Clearwater Analytics (US:CWAN)2025-11-05 23:00Financial Data and Key Metrics Changes - The company reported Q3 2025 revenues of $205.1 million, representing a 77% year-over-year growth, with annual recurring revenue (ARR) reaching $807.5 million, also up 77% year-over-year [5][31] - Adjusted EBITDA for Q3 was $70.7 million, up from $58.3 million in Q2, with an EBITDA margin of 34.5%, an increase from 32.1% in Q2 [5][41] - Gross revenue retention (GRR) for the combined company was 98%, indicating strong client retention [7][33] Business Line Data and Key Metrics Changes - Core Clearwater business grew approximately 21% year-to-date compared to last year, while Infusion is expected to grow 12% for the year [12][17] - The integrated business achieved gross margins of 78.5%, with steady state clients reaching 82% gross margin in Q3 [7][40] - The company noted a 70% year-over-year increase in bookings for core cross-sell modules, including LPX, MLX, and Prism [36][98] Market Data and Key Metrics Changes - The total addressable market (TAM) has grown to approximately $23 billion, with significant opportunities across various geographies and markets [10][11] - The hedge fund market showed strong performance, contributing to revenue upside, with a balanced growth across North America, Europe, and Asia [14][51] - The company signed a global multibillion hedge fund client, indicating strong demand in the hedge fund sector [14][51] Company Strategy and Development Direction - The company aims to build an integrated, open, modular, and extensible platform to disrupt the industry and enhance operational efficiency for clients [22][29] - Generative AI is seen as a key technological advancement, with the company leveraging it to improve gross margins and operational processes [23][28] - The strategic acquisitions of Infusion, Beacon, and Bistro are expected to enhance the company's market position and cross-selling capabilities [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory, citing a strong pipeline and increased client engagement [45][46] - The company anticipates continued growth in the core Clearwater business and expects to see acceleration in ARR in Q4 2025 [59][78] - Management highlighted the importance of aligning pricing with value for clients, particularly in the context of the new commercial model for Infusion [66][68] Other Important Information - The company has made significant progress in integrating the acquired businesses, with a focus on enhancing product offerings and client solutions [30][102] - The company is actively working on a new pricing model for Infusion, expected to roll out for new clients starting January 1, 2026 [66][68] - The company reported a strong pipeline for cross-selling opportunities, particularly in risk and alternative assets [36][91] Q&A Session Summary Question: Can you provide an update on market segments showing strength? - Management noted that alternatives and risk offerings are driving significant growth, with a 70% year-over-year increase in bookings for core cross-sell modules [49][51] Question: How does the ARR growth of 17% reconcile with core business momentum? - Management explained that larger deals create lumpiness in ARR, but they expect acceleration in Q4 [53][59] Question: What is the expected timing for the new pricing model for Infusion? - The new pricing model is set to roll out for new clients starting January 1, 2026, with existing clients to follow [66][68] Question: How is the integration of the VKB deal progressing? - Integration is on track, with expectations to go live by mid-next year [102] Question: How much of new bookings is driven by alternative assets? - Alternative assets now account for over 35% of bookings, up from 24-25% previously [107]