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Clearwater Analytics (CWAN) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q4 2022 was $82.7 million, and full-year revenue was $303.4 million, representing a year-over-year growth of 20.4% [78][99] - Gross revenue retention remained at 98% for the 16th consecutive quarter, while net revenue retention increased to 106% [88][8] - Gross profit for Q4 was $62.6 million, with a gross margin of 75.7% [38][88] - EBITDA for the full year 2022 was $81.1 million, with a Q4 EBITDA margin of 29.4% [104][88] - Annualized recurring revenue (ARR) at the end of December 2022 was $323.5 million, including $6.4 million from the JUMP acquisition [92] Business Line Data and Key Metrics Changes - The insurance vertical accounted for 52% of ARR, asset management for 33%, and corporates/government for 15% as of December 31, 2022 [92] - The JUMP acquisition is expected to enhance the total addressable market (TAM) by $1 billion, allowing for the delivery of front office systems [89] Market Data and Key Metrics Changes - Clearwater's platform processes and reports on $6.4 trillion in assets daily, an increase from $5.9 trillion at the end of 2021 [92] - The company is onboarding clients in various international markets, including Singapore, Thailand, Hong Kong, Australia, Japan, France, the UK, and the Netherlands [38] Company Strategy and Development Direction - The company focuses on a client-centric approach, aiming for consistent, reliable, and durable growth [4] - Clearwater plans to continue investing in R&D, allocating 25% of revenue in 2022 and maintaining this level in 2023 [34] - The transition to a base plus pricing model is a key strategy, with 100% of new clients with contracts over $500,000 adopting this model [37][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in 2023 guidance, expecting revenue growth of 19% to 20% [95][99] - The company remains vigilant regarding economic conditions and plans to align headcount growth with new business growth [95] - Management noted that the demand for Clearwater's solutions remains strong, particularly in the face of regulatory challenges [100] Other Important Information - The JUMP acquisition closed in November 2022, and the integration is expected to enhance Clearwater's offerings [6][89] - The company incurred $5.9 million in Tax Receivable Agreement expenses in Q4 2022 [39] Q&A Session Summary Question: What is driving the confidence in ARR growth? - Management highlighted strong bookings in Q4 and a focus on bookings as a leading indicator for future revenue [13][42] Question: Are there expectations for growth in specific verticals for 2023? - Management indicated that they are gaining share across all verticals, with a particular focus on asset management due to its larger TAM [20][50] Question: Can you elaborate on the due diligence process for potential acquisitions? - Management stated they are open to acquisitions that enhance geographic expansion or add value to current clients, emphasizing a high bar for any future deals [56][66] Question: What trends are being observed in the top of the funnel and conversion pace? - Management noted a strong funnel and continued interest from large clients, with a positive outlook for conversions [30][61] Question: How is the transition to the base plus model impacting NRR? - Management clarified that while the base plus model stabilizes revenue, the focus remains on increasing product adoption to drive NRR higher [12][112]