Executive Summary

Clearwater delivered a strong first quarter as an integrated company: revenue $205.1M (+77% YoY), non-GAAP gross margin 78.5%, and adjusted EBITDA $70.7M (+84% YoY); both revenue and EBITDA exceeded internal guidance, with revenue also above consensus. Hedge fund demand and margin efficiency from GenAI and integration were key drivers .
Q4 2025 guidance was set at revenue $216–$217M and adjusted EBITDA $73M (34% margin), and FY 2025 guidance increased to revenue $730–$731M and EBITDA $247M (34% margin), signaling confidence in continued execution and synergy realization .
KPIs remained durable: ARR $807.5M (+77% YoY), GRR 98%, and NRR 108% (down modestly from 110% in Q2 on lower AUM tailwinds and upsell), with organic ARR accelerating sequentially to $534.4M (+$21.7M QoQ) .
Catalysts: margin expansion ahead of expectations; new Q4 and raised FY guidance; deleveraging and buybacks; expanding cross-sell in alternatives and risk (70% bookings growth); and 800+ AI agents deployed across >$10T client assets supporting operational transformation .

What Went Well and What Went Wrong

What Went Well

Strong beat vs internal guidance: revenue topped the high end by >$1M and EBITDA was >$5M above guide; EBITDA margin expanded to 34.5% (+140 bps YoY) on integration and GenAI efficiency .
Durable KPIs with broad-based bookings: ARR $807.5M (+77% YoY), GRR 98%, and momentum across insurance, asset owners, asset managers, and hedge funds; two recent seven-figure risk deals highlight Beacon traction .
GenAI scaled in production: 800+ AI agents delivering 90% reduction in manual reconciliation, 80% faster report generation, and 50% faster financial close; management: “the use of GenAI is continuing to accelerate… we achieved 78.5% gross margins for the integrated business” .

What Went Wrong

GAAP profitability impacted by integration-related costs and interest: GAAP net loss of $(10.5)M; GAAP gross margin declined YoY to 65.6% (Q3’24: 72.9%) despite non-GAAP margin stability .
Net revenue retention stepped down to 108% from 110% in Q2, driven by lower AUM tailwind and lighter upsell contributions; hedge fund NRR weighed on consolidated expansion .
Debt remains elevated post acquisitions ($838.9M total debt), though management is actively deleveraging ($40M repaid in Q3) and repurchasing shares ($8.9M within announced $100M buyback) .

Financial Results

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD Millions)	$115.8	$181.9	$205.1
GAAP Gross Margin %	72.9%	65.1%	65.6%
Non-GAAP Gross Margin %	78.5%	77%	78.5%
Adjusted EBITDA ($USD Millions)	$38.3	$58.3	$70.7
Adjusted EBITDA Margin %	33%	32%	34.5%
GAAP Net Income (Loss) ($USD Millions)	$4.8	$(24.2)	$(10.5)
Non-GAAP Net Income ($USD Millions)	$31.0	$34.8	$40.6
GAAP Diluted EPS ($)	$0.02	$(0.09)	$(0.04)
Non-GAAP Diluted EPS ($)	$0.12	$0.12	$0.14

KPIs	Q1 2025	Q2 2025	Q3 2025
ARR ($USD Millions)	$493.9	$783.5	$807.5
GRR %	98%	98%	98%
NRR % (Consolidated)	114%	110%	108%
Organic ARR ($USD Millions)	—	$513.0	$534.4

Balance Sheet Snapshot	Q2 2025	Q3 2025
Cash, Cash Equivalents & Investments ($USD Millions)	$71.9	$64.1
Total Debt, net of issuance costs ($USD Millions)	$878.1	$838.9

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Millions)	Q4 2025	—	$216–$217	New
Adjusted EBITDA ($USD Millions)	Q4 2025	—	$73	New
Adjusted EBITDA Margin %	Q4 2025	—	34%	New
Revenue ($USD Millions)	FY 2025	$726–$732	$730–$731	Raised (midpoint up)
Adjusted EBITDA ($USD Millions)	FY 2025	$232–$237	$247	Raised
Adjusted EBITDA Margin %	FY 2025	~32%	34%	Raised
Revenue ($USD Millions)	Q3 2025	$203–$204	ACTUAL: $205.1	Beat vs guidance
Adjusted EBITDA ($USD Millions)	Q3 2025	~$65	ACTUAL: $70.7	Beat vs guidance

