Clearwater Analytics Announces Second Quarter 2022 Financial Results

Record Quarterly Revenue of $73.4 MillionSecond Quarter Revenue Up 21% Year-Over-Year14 Consecutive Quarters of 98% Gross Revenue RetentionOperating Cash Flow Generation of $18.3 Million in the Quarter

BOISE, Idaho, Aug. 3, 2022 /PRNewswire/ — Clearwater Analytics Holdings, Inc. (NYSE: CWAN) (“Clearwater Analytics” or the “Company”), an industry-leading SaaS solution for automated investment data aggregation, reconciliation, accounting, and reporting, announced today its financial results for the quarter ended June 30, 2022.

“Clearwater Analytics posted another strong quarter and continues to grow by adding marquee new clients across the globe. For both new and existing clients, efficient operations and a deep understanding of investment risk and compliance are critical business functions that make Clearwater Analytics a mission-critical partner,” said Sandeep Sahai, Chief Executive Officer. “We continue to win clients and displace our competitors, reflecting the strength and value that our next-generation technology offers. Now more than ever, our clients rely on Clearwater Analytics to help them navigate through the ebbs and flows of market uncertainty with daily intelligence that informs their investments in new securities and strategies.”

Second Quarter 2022 Financial Results Summary

Revenue: Total revenue for the second quarter of 2022 reached $73.4 million, an increase of 20.6%, from $60.9 million in the second quarter of 2021.
Gross Profit: Gross profit for the second quarter of 2022 was $52.5 million, compared with $45.3 million in the second quarter of 2021. Non-GAAP gross profit for the second quarter of 2022 was $55.6 million, which equates to a 75.7% non-GAAP gross margin.
Net Income/(Loss): Net loss for the second quarter of 2022 was $2.2 million compared with net loss of $0.2 million in the second quarter of 2021. In the second quarter of 2022, the Company recorded a $3.1 million expense related to its Tax Receivable Agreement. Non-GAAP net income for the second quarter of 2022 increased by 119% to $13.3 million from $6.1 million in the second quarter of 2021.
Adjusted EBITDA: Adjusted EBITDA for the second quarter of 2022 was $19.1 million, compared with $17.4 million in the second quarter of 2021. Adjusted EBITDA margin for the second quarter of 2022 was 26.0% reflecting the Company’s ability to balance incremental investments in sales and marketing and research and development with earnings in the quarter.
Cash Flows: Operating cash flows for the second quarter were $18.3 million and free cash flows were $16.5 million reflecting an 87% conversion of Adjusted EBITDA to free cash flow.
Net Income/(Loss) Per Share and Non-GAAP Net Income Per Share attributable to Clearwater Analytics Holdings, Inc.: Net loss per basic and diluted share was $0.01 and non-GAAP net income per diluted share was $0.05 in the second quarter of 2022.
Cash: Cash, cash equivalents and short-term investments were $281.6 million as of June 30, 2022.

Second Quarter 2022 Key Metrics Summary

Annualized Recurring Revenue: As of June 30, 2022, annualized recurring revenue (“ARR”) reached $290.4 million, an increase of 18.5% from $245.0 million as of June 30, 2021.ARR is calculated at the end of a period by dividing the recurring revenue in the last month of such period by the number of days in the month and multiplying by 365.
Gross Revenue Retention Rate: As of June 30, 2022, the gross revenue retention rate was 98%. The Company has reported a gross revenue retention rate of 98% for fourteen consecutive quarters.Gross revenue retention rate represents annual contract value (“ACV”) at the beginning of the 12-month period ended on the reporting date less client attrition over the prior 12-month period, divided by ACV at the beginning of the 12-month period, expressed as a percentage. ACV is comprised of annualized recurring revenue plus contracted-not-billed revenue, which represents the estimated annual contracted revenue for new and existing client opportunities prior to revenue recognition.
Net Revenue Retention Rate: As of June 30, 2022, the net revenue retention rate was 104% which is a decline from 107% as of March 31, 2022. With the unusual market conditions of the equity markets and fixed income securities having both fallen in concert, the Company saw a 3% decline in the net revenue retention rate in the second quarter.Net revenue retention rate is the percentage of recurring revenue from clients on the platform for 12 months and includes changes from the addition, removal, or value of assets on our platform, contractual changes that have an impact to annualized recurring revenues and lost revenue from client attrition.

