is really important, really, is clear roles and responsibilities. Some of these are underway. Some are partially underway. Some are going to launch in Q4, and it's just a question of timing. Why is that? Because we want everyone to just go back to do what you were doing, just incrementally better. Take care of the home corp first. Then we talk about all these new products, these new ideas. That's all great. Let's just go back and do what we were doing earlier. This is a pictorial of where we think this is going to come from.

Operator

I think the hedge fund focus might add 2%. I think the commercial model will add 4%, 4.5%, 3.5% in that region, and the cross-sell, we feel, can add another 4% to it. If you look at the Bistro story, this is a lot more straightforward. What they have done and continue to do is they do risk for some of the most sophisticated clients on the planet. We feel that the first thing is continue to do what you were doing. We have taken some of the sales team and increased their sales teams and brought in, I think, a little bit more rigor in how they sell. I think Kirat will speak to you. I think he's very, very amazing at the business and the problem. On the sales front, I feel like he doesn't feel the need to sell. It's like, what the hell?

Operator

It's a good product. You should buy it. We know better. We're going to put out a GTM team, and that's doing well. They have access to the Clearwater client base and the Enfusion client base. Hedge fund risk, another big one. Alternatives and packaged products. I think both of these businesses have a five-point plan to get to do GTM. What also really, really matters is our core business. The core business has to continue to do what it has done. That was the thesis when we did these acquisitions, that the core business has to continue to do what it is doing, just do it slightly and incrementally better. If we can build the platform in the next year or two, disruptively better. To talk about that, I'll bring on stage Subi Sethi. She's the Chief Operating Officer.

Operator

She's responsible for all client interaction from the time we sell something, actually before we sell something. She manages clients through the lifecycle. Also Scott Erickson, who's the Chief Revenue Officer. Thank you.

Operator

Everybody is waiting for me. Thank you.

Operator

Ceremonial shaking. Thanks, Sandeep.

Operator

This is already on.

Operator

Good afternoon, everybody. Oh, this is on already. OK. Clearly, I have to say this. This is a Cvan moment, right? A new branding. What we want to share today is a Clearwater growth model, which is actually nothing new. We've been, as Sandeep alluded to, we've laid down the vision. We've laid down the framework. We're going to continue to do incrementally better. For many years, we've actually earned the right in the enterprise boardrooms. Many of our large institution clients actually trust us with their investment operations data. That trust, that track record, is the foundation of Clearwater's growth model. Having said that, what I want to share with you is the four levels. I'm supposed to click this. Our model has four dimensions. The good news, as I said, it's nothing new. We want to continue on our path.

Operator

As we know, there's a decent long runway already in this. The first is how do we deepen with our clients? Last year, when I stood here, we challenged ourselves, how do we move from one basis point to four? That required a massive shift in the way we think. Not only think about how we service our clients, but how do we deliver the expanding value to our clients? That's something which we have made. That's resonating very well with our clients. The second is the vertical specialization. Every one of you is very, very familiar with insurance as a vertical. I remember in my early tenure at Clearwater, we used to serve very few large institutional insurers. However, today we have all kinds. We have large insurance, we have mid-size, and we have retail carriers. What's remarkable is this.

Operator

They all work on that same product and same instance, flexed to their needs as how they would want to leverage it. The third is geographical expansion. Europe and Asia are not future bets anymore. They're real revenue markets for us today. I remember a client in London telling me, if I can bring all that experience of Clearwater to that market, we can actually lead it. Happy to share that we already have. Last but not the least, asset managers and asset owners. The TAM here is enormous. Asset managers and asset owners, they not only want data, but they want a technology partner who can work with them end to end and manage their workflows, because the variance in their workflows is unbelievable. Let me take you deeper into the lifecycle.

Operator

Two years back, when we stood here, we were wanting to move from one basis point to four basis points. Look where we've come with some of our products, which we launched then on LPx, MLx, and Prism. I'm proud to say these products actually today carry 20,000 LP funds and 30,000 mortgage funds, and they're operating at a scale. While I was busy delighting those clients on LPx and MLx as a part of my job as Chief Operating Officer and dealing with clients, my clients were forcing us to do more. They wanted to hear from me, saying, now you have already reconciled data of mine. You've done one data connection. You have ingested my data. You've reconciled, and it's very current every day. Can you give me risk? Can you give me performance? Can you give me front-end solutions? They were forcing my agenda.

