Clearwater Analytics Announces Third Quarter 2022 Financial Results

Record Quarterly Revenue of $76.6 Million
Third Quarter Revenue Up 19% Year-Over-Year, Up 4.3% Sequentially Over Q2
15 Consecutive Quarters of 98% Gross Revenue Retention

BOISE, Idaho, Nov. 2, 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 September 30, 2022.

"Clearwater delivered a strong quarter as we won large and global organizations such as Nationwide Mutual Insurance Company, Continental General, Chandler Asset Management, and Bronte Capital, achieving our mission to expand into new geographies and adjacent markets. Through the pending acquisition of JUMP Technology in France, we will diversify our product portfolio while expanding our software to be an end-to-end investment lifecycle and achieving immediate scale in Europe," said Sandeep Sahai, Chief Executive Officer. "We're proud of the momentum we've maintained in Q3 which we believe is due to our high customer satisfaction and focused go-to-market activities. As companies around the globe tighten their belts, they have astutely determined that Clearwater is the smart choice for their required productivity. With many of the world's largest organizations making strategic investments in their future with Clearwater, we are honored by their partnership and look forward to helping them grow and thrive."

• Revenue: Total revenue for the third quarter of 2022 reached $76.6 million, an increase of 19%, from $64.5 million in the third quarter of 2021.
• Gross Profit: Gross profit for the third quarter of 2022 was $53.8 million, compared with $46.7 million in the third quarter of 2021. Non-GAAP gross profit for the third quarter of 2022 was $57.3 million, which equates to a 74.8% non-GAAP gross margin.
• Net Income/(Loss): Net loss for the third quarter of 2022 was $3.0 million compared with net loss of $11.4 million in the third quarter of 2021. In the third quarter of 2022, the Company recorded a $2.6 million expense related to its Tax Receivable Agreement and $1.3 million in transaction expenses related to the JUMP Technology acquisition. Net loss in the third quarter of 2021 included a $10.3 million loss on debt extinguishment. Non-GAAP net income for the third quarter of 2022 increased by 59% to $13.8 million from $8.7 million in the third quarter of 2021.
• Adjusted EBITDA: Adjusted EBITDA for the third quarter of 2022 was $18.8 million, compared with $17.1 million in the third quarter of 2021. Adjusted EBITDA margin for the third quarter of 2022 was 24.6%.
• Cash Flows: Operating cash flows for the third quarter were $14.7 million and free cash flows were $12.8 million reflecting a 68% 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 share was $0.02, and net loss per diluted share was $0.01 in the third quarter of 2022. Non-GAAP net income per basic share was $0.07, and non-GAAP net income per diluted share was $0.06 in the third quarter of 2022.
• Cash: Cash, cash equivalents and short-term investments were $291.5 million as of September 30, 2022.

• Annualized Recurring Revenue: As of September 30, 2022, annualized recurring revenue ("ARR") reached $303.6 million, an increase of 18.1% from $257.0 million as of September 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 September 30, 2022, the gross revenue retention rate was 98%. The Company has reported a gross revenue retention rate of 98% for fifteen 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 September30, 2022, the net revenue retention rate was 103%, a decline from 104% as of June 30, 2022. The new pricing construct discussed on our August 3, 2022 earnings call has started to bear fruit and has partially offset ARR decreases in the third quarter of 2022.
  
  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.

• Clearwater Analytics announced that it had entered into an agreement to acquire Paris, France-based JUMP Technology. The transaction will vastly expand Clearwater Analytics' total addressable market in investment management with a complete front-to-back solution. JUMP Technology's solutions are expected to benefit existing Clearwater customers, provide cross-sell opportunities in both the insurance and asset management markets, and expand the Company's reach across Europe. Clearwater expects the acquisition to close in the fourth quarter of 2022.
• Clearwater Analytics continued strong growth momentum across new markets and geographies. In the third quarter, we added marquee clients such as Nationwide Mutual Insurance Company, Altos Labs, Inc., Chandler Asset Management, Inc., Continental General Insurance Company, FAI Capital Management, Inc., The Bank of Nevis Limited, and Sonatus, Inc., as well as expanded our footprint within existing clients.
• Chimera Investment Corporation, an internally managed real estate investment trust (REIT) headquartered in New York City and publicly traded on the NYSE, is now live with Clearwater to provide investment data transparency while supporting sophisticated accounting requirements.
• INTÉRIALE Mutual, a leading French insurer, is live with Clearwater Analytics as its investment accounting and reporting service provider.
• Bronte Capital, a Sydney-based, global long/short fund manager, selected Clearwater to power its investment data management, reporting, and portfolio analytics.
• Clearwater Analytics hosted its Clearwater Connect conference in Boise, Idaho in September. More than 500 current and prospective Clearwater Analytics users learned about the Company's award-winning platform and explored the future of investment operations. Clearwater Connect attendees got a first look at the newest features and capabilities of the Clearwater platform and learned how these innovative technologies can be used to significantly boost business productivity and growth opportunities.
• In the third quarter of 2022, Clearwater Analytics announced the appointments of Lisa Jones, an asset management veteran and Head of the Americas, President, and CEO of Amundi US, Inc., and Jaswinder Pal Singh, a Princeton Computer Science Professor and SaaS tech pioneer, to its Board of Directors.
• In the third quarter of 2022, Captive Review named Clearwater Analytics the winner of the 2022 US Captive Review Awards in the Software Solution category.
• To offer additional insight into how insurance companies manage their assets, Clearwater Analytics, in collaboration with The Insurance Asset Outsourcing Exchange, announced the publication of the 2022 Insurance Investment Outsourcing Report. This ninth annual report found continued substantial growth in insurance companies' use of third-party investment management solutions.

Revenue guidance for the fourth quarter of 2022 and full year 2022 assumes, based on management's estimates, approximately $1 million in revenue from JUMP Technology post-acquisition, which is dependent on the timing of closing such acquisition.

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.

Clearwater Analytics will hold a conference call and webcast on November 2, 2022, at 5:00 p.m. Eastern time to discuss third 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.

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.

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. 

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, risk factors related to the Company's acquisition of JUMP Technology, including the Company's ability to (i) complete the acquisition of JUMP Technology on the Company's expected timing or at all, (ii) successfully integrate the operations and technology of JUMP Technology with those of the Company, and (iii) retain the management and employees or clients of JUMP Technology, 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.