Recent Business Highlights

As another example of high growth businesses needing timely and accurate investment accounting, Sutton RE, a proven provider of specialized reinsurance solutions across the globe, selected Clearwater Analytics’ best-in-class technology to manage their operations across more than $29 billion assets under management spanning a diverse and complex portfolio of investments.
Clearwater Analytics added its first public pension fund client, the Public Employee Retirement System of Idaho (“PERSI”) which manages more than $23 billion in assets, to its SaaS platform to provide data aggregation and reporting for the 850 employer organizations and more than 170,000 individuals served in the State of Idaho by PERSI.
One of Asia’s leading non-life insurance brands, MSIG, with a presence in 50 countries and regions globally, selected Clearwater Analytics to support its transformation strategy. MSIG’s Asia headquarters along with its business units in Hong Kong, Malaysia and Thailand will standardize their operating model, and adopt Clearwater Analytics for a consolidated view of data, analytics, accounting, regulatory, and operational reporting.
Clearwater Analytics hosted its European Clearwater Connect conference in London. More than 100 current and prospective Clearwater Analytics users seized the opportunity to significantly enhance their knowledge of the world’s most comprehensive investment accounting solution.
Clearwater Analytics continues to receive industry recognition for its innovative investment accounting solution. In the second quarter of 2022, it was honored with the IASA Solution Provider of the Year award and the FTF News Award for best client reporting solution for the second consecutive year.

Third Quarter and Full-Year 2022 Guidance

Certain components of the guidance given above are provided on a non-GAAP basis only without providing a reconciliation to guidance provided on a GAAP basis. Information is presented in this manner, consistent with Securities and Exchange Commission (the “SEC”) rules, because the preparation of such a reconciliation could not be accomplished without “unreasonable efforts.” The Company does not have access to certain information that would be necessary to provide such a reconciliation, including non-recurring items that are not indicative of the Company’s ongoing operations. The Company does not believe that this information is likely to be significant to an assessment of the Company’s ongoing operations.

Third Quarter 2022

Full Year 2022

Revenue

$74.5 million to $75 million

$298 million to $300 million

Year-over-Year Growth %

~16%

~19%

Adjusted EBITDA

$19 million to $19.5 million

$79 million to $81 million

Conference Call Details

Clearwater Analytics will hold a conference call and webcast on August 3, 2022, at 5:00 p.m. Eastern time to discuss second quarter 2022 financial results, provide a general business update, and respond to analyst questions.

A live webcast of the call will also be available on the Company’s investor relations website. Please visit investors.clearwateranalytics.com at least fifteen minutes prior to the start of the event to register, download and install any necessary audio software.

If you are unable to participate live, a replay of the webcast will be available following the conference call on the Company’s investor relations website, along with the earnings press release, and related financial tables.

About Clearwater Analytics 

Clearwater Analytics is a global industry-leading SaaS solution for automated investment data aggregation, reconciliation, accounting, compliance, risk, performance, and reporting. Each day, the Clearwater solution reports on more than $5.9 trillion in assets for clients that include leading insurers, asset managers, corporations, pension plans, governments, and nonprofit organizations – helping them make the most of their investment portfolio data with a world-class product and client-centric servicing. Investment professionals around the globe trust Clearwater to deliver timely, validated investment data and analytics. Additional information about Clearwater can be found at clearwateranalytics.com, LinkedIn, and Twitter.

Use of non-GAAP Information

This press release contains certain non-GAAP measures, including non-GAAP gross profit, non-GAAP gross margin, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, non-GAAP net income per diluted share and free cash flow.

The non-GAAP measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. However, the Company believes that this non-GAAP information is useful as an additional means for investors to evaluate its operating performance, when reviewed in conjunction with its GAAP financial statements. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP, and because these amounts are not determined in accordance with GAAP, they should not be used exclusively in evaluating the Company’s business and operations. In addition, undue reliance should not be placed upon non-GAAP or operating information because this information is neither standardized across companies nor subjected to the same control activities and audit procedures that produce the Company’s GAAP financial results.

The Company’s non-GAAP statement of operations measures, including non-GAAP gross profit, non-GAAP gross margin, adjusted EBITDA, adjusted EBITDA margin, non-GAAP net income, non-GAAP net income per diluted share and free cash flow, are adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items that management believes are not indicative of its ongoing operations. These adjusted measures exclude the impact of share-based compensation and eliminate potential differences in results of operations between periods caused by factors such as financing and capital structures, taxation positions or regimes, restructuring, impairment and other charges. Please refer to the reconciliations of these measures below to what the Company believes are the most directly comparable measures evaluated in accordance with GAAP.

Use of Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include information concerning the Company’s possible or assumed future results of operations, business strategies, technology developments, financing and investment plans, dividend policy, competitive position, industry, economic and regulatory environment, potential growth opportunities and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” or similar expressions and the negatives of those terms, but are not the exclusive means of identifying such statements.