Operator

Let me tell you, some of you are my clients here as well, very impatient bunch. They were forcing our agenda. We also, at the same time, took a step back and realized that developing these products organically will take time. Thereby, we complemented our growth agenda from organic growth to inorganic moves. Enfusion and Beacon, as Sandeep talked about, both highly relevant, both critical in scaling up our entire lifecycle and roadmap. Now, why does this strategy work with our clients? The reason why this strategy works with our client is because we've earned what I call a license to operate. These are some of my favorite charts, so I'm a little biased towards them. Please bear with me.

Operator

Over the last five years, we've actually maintained a net promoter score of 60 and above, and 60 and above not in one vertical, but across all verticals for consecutive five years. That is what I call license to operate. That consistency only comes when every transaction, every reconciliation, every anomaly fix is done with precision. The reason why we can do that with precision is because that's one product, one instance, working for all clients. Here is a critical piece. Every one of those transactions generates data. When those operational data are converted into insights, they actually govern our technology roadmap. The combination of operations, insight, and product, that's our competitive edge. That's our advantage. Let me tell you, all of the enterprises actually struggle to implement AI on the top of it because they do not have a single source of data. We do.

Operator

Our 114% net retention rate is not just a metric. It is a litmus test of our clients having trust in us and growing with us. Let's talk a little bit about our clients. The good news is there's no concentration on any segment over here. Today, we have over 130 clients. When you have two more, you actually kind of round it off, who actually pay $1 million or more in ARR on a regular basis. With 98% gross retention, they've been with us forever. That's grown both organically as well as inorganically. We think about clients, clients' experience, and client delight at two dimensions. First, are they happy? For us, happiness and delight means both economic buyers, as well as our power users, are able to manage their workflows seamlessly on our system. The second being, are they sticky?

Operator

Some of our clients' data actually directly go in their board decks. Yesterday, one of the clients' CIO actually told me, Clearwater is the only partner wherein his charts on investment operations get generated by one click on Clearwater's system, and he gets the deck. Now, that's a kind of stickiness you actually cannot manufacture. That deep integration really drives stickiness, which is why you could see a chart which Sandeep showed, a straight, consistent chart for seven years of 98% gross retention rate. How do we grow with our existing clients? That's a question which we have evolved, and we're continuing to evolve. The good news is every day, our clients call us and say, we want to do more with us. There are many irons in the fire, and that's a common phrase in Clearwater we actually use.

Operator

I lead operations globally for Asian clients, European clients, American clients, some of the Mexican clients as well. Having said that, while I make it sound very easy, it's actually not always working with precision every time. We put many irons in the fire. I'll talk a little bit about each one of them. The negative 2% is something which actually I'm very proud of, even if it's a negative 2%, which is managing churn. While I believe 2% churn is best in class, I still look at every reason why our clients leave us. Some of it is small asset managers which are folding, but some of it is also input to our product roadmap. Second being, how do we get the full book of our clients on the system? The more asset classes we put on Clearwater, the better the product becomes, the better the insights become.

Operator

It's one book, one source of trust, one source of data for our clients. Can't get leaner than that. Third, cross-sell and upsell. Now, with order management system, portfolio management system, performance, front-end, all in our portfolio, our clients are asking me every day, now since you have my reconciled data, can you give me a scenario analysis? Can you give me shock analysis? Can you help me with OCI strategy? Can you give me a performance report? I have so many asset managers. I want to make a performance dashboard for all my asset managers and look at their portfolios and how they're investing in. The answer to all those questions is yes, yes, and yes. Those are exactly the areas where clients want us to grow and have one partner wherein everything is consolidated. Fourth, commercial model innovation. Sandeep briefly talked about that.

