Q4 2024 Earnings Summary
- Clearwater Analytics exceeded revenue expectations by $7 million in Q4 2024, driven by strong bookings conversion and an increase in Net Revenue Retention (NRR) to 116%, surpassing their expectation of 114%. This showcases the company's ability to outperform and deliver strong financial results.
- The company is experiencing over 20% organic growth, allowing significant reinvestment in sales, marketing, and R&D efforts. Clearwater is adding substantial resources to its Go-To-Market teams not just in North America but also in Continental Europe, the U.K., and Asia, supporting continued expansion and growth.
- By maintaining high client retention rates of 98-99% and employing a strategy of having "many irons in the fire"—including upselling additional assets, investing in new products, effective pricing models, and capturing AUM growth—Clearwater aims to achieve durable growth and maintain a high NRR of 115% consistently.
- Clearwater's revenue beat in Q4 2024 included a non-recurring $3 million from one-time services related to NAIC changes, which may not contribute to future growth.
- The revenue growth guidance for 2025 is 19%-20%, lower than the 22.7% growth achieved in 2024, suggesting a potential slowdown in growth momentum.
- Integration challenges from the Enfusion acquisition could affect future performance, as the CEO acknowledged that integrating Enfusion "isn't super easy" and there is significant "integration work to do".
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Increased from $99.019M to $126.465M (≈28% increase) | Total Revenue growth was driven by an expanding client base, increased asset billings, and likely contributions from strategic acquisitions. This improvement builds on previous periods where revenue growth was supported by new client acquisitions and higher average assets billed, now accelerating with a stronger momentum in Q4 2024. |
U.S. Revenue | Increased from $79.36M to $102.93M (≈30% increase) | U.S. revenue saw robust growth through an expanded domestic client base and enhanced revenue per client, aligning with prior improvements. The increase reflects a continuation of the strategy observed in earlier periods where market penetration and higher basis point rates contributed to higher revenue. |
Rest of World Revenue | Increased from $19.65M to $23.54M (≈20% increase) | Rest of World revenue growth was achieved by expanding the international presence and targeted regional investments, such as new offices and strategic hires. This further builds on efforts seen in previous quarters to innovate products and onboard new clients in international markets. |
Net Income | Turned from a loss of $3.447M to a profit of $420.305M | Net Income's dramatic turnaround is likely attributable to a combination of robust revenue growth and improved cost management, including lower relative expense pressures compared to previous periods. While prior quarters saw revenue increases offset by high equity-based compensation and G&A expenses, Q4 2024 reflects an extraordinary performance—possibly enhanced by non-recurring or tax-related benefits—that drove net income sharply positive. |
Earnings Per Share | Improved from -$0.02 to $1.85 | EPS improvement directly mirrors the net income performance, with operational efficiencies, revenue growth, and lower expense burdens contributing to turning a loss per share into a healthy profit per share. This significant change aligns with the overall turnaround in profitability seen in Q4 2024. |
Net Change in Cash | Declined from +$16.1M to -$51.344M | Net Change in Cash turned negative due to markedly increased cash outflows in investing and financing activities, despite improved operating cash flow. This volatility reflects a strategic reallocation of cash—potentially for capex, investments, or debt repayments—which contrasts with the positive cash flow observed in Q4 2023. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue (Quarterly) | Q1 2025 | At least $120.2M, ~21% YoY | $125M, ~22% YoY | raised |
Adjusted EBITDA (Quarterly) | Q1 2025 | $38.5M, ~32% margin | $41.5M, 33.2% margin | raised |
Revenue (Annual) | FY 2025 | $445.5M, ~21% YoY | $535.5M to $542M, ~19-20% YoY | raised |
Adjusted EBITDA (Annual) | FY 2025 | $142.5M | $182M to $185M | raised |
Equity-Based Compensation and Related Payroll Taxes | FY 2025 | no prior guidance | $106M | no prior guidance |
Depreciation and Amortization | FY 2025 | no prior guidance | $13M | no prior guidance |
Non-GAAP Tax Rate | FY 2025 | no prior guidance | 25% | no prior guidance |
Share Count | FY 2025 | no prior guidance | 263 million shares | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q4 2024 | $120.2 million | $126.465 million | Beat |
