Clearwater Analytics (US:CWAN)2022-11-05 07:54Financial Data and Key Metrics Changes - Revenue for Q3 2022 reached $76.6 million, representing a 19% year-on-year growth and exceeding the upper end of revenue guidance by 2% [6][25] - Gross margin was reported at 74.8%, reflecting increased efficiency despite inflationary wage pressures [9][29] - Adjusted EBITDA was $18.8 million, translating to a 24.6% margin, an increase from $17.1 million in Q3 2021 [10][31] - Free cash flow generation was $12.8 million, maintaining a solid conversion rate of adjusted EBITDA to free cash flow at 68% [10][33] Business Line Data and Key Metrics Changes - Annualized recurring revenue (ARR) grew to $303.6 million, up 18.1% year-over-year, driven by strong new client acquisition [17][27] - Gross revenue retention remained consistent at 98% for the 15th consecutive quarter, indicating strong client loyalty [13][28] - The company launched a new pricing model, with 49% of ARR now under this model, expecting to reach 80% by year-end [11][38] Market Data and Key Metrics Changes - The company reported a decline in asset values on its platform due to market conditions, impacting ARR growth by 5% [17][28] - The demand environment for the company's platform remains robust, driven by clients' needs for risk management and compliance [8][19] Company Strategy and Development Direction - The strategic goal includes transitioning to a multiproduct company, with the introduction of Clearwater LPx for private funds [13][20] - The acquisition of JUMP Technology is expected to enhance the company's presence in Europe and expand its product offerings [14][15] - Continued investment in international markets and operational teams is planned to support growth [9][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate market headwinds and maintain growth, targeting a revenue range of $300 million to $302 million for the full year 2022 [35][91] - The management team highlighted the importance of transitioning clients to the new pricing model to mitigate future volatility [18][36] Other Important Information - The company hosted its Annual User Conference, which received positive feedback from clients regarding the platform's roadmap and future capabilities [21][59] - The workforce grew by approximately 20% year-to-date, reflecting the company's commitment to investing in its people [23] Q&A Session Summary Question: What percentage of clients are live on the new pricing model? - 49% of annualized recurring revenue is on the new model, with expectations to reach approximately 80% by year-end [38][39] Question: How does JUMP Technology enhance market penetration? - JUMP allows the company to offer integrated end-to-end solutions, particularly appealing to clients managing their own books [42][43] Question: What is the impact of market conditions on net revenue retention? - Net revenue retention was 103%, slightly down from the previous quarter, but management expects improvements as new pricing constructs take effect [18][76] Question: How is demand trending in Europe? - Europe has shown strong demand, with 15% of revenue now coming from international markets, and the company is optimistic about growth in this region [68][69] Question: What are the drivers behind new client acquisitions? - Clients are seeking efficiency, looking to manage costs, and needing better risk management solutions in a volatile market [84][86]