Operator

We don't only protect our clients' investment. We also design structures and contracts which protect our revenue while keeping fully aligned with our client growth agenda. Last but not the least, the AUM tailwind. Some of it is market-driven, and some of it is not market-driven. Some businesses are profitable than the others. At the end of it, as our clients are growing, so are we. This is definitely my favorite chart. Now, margin mindset. This is a DNA we've built in the last six years, and it's growing across the entire enterprise. Last year, when I stood on this stage, and I promised we could deliver 80% gross margins on our core accounting product. The 77% number you saw was a combined number. I'm proud to say that we did it. In fact, the steady-state clients are actually trailing at 83%. It's something which I'm really, really proud of.

Operator

How were we able to do that? By putting AI at the center. When Sandeep last year came to me and asked for a 50 basis point improvement, I thought to myself, it's bold, but it's doable. Since he's my boss, I was cautiously optimistic. At the end of it, my playbook at that time did not have an AI. I did not know what the art of possibility at that time when we put these models into place and implement them and make them AI native. To help you understand this a little better, Clearwater Analytics processes millions of transactions every single day. That gives us data and signals that nobody else has because it's a single instance. I'm able to see a security if bought at X or X plus 1 or X plus 2 by A and B. I can see the entire lifecycle.

Operator

With that data, over time, we've built 1,000 plus AI domain-specific models which are tuned to every business problem. If somebody is wanting to compare a book yield, we have that problem. If somebody is wanting to know the compliance rules summarized, we have that as a model. These are not experiments. They're live and running in production. That is what you are seeing as an uptake in the margin charts. That's the power of combining operational depth with AI expertise. Suspense is another example. Suspense by the name itself is a suspense. Only accountants understand that. This is a different problem. I've credited money, and I don't know where that is. We built a workflow, a suspense workflow, which is AI native. Not only does it manage to clean the suspense every day, but it also tells you against which security that suspense is coming from.

Operator

At the end of the day, my clients are able to close book on day one and day two because they have zero suspense activity.

Operator

are two clickers up here, but Subi said I couldn't hold a clicker when she was going, as I might get a little anxious and push her along. In all seriousness, I want to thank Subi and her leadership. It is so much easier to grow when there's high confidence in your ability to deliver and to deliver for clients. As we talk about one to four as being the key area of focus for growth, and just to continue on what we committed two years ago on this very stage, it only comes when you have happy clients, 60 NPS. Are you kidding me? In every single market. The unit economics of being able to deliver at scale and do it profitably, to not only price it right, but to deliver.

Operator

The ability to grow and our confidence in continuing to do so is not just because we've executed in the past, as Sandeep has described, but because we consistently deliver for our clients. From a revenue perspective and a sales perspective, what a luxury it is for us and our team to know that clients are satisfied, both from a new logo perspective, happy clients lead to new logos, as well as growing and having that license to operate that Subi talks about. Subi talked a lot about one to four basis points and growing the existing wallet share with our existing clients. I'm going to talk about the three other pillars and then finish by talking about the additional opportunities we have since the acquisitions of Enfusion, Beacon, and Bistro.

Operator

The four pillars that we talked about, one to four, grow insurance, grow globally, and grow asset managers and asset owners, to start with insurance. This one's personal for me. I actually ran our product team when we brought on our first insurance client. It's thrilling to be able to stand here today. Sandeep talked about earlier is that the dominant position we have in insurance. We've truly gone in and disrupted the industry in providing positive personal and business outcomes to our clients. We still have a ton of runway in insurance. As Subi mentioned, we have global recognition of the solution. We also have large marquee clients in every single geography. Actually, our largest client, our largest insurance client is non-U.S., both in terms of AUM and revenue. The current ARR of $279 million against that TAM of $6.3 billion leaves tons of runway.

Operator

That TAM has increased since we last met. Sandeep talked a little bit about this because it's not just the one basis point of data management, accounting, and reporting, but it's also now the entire investment lifecycle around both front office capabilities as well as risk. Last time, we didn't include Asia in this number. We only include markets where we were going full bore into those markets. We hadn't yet done that two years ago. That leads us to the second point of growth. As we continue to focus on insurance and capture this huge runway, the goal is to continue to grow globally. The reality is the TAM outside.

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