Revenue | FY 2024 | $445.5 million | $451.803 million | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Net Revenue Retention (NRR) | Q1 and Q2 reported stable NRR at 110% with Q3 improving to 114% via additional asset onboarding, cross‐selling, and a 2% AUM tailwind | Q4 reached 116% driven by upsell (7%), cross‐sell (3%), and pricing improvements, with strong gross retention (98%) and a focus on durability | Upward trend with increasing durability and performance, reflecting consistent enhancements across periods. |
Organic Revenue Growth | Q1 showed 21.4% YoY, Q2 ARR growth above 20%, and Q3 reached 22.4% YoY increase; fundamentals driven by low churn, cross‐selling, and expanding AUM | Q4 reported 28% YoY organic growth with ARR growth at 25.3%, emphasizing strong unit economics and profitable execution | Acceleration in organic growth, indicating improved execution and a stronger unit economics profile. |
International Expansion | Q1 emphasized new contracts across APAC, Germany, France, and the U.K. with investments in leadership and go‐to‐market activities; Q2 and Q3 highlighted early-stage presence in Asia and strong expansion signals in key European markets | Q4 sharpened focus on Europe and Asia with fully funded go-to-market teams in Continental Europe, the U.K., and Asia, aiming to become the platform of choice in these regions | Consistent international focus with an intensification of commitment and resource allocation in Q4. |
Acquisition Strategy | Q1 and Q2 revolved around the Wilshire acquisition integration—using tuck-in acquisitions to expand TAM and enhance risk/performance capabilities; Q3 mentioned strategic alliances such as the Snowflake partnership with minimal integration challenges | Q4 introduced the upcoming Enfusion acquisition described as a meaningfully larger deal with detailed integration planning and reassignment of leadership to focus on revenue synergies | Shift toward larger, more complex acquisitions with greater emphasis on integration planning and synergies. |
New Product Innovation & Cross-Selling | Q1 saw introductions like Clearwater Intelligence Console and cross-selling driving 25% of bookings; Q2 noted incremental increases with new product bookings even from new clients; Q3 credited cross-selling new technologies for part of the NRR improvement despite maturity concerns | Q4 highlighted long-term drivers such as Insights and marketplaces, with cross-sell contributing 3% currently and recognition that these innovations will significantly impact revenue in the 2026-2027 timeframe | Continued emphasis on innovation and cross-selling with ongoing uncertainty around immediate revenue contributions, positioning these as longer term strategic investments. |
Margin Expansion | Q1 reported 31.3% adjusted EBITDA margin with improved gross margins (78%); Q2 and Q3 maintained consistent efforts aiming for 200 basis points EBITDA expansion and incremental gross margin improvements | Q4 achieved a gross margin of 78.8% nearing the 80% target and an EBITDA margin of 33%, with continuing investments in R&D and GTM balanced by generative AI efficiency gains | Steady improvement in margins with disciplined investments ensuring profitability while pursuing strategic growth initiatives. |
Evolving Revenue Guidance & Macroeconomic Headwinds | Q1 raised full-year guidance to ~$438–442 million with modest macro insights; Q2 increased full-year guidance with caution regarding potential interest rate impacts; Q3 raised guidance and noted a beneficial Fed rate cut with minimal reported headwinds | Q4 guided for 19–20% revenue growth in early 2025 with transparency on one-off adjustments (e.g. no AUM tailwind assumed) and minimal FX headwinds due to natural hedging | Consistent upward revisions in revenue guidance amid transparent acknowledgment of macro factors, with a trend toward conservative near-term guidance despite strong organic performance. |
Non-recurring Revenue Items | Q1 mentioned one-off timing shifts (early client go-live) and exceptionally low churn; Q3 referenced a 2% AUM tailwind and discrete contributions from maturing product onboarding | Q4 reported a clear $3 million non-recurring revenue boost due to NAIC regulatory changes completed ahead of schedule, with explicit statements that this boost will not recur | Recurring reliance on one-off events continues, though Q4 presents a clearly flagged non-recurring regulatory boost, underscoring the need to separate sustainable growth from temporary factors. |
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Enfusion Acquisition Synergies
Q: How quickly can you achieve Enfusion deal synergies?