Forward-looking statements involve known and unknown risks, uncertainties, and other factors, many of which are beyond Clearwater Analytics’ control, that may cause the Company’s actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties may cause actual results to differ materially from Clearwater Analytics’ current expectations and include, but are not limited to, the Company’s ability to keep pace with rapid technological change and competitors in its industry, the possibility that market volatility, a downturn in economic conditions or other factors may cause negative trends or fluctuations in the value of the assets on the Company’s platform, the Company’s ability to manage growth, the Company’s ability to attract and retain skilled employees, the possibility that the Company’s solutions fail to perform properly, disruptions and failures in the Company’s and third parties’ computer equipment, cloud-based services, electronic delivery systems, networks and telecommunications systems and infrastructure, the failure to protect the Company, its customers’ and/or its vendors’ confidential information and/or intellectual property, claims of infringement of others’ intellectual property, factors related to the Company’s ownership structure and status as a “controlled company” as well as other risks and uncertainties detailed in Clearwater Analytics’ periodic public filings with the SEC, including but not limited to those discussed under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed on March 16, 2022, and in other periodic reports filed by Clearwater Analytics with the SEC. These filings are available at www.sec.gov and on Clearwater Analytics’ website.

Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements represent management’s beliefs and assumptions only as of the date of this press release and should not be relied upon as representing Clearwater Analytics’ expectations or beliefs as of any date subsequent to the time they are made. Clearwater Analytics does not undertake to and specifically declines any obligation to update any forward-looking statements that may be made from time to time by or on behalf of Clearwater Analytics.

Clearwater Analytics Holdings, Inc.

Consolidated Balance Sheets

(In thousands, except share amounts and per share amounts, unaudited)

June 30

December 31

2022

2021

Assets

Current assets:

Cash and cash equivalents

278,646

254,597

Short-term investments

3,000

—

Accounts receivable, net

55,593

50,190

Prepaid expenses and other current assets

17,223

16,551

Total current assets

354,462

321,338

Property and equipment, net

12,613

10,738

Operating lease right-of-use assets, net

21,583

Deferred contract costs, non-current

5,572

5,687

Debt issuance costs – line of credit

826

922

Other non-current assets

5,589

5,670

Total assets

400,645

344,355

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

891

1,416

Accrued expenses and other current liabilities

20,916

27,032

Notes payable, current portion

2,750

Operating lease liability, current portion

5,185

Total current liabilities

29,742

31,198

Notes payable, less current maturities and unamortized debt issuance costs

49,824

51,157

Operating lease liability, less current portion

17,789

Tax receivable agreement liability

3,100

Other long-term liabilities

965

132

Total liabilities

101,420

82,487

Stockholders’ Equity

Class A common stock, par value $0.001 per share; 1,500,000,000 shares authorized, 57,660,081 shares issued and outstanding as of June 30, 2022, 47,948,888 shares issued and outstanding as of December 31, 2021

Class B common stock, par value $0.001 per share; 500,000,000 shares authorized, 2,696,785 shares issued and outstanding as of June 30, 2022, 11,151,110 shares issued and outstanding as of December 31, 2021

Class C common stock, par value $0.001 per share; 500,000,000 shares authorized, 47,377,587 shares issued and outstanding at June 30, 2022 and December 31, 2021

Class D common stock, par value $0.001 per share; 500,000,000 shares authorized, 130,083,755 shares issued and outstanding at June 30, 2022 and December 31, 2021

130

Additional paid-in-capital

420,123

388,591

Accumulated other comprehensive loss

(1,012)

(34)

Accumulated Deficit

(183,198)

(191,926)

Total stockholders’ equity attributable to Clearwater Analytics Holdings, Inc.

236,151

196,867

Noncontrolling interests

63,074

65,001

Total stockholders’ equity

299,225

261,868

Total liabilities and Stockholders’ Equity

Consolidated Statements of Operations

Three Months EndedJune 30,

Six Months EndedJune 30,

73,409

60,876

144,187

117,770

Cost of revenue(2)

20,919

15,576

42,091

29,898

Gross profit

52,490

45,300

102,096

87,872

Operating expenses:

Research and development(2)

22,836

16,740

44,130

32,576

Sales and marketing(2)

13,074

8,814

25,067

16,025

General and administrative(2)

15,453

11,184

30,493

18,727

Total operating expenses

51,363

36,738

99,690

67,328

Income from operations

1,127

8,562

2,406

20,544

Interest expense, net

403

8,510

832

16,959

Tax receivable agreement expense

Other (income) expense, net

(444)

(13)

(359)

Income (loss) before provision for income taxes

(1,932)

(1,167)

3,520

Provision for income taxes

298

276

535

320

Net income (loss)

(2,230)

(211)

(1,702)

3,200

Less: Net income attributable to noncontrolling interests

198

329

Net loss attributable to Clearwater AnalyticsHoldings, Inc.

(2,428)

(2,031)

Net loss per share attributable to Class A and Class D common stock(1):

Basic and diluted

(0.01)

NMF

Weighted average shares of Class A and Class D common stockoutstanding:

Basic

185,781,262

182,085,548

Diluted

237,545,574

237,213,366

NMF – not meaningful

(1) Basic and diluted net income per share of Class A and Class D common stock is applicable only for the periods after the IPO and related transactions.

