Clearwater Analytics (CWAN) - 2025 Q1 - Quarterly Report

PART I Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Q1 2025, detailing significant growth in assets, revenue, and net income, primarily driven by acquisitions Key Financial Performance (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Revenue | $126.9 | $102.7 | +23.5% | | Gross Profit | $92.9 | $74.5 | +24.7% | | Income from Operations | $7.1 | $(0.2) | N/A | | Net Income | $6.9 | $2.2 | +210.2% | | Net Income Attributable to CWAN | $6.5 | $1.9 | +243.0% | | Diluted EPS | $0.03 | $0.01 | +200.0% | Condensed Balance Sheet Highlights (as of March 31, 2025) | Account | March 31, 2025 | Dec 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $1.285 billion | $1.170 billion | +9.9% | | Cash and cash equivalents | $275.2 million | $177.4 million | +55.2% | | Intangible assets, net | $142.9 million | $30.9 million | +362.8% | | Goodwill | $72.6 million | $71.0 million | +2.3% | | Total Liabilities | $142.7 million | $139.3 million | +2.4% | | Total Stockholders' Equity | $1.143 billion | $1.030 billion | +10.9% | Condensed Cash Flow Statement (Three Months Ended March 31) | Activity | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $24.5 | $10.0 | | Net cash provided by (used in) investing activities | $99.5 | $(11.8) | | Net cash used in financing activities | $(27.2) | $(30.1) | | Change in cash and cash equivalents | $97.8 | $(32.1) | - On March 31, 2025, the company acquired Blackstone's Bistro software platform for $112.7 million, consisting of $102.7 million in Class A common stock and $10.0 million in cash, resulting in the recognition of $112.7 million in intangible assets[52][53] - Subsequent to the quarter end, the company completed acquisitions of Enfusion for ~$1.4 billion and Beacon for ~$550 million, financed by a new credit agreement for an $800 million term loan and a $200 million revolving facility[81][82][84] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses strong Q1 2025 performance, highlighting revenue growth from new clients and strategic acquisitions, positive trends in key operating metrics, and robust liquidity supported by a new $1 billion credit facility Overview and Recent Developments The company provides a cloud-native SaaS platform managing over $8.8 trillion in assets for 1,400+ clients and recently acquired Bistro, Enfusion, and Beacon to build a comprehensive front-to-back investment solution - The company's platform provides comprehensive accounting, data, and analytics for over $8.8 trillion of global invested assets for over 1,400 clients as of December 31, 2024[89] - The company maintains a high gross retention rate of at least 98% in 24 of the last 25 quarters and a Net Promoter Score (NPS) of 60+[89] - Recent strategic acquisitions include Blackstone's Bistro platform, Enfusion, and Beacon, aimed at creating a comprehensive, cloud-native front-to-back solution for the investment industry[94] Key Operating and Financial Metrics Key operating metrics show strong performance with Annualized Recurring Revenue growing 22.7% to $493.9 million, a Net Revenue Retention Rate of 114%, and Adjusted EBITDA increasing to $45.1 million with a 36% margin Key Operating Metrics | Metric | Q1 2025 | Q1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Annualized Recurring Revenue | $493.9 million | $402.3 million | +22.7% | | Gross Revenue Retention Rate | 98% | 99% | -1 ppt | | Net Revenue Retention Rate | 114% | 110% | +4 ppts | Adjusted EBITDA Reconciliation (in millions) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $6.9 | $2.2 | | Adjustments | $38.1 | $30.0 | | Adjusted EBITDA | $45.1 | $32.2 | | Adjusted EBITDA Margin | 36% | 31% | Results of Operations Q1 2025 revenue increased 24% to $126.9 million, driven by new clients and acquisitions, leading to a significant improvement in operating income to $7.1 million and over 200% growth in net income Revenue Analysis (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue (in millions) | $126.9 | $102.7 | $24.1 | 24% | - The 24% revenue increase was driven by $6.9 million from new clients, $2.4 million from the Wilshire Technology acquisition, and growth from existing clients, supported by a 13% increase in average assets on the platform and a 5.5% increase in the average basis point rate[124] Operating Expense Analysis (Q1 2025 vs Q1 2024, in millions) | Expense Category | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of Revenue | $33.9 | $28.2 | $5.7 | 20% | | Research & Development | $37.4 | $37.7 | $(0.3) | (1)% | | Sales & Marketing | $19.6 | $16.3 | $3.3 | 20% | | General & Administrative | $28.8 | $20.7 | $8.1 | 39% | - The 39% increase in General and Administrative expenses was primarily driven by a $6.5 million rise in outside services (legal, consulting, accounting) related to the Bistro, Enfusion, and Beacon acquisitions[129] Liquidity and Capital Resources As of March 31, 2025, the company maintained strong liquidity with $282.9 million in cash and investments, further bolstered by a new $1 billion credit facility secured post-quarter to finance recent acquisitions - As of March 31, 2025, the company held $275.2 million in cash and cash equivalents and $7.7 million in short-term investments[133] - In April 2025, the company secured a new credit agreement with an $800 million term loan and a $200 million revolving facility to fund the Bistro, Enfusion, and Beacon acquisitions[134] - Net cash from operating activities increased to $24.5 million in Q1 2025 from $10.0 million in Q1 2024, primarily due to higher net income and non-cash charges[136][137] Quantitative and Qualitative Disclosures About Market Risk The company identifies AUM market price risk and interest rate risk, particularly from a new $800 million term loan, as primary market exposures, while inflation is monitored but not currently material - AUM Market Price Risk: A significant portion of revenue is based on the value of assets on the platform ($8.8 trillion as of Dec 31, 2024), making fees susceptible to market fluctuations[147] - Interest Rate Risk: Following the new credit agreement in April 2025, which includes an $800 million term loan, a hypothetical 100 basis point (1%) increase in SOFR would increase annual interest expense by approximately $10 million[150] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[152] - No changes occurred in the internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[153] PART II Summary of Other Disclosures This section details other SEC disclosures, confirming no material legal proceedings or changes to risk factors, and reports the unregistered issuance of 3,833,333 Class A common shares for the Bistro acquisition - The company is not currently involved in any litigation or proceedings that are expected to have a material adverse effect on its business or financial condition[157] - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K[158] - On March 31, 2025, the company issued 3,833,333 shares of Class A common stock as part of the consideration for the Bistro acquisition in an unregistered sale[160]