A: Sandeep expressed confidence in achieving synergies with Enfusion relatively quickly. They've had detailed meetings with Enfusion's leadership and are impressed with the technology's similarity. He mentioned that they've provided guidance around growth expectations and margin expansion, and everything they've seen so far allows them to believe that achieving those goals is completely doable. -
Margin Expansion and Gen AI Impact
Q: How does Gen AI affect your margin outlook?
A: Sandeep noted that Q4 margin was 78.8%, very close to their long-term target of 80%, and they don't find it challenging to surpass that. He believes Gen AI pays back very quickly, often within the year, and doesn't see any headwind in terms of Gen AI lowering the margin profile. -
Net Revenue Retention Drivers
Q: What drove the NRR improvement to 116%?
A: Jim stated that the main driver was upsell of the Clearwater platform across other divisions, contributing 7%, which was higher than their base algorithm. Cross-sell was 3%, and their teams have become energized around it, understanding its value. They've also implemented normalized price increases across the entire portfolio. -
Revenue Beat Explanation
Q: What drove the additional $4 million revenue beat?
A: Jim explained they had a strong bookings quarter, and their bookings are converting into revenue. Sandeep added that the Net Revenue Retention (NRR) was 116%, exceeding their expectation of 114%, which contributed 2% and is real money. The conversion from booking was very strong. -
Enfusion Pricing Model Evolution
Q: How will Enfusion's pricing model evolve post-close?
A: Sandeep believes the current commercial model could use improvement. They executed on similar changes swiftly and responsibly in 2022. Driving NRR within the Enfusion client base is an important objective, and while they couldn't specify exact changes, they have many ideas and plan to execute them in coming quarters. -
Core Business Momentum Amid Acquisition
Q: How will you maintain core momentum while integrating Enfusion?
A: Sandeep emphasized they only pursued the acquisition because their core business is working well. They've developed joint teams and a strong PMO function, with workstream leaders from both sides. They've also allocated specific leaders to focus on the integration while ensuring the rest of the team remains dedicated to running their own business effectively. -
Factors Driving Durable Demand
Q: What is fueling durable demand and growth?
A: Sandeep explained they have multiple irons in the fire to drive growth, starting with strong retention. They have dedicated teams focusing on additional assets and are investing in new products to drive additional assets and acquire new logos. This multifaceted approach leads to durability in growth. -
Gross Margin Improvement and Onboarding
Q: Are you seeing shorter onboarding times improving revenue visibility?
A: Sandeep confirmed that they see a shorter period between booking and ARR, and a shorter time to go live. The onboarding process has become mature, and the commercial model has evolved. This improves both revenue growth and the margin profile. -
NAIC Regulatory Impact
Q: Will NAIC regulations continue to be a tailwind in 2025?
A: Sandeep stated that regulatory reporting has always been a tailwind, and they continue to make investments in that space. While the NAIC made a massive change this year that felt a bit one-time-ish, they expect regulatory changes to continue, providing ongoing opportunities. -
Sales Capacity and Expansion
Q: How should we think about your sales capacity this year?
A: Sandeep mentioned that with the business growing over 20% organically, there's a lot of room to make investments. Go-to-market (GTM) teams are fully funded, not just in North America but also in Continental Europe, the U.K., and Asia. They continue to add muscle to the GTM function. -
Use Case with OpenAI
Q: What do you do for OpenAI?
A: Sandeep said they do the same data ingestion, reconciliation, accounting, and reporting as they do for other clients. Nothing different from any of the other listed corporate clients with what they're doing for OpenAI. -
Insights Product Contribution
Q: How is the Insights product contributing to growth?
A: Sandeep noted that while clients are very interested and are paying for it, Insights is not expected to be a major contributor to revenue growth in 2025. They expect it to start contributing more in 2026 and beyond, but it's more of an enabler of operational efficiency and onboarding at this stage.