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Clearwater Analytics Announces Second Quarter 2022 Financial Results

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Record Quarterly Revenue of $73.4 Million
Second Quarter Revenue Up 21% Year-Over-Year
14 Consecutive Quarters of 98% Gross Revenue Retention
Operating 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 (PRNewsfoto/Clearwater Analytics, LLC)
Clearwater Analytics (PRNewsfoto/Clearwater Analytics, LLC)

"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



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

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.

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




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



58




48


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



3




11


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



47




47


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




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


$

400,645



$

344,355


 

Clearwater Analytics Holdings, Inc.

Consolidated Statements of Operations

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




Three Months Ended
June 30,



Six Months Ended
June 30,




2022



2021



2022



2021


Revenue


$

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



3,100







3,100





Other (income) expense, net



(444)




(13)




(359)




65


Income (loss) before provision for income taxes



(1,932)




65




(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 Analytics
Holdings, 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



$

(0.01)



NMF