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2025)	Trend
GenAI and margin efficiency	Q1: GM 78.9% core; Helios & agentic workflows . Q2: non-GAAP GM 77.4% and Helios impact .	800+ AI agents; 90% reconciliation reduction; 80% faster reporting; 78.5% non-GAAP GM for integrated business .	Improving
Cross-sell momentum	Q1: building cross-sell org (Wilshire model) . Q2: record bookings; synergy and pipeline .	70% YoY growth in bookings for LPX/MLX/Prism/Risk; robust pipeline .	Improving
Enfusion commercial model	Q1: plan to redesign over months . Q2: approach and durability .	Rollout for new clients on Jan 1, 2026, then existing base; aim for 4–5% annual net price uplift via broader base .	Progressing
Risk/Beacon traction	Q2: VKB front-to-back win; client interest .	Two seven-digit risk deals signed; cross-sell to hedge funds and asset managers .	Improving
Alternatives (LPX/MLX)	Q1: LPX/MLX adoption in asset managers/insurance . Q2: continued momentum .	Alternatives bookings up >35% of mix and 70% YoY growth across LPX/MLX/Risk/Prism .	Improving
International expansion	Q2: VKB and multiple EMEA/APAC wins .	Board adds global leaders; wins across Latin America (FLAR) and Europe .	Improving
Hedge fund market	Q2: record bookings; conversions; churn normalized .	Strong Q2 and Q3; forecasting a solid Q4; NRR headwind being addressed .	Improving bookings; retention evolving
Retention metrics	Q1 core NRR 114% . Q2 consolidated NRR 110% .	NRR 108% on lower AUM tailwind and lighter upsell; GRR 98% .	Slightly weaker
Deleveraging & buybacks	Q2 debt $872M; stated deleveraging plan .	$40M debt repaid; $8.9M buyback within $100M program .	Improving leverage profile

Management Commentary

CEO: “We achieved 78.5% gross margins for the integrated business… the use of GenAI is continuing to accelerate and is outpacing our own assessment of the margin improvement it can drive.” .
CFO: “Adjusted EBITDA was $70.7 million… EBITDA margin expanded meaningfully to 34.5%… any question about margin synergy can be put to bed. Now we are squarely focused on growth… We expect fourth quarter EBITDA to be $73 million… full year margin of 34%.” .
CEO on AI: “Our platform hosts over 800 AI agents… clients have seen 90% reductions in manual reconciliation… 80% faster regulatory reporting, and 50% faster financial close cycles” .
CFO on retention drivers: “We achieved 98%… gross retention… Net revenue retention rate was 108%… price increases just under 3%, cross-sell just under 3%, upsell just under 3%, AUM and other <1%” .

Q&A Highlights

Pipeline strength and breadth: Bookings evenly spread across segments; alternatives and risk standout; hedge funds strong in Q2/Q3 with expected Q4 strength .
ARR dynamics: Organic ARR accelerated sequentially; lumpiness from larger deals and onboarding timing; expectation for Q4 acceleration .
Enfusion commercial model: New pricing model for all new clients Jan 1, 2026; phased rollout to existing clients in 2026; focus on value alignment rather than headline price hikes .
AI monetization: GenAI primarily drives margin and operational benefits; monetization embedded via next-gen client reporting and product adoption (e.g., Prism) rather than standalone AI pricing .
Alternatives penetration: LPX expected across entire insurance base over next few years; MLX and Prism gaining momentum; white space across asset owners .

Estimates Context

Metric	Q3 2025 Consensus	Q3 2025 Actual	Result
Revenue ($USD Millions)	$203.6*	$205.1	Beat
Non-GAAP EPS ($)	$0.137*	$0.14	Beat
Adjusted EBITDA ($USD Millions)	$64.6*	$70.7	Beat

Forward	Consensus	Company Guidance
Q4 2025 Revenue ($USD Millions)	$216.7*	$216–$217
Q4 2025 Adjusted EBITDA ($USD Millions)	$73.0*	$73
FY 2025 Revenue ($USD Millions)	$730.2*	$730–$731
FY 2025 Adjusted EBITDA ($USD Millions)	$245.0*	$247

Values retrieved from S&P Global.*

Implications: Consensus appears aligned with the company’s Q4 guide; FY EBITDA guidance moved above consensus, likely prompting upward estimate revisions. The Q3 beat was driven by hedge fund revenue upside and efficiency gains, supporting estimate momentum into Q4/FY .

Key Takeaways for Investors

Strong execution on first integrated quarter: revenue and EBITDA beats vs guidance and consensus; margin expansion ahead of expectations supports near-term sentiment .
Guidance raised for FY EBITDA and margin to 34%, signaling confidence in synergy capture and GenAI-enabled efficiency; potential for further estimate upgrades .
Durable KPIs with improving organic ARR and broad-based bookings; watch NRR recovery as AUM tailwinds normalize and cross-sell/upsell ramp into 2026 .
GenAI at production scale is a differentiator; early client outcomes (90% reconciliation reduction, 80% faster reporting) indicate sustained margin leverage and product monetization via embedded workflows (Prism, risk) .
Enfusion pricing model shift begins January 2026; expect commercial alignment to support NRR expansion and revenue quality over 2026–2027 .
Deleveraging underway (2.7x net debt/annualized Q3 EBITDA) and active buybacks ($8.9M in Q3) provide capital allocation flexibility into 2026 .
Trading lens: Near-term catalysts include Q4 execution in hedge funds and cross-sell momentum in alternatives and risk; medium-term thesis rests on integrated front-to-back platform delivery and NRR path to 115% .

Clearwater Analytics Holdings, Inc. (CWAN)·Q3 2025 Earnings Summary