(2) Amounts include equity-based compensation as follows:

Cost of revenue

2,376

749

4,687

1,272

Research and development

4,565

2,034

8,870

3,686

Sales and marketing

3,215

1,295

6,511

2,127

General and administrative

6,035

2,613

11,999

4,471

Total equity-based compensation expense

16,191

6,691

32,067

11,556

Consolidated Statements of Cash Flows

(In thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

OPERATING ACTIVITIES

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

1,159

735

2,118

1,412

Noncash operating lease cost

1,794

3,334

Equity-based compensation

Change in tax receivable liability

Amortization of deferred contract acquisition costs

1,103

784

2,067

1,511

Amortization of debt issuance costs, included in interest expense

504

138

974

Deferred tax benefit

(508)

(484)

Changes in operating assets and liabilities:

(2,414)

(3,599)

(5,403)

(12,193)

Prepaid expenses and other assets

1,169

(963)

(11,433)

Deferred commissions

(1,304)

(886)

(2,115)

(1,245)

(76)

626

(421)

Accrued expenses and other liabilities

192

3,714

(7,130)

(4,805)

Accrued sales tax liability

(5,379)

(457)

Net cash provided by (used in) operating activities

18,253

2,016

25,167

(16,352)

INVESTING ACTIVITIES

Purchases of property and equipment

(1,742)

(921)

(3,968)

(2,231)

Purchase of available-for-sale investments

(3,000)

Net cash used in investing activities

(4,742)

(6,968)

FINANCING ACTIVITIES

Proceeds from issuance of common units

1,560

Proceeds from exercise of options

771

251

6,384

Minimum tax withholding paid on behalf of employees for net unit settlement

(587)

Repurchase of common units

(626)

Repayments of borrowings

(688)

(770)

(1,375)

(1,539)

Proceeds from employee stock purchase plan

2,401

Payment of costs associated with the IPO

(400)

(214)

Net cash provided by (used in) financing activities

2,484

(919)

7,196

(1,341)

Effect of exchange rate changes on cash and cash equivalents

(1,023)

(83)

(1,346)

(133)

Net change in cash and cash equivalents during the period

14,972

24,049

(20,057)

Cash and cash equivalents, beginning of period

263,674

40,938

61,088

Cash and cash equivalents, end of period

41,031

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest

347

7,907

615

15,769

Cash paid for income taxes

115

486

NON-CASH INVESTING AND FINANCING ACTIVITES

Direct costs incurred with the IPO included in other assets and accrued expenses

1,172

Tax distributions to unitholders included in accrued expenses

976

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(3)

(0)

Adjustments:

Other expenses(1)

451

1,682

19,074

17,407

100

(1)

Tax receivable agreement

1,522

2,394

37,937

35,521

(1) Other expenses includes management fees to our investors, income taxes, foreign exchange gains and losses and other expenses that are not reflective of our core operating performance including the costs to set up our Up-C structure and Tax Receivable Agreement.

Up-C structure expenses

926

158

Management fees and reimbursed expenses

597

493

1,188

1,083

Provision for income tax expense

Miscellaneous

Total other expenses

Reconciliation of Free Cash Flow

Less: Purchases of property and equipment

1,742

921

3,968

2,231

Free Cash Flow

16,511

1,095

21,199

(18,583)

Reconciliation of Non-GAAP Information

728

404

1,334

Gross profit, non-GAAP

55,594

46,453

108,117

89,915

As a percentage of revenue, non-GAAP

Cost of Revenue

Cost of revenue, non-GAAP

17,815

14,423

36,070

27,855

258

217

482

422

Research and development, non-GAAP

18,013

14,489

34,778

28,468

120

Sales and marketing, non-GAAP

9,793

7,456

18,424

13,778

107

170

General and administrative, non-GAAP

8,714

7,101

16,978

12,148

Income from operations, non-GAAP

Tax impacts of adjustments to net income(1)

(5,543)

(2,584)

(10,865)

(5,364)

Net income, non-GAAP

13,274

6,050

26,064

12,813

Net income per share(2) – basic, non-GAAP

0.07

0.14

Net income per share(2) – diluted, non-GAAP

0.05

0.10

Weighted-average common shares outstanding – basic

Weighted-average common shares outstanding – diluted

254,338,870

253,780,420

(1) The estimated non-GAAP effective tax rate was 29% for the three and six months ended June 30, 2022 and has been used to adjust the provision for income taxes for non-GAAP net income and non-GAAP basic and diluted net income per share.

(2) Basic and diluted net income per share of Class A and Class D common stock is applicable only for the periods after the IPO and related transactions.

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SOURCE Clearwater Analytics, LLC

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