Q2 2024 Earnings Summary
Reported on Jan 9, 2025 (After Market Close)
Pre-Earnings Price$19.55Last close (Jul 31, 2024)
Post-Earnings Price$21.00Open (Aug 1, 2024)
Price Change
$1.45(+7.42%)
- Strong Organic ARR Growth exceeding 20%, even after excluding the impact of the Wilshire acquisition, indicating robust demand for Clearwater Analytics' solutions.
- High Net Revenue Retention Rate of 110%, with expectations to increase to 115% as they cross-sell more solutions to existing clients, demonstrating effective upselling and client satisfaction.
- Improving Margins and Strong Cash Flow Generation, with adjusted EBITDA margin of 31.3% in Q2, exceeding guidance, and record high free cash flow of $42.4 million, representing a 117% year-over-year improvement, supporting strategic investments and growth.
- Heavy investment in R&D may pressure margins longer than anticipated. Clearwater is spending 60% of R&D capacity on building new products , with plans to reduce R&D expenses from 25%-26% to 20% in the mid to long term. If these new products do not generate expected returns, margins could be negatively impacted.
- Macro headwinds may affect future growth. Management acknowledges that "a number of enterprise software companies saw weakness in pipeline and eventually in booking and eventually in revenue" and they "continue to be watchful". Despite current optimism, macroeconomic challenges could impact Clearwater's pipeline and sales cycles.
- Net Revenue Retention (NRR) remains flat at 110%, potentially delaying growth targets. NRR was "unchanged sequentially" at 110% , and while the company aims to reach 115% NRR by first quarter of 2026 , achieving this target may take longer than expected, potentially limiting revenue growth from existing customers.