Clearwater Analytics Holdings Inc (CWAN) 2024 Q1 法說會逐字稿

Thank you and welcome, everyone, to Clearwater Analytics first-quarter 2024 financial results conference call. Joining me on the call today are Sandeep Sahai, Chief Executive Officer; and Jim Cox, Chief Financial Officer. (Operator Instructions) I'd like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Questions of future goals, intentions, and expectations, including in relation to business outlook, future financial performance and similar items, including without limitations, expressions using the terminology may, will, and expect, and believe, and expressions which reflect something other than historical facts are intended to identify forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our filings with the SEC. Actual results may differ materially from any forward-looking statement. Company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law for more mission, please refer to the cautionary statement included in our earnings press release.

Lastly, all metrics discussed on this call are presented on a non-GAAP or adjusted basis, unless otherwise noted. A reconciliation to GAAP results can be found in the earnings press release that we have posted to our Investor Relations website. With that, I'll turn the call over to our Chief Executive Officer. Sandeep.

So I thank you, Jill, and thank you all for joining us. Building a durable business that grows consistently while improving gross margin, EBITDA and cash flow has always been our stated endeavor. I'm pleased to report that Q1 2020 for denim bottom, all those goals, revenue grew 21% year over year to $102.7 million in the quarter, and our EBITDA grew 42.9% year over year to $32.2 million or 31.3% of our revenue less discuss revenue growth, which was purely organic in some more detail, it starts with NPS. We believe our NPS scores are industry leading and we have taken to reporting it as 60 plus because the numbers are even higher. As a direct consequence, we had incredibly low churn and gross revenue retention grew from an already outstanding 98% to an incredible 99%.

Next, the revenue growth was widespread across geographies. North America grew 20%, and Europe and Asia grew faster to deliver the aggregate 21% growth ARR growth year-on-year reaccelerated to 19.3%. The multiproduct journey continues to gather momentum and new products introduced over the last two quarters delivered solid wins contributing to an NRR of 110 for the quarter. The Clearwater job platform had a very strong quarter and added six significant clients in the quarter. Finally, our win rate continues to be 80% when the proposal is written and stands testimony to the disruptive power of our platform. Our plan for sustained growth is founded on two strategic pillars. Number one, continued acquisition of new logos across an increasing breadth of industries and geographies, and number two, growing NRR to 115. Let's take some actual wins in Q1 to substantiate the progress we are making. We welcomed a publicly traded healthcare company with multiple subsidiaries and $40 billion in AUM to the three, what a community this quarter. The decision to transition to us came after growing frustration with the previous legacy technology provider and on-site depot, followed by an RFP process, demonstrated our ability to comprehensively address multiple asset classes on a single instance multitenant platform. Several reference calls that attested to our ability to onboard efficiently and provide exceptional service, sealed the deal, our ever-growing solutions for alternatives continues to help us win deals and do more with current clients. We continue to see growth in these assets on our platform, a newly introduced innovation, the Clearwater intelligence console or quick LBS solution, our generated EIB. solution for LPs. It's about delivering investment insights to our clients. On-demand institutional investors can leverage quick LTX, easily extract actionable insights from accounting data and performance metrics, even translating General Partner documentation into 96 different languages.

Let's discuss a recent win driven by our capabilities in alternatives. One of our clients have been growing very rapidly where the complexity and size of the operations outpaced their ability to manage investment operations. Effectively an acquisition added a significant number of LPs to the portfolio and they relied on a legacy platform for its processing to get a comprehensive picture of the portfolio, they would have had to build a brand new data warehouse, a detailed demonstration of our platform showcased how Clearwater could streamline their processes for all asset classes into one single-instance multi-tenant platform, they decided to adopt Clearwater, LTX and Clearwater LPS strategy. In addition to the Clearwater core platform they had already been using. We have discussed Prism many times before. This product has become a real winner for us across geographies and market sector. We signed US asset management part of Erste Group Bank AG, one of the leading asset managers in Central and Eastern Europe, managing EUR70 billion in assets for a broad client base, including pension plan, the join our fast-growing community of European buy-side clients. This win demonstrates Clearwater prisms uniqueness and its ability to deliver a comprehensive view of their clients' portfolio, attracting asset flows that are so vital for asset managers in this challenging market.

Talking about international markets, we signed new contracts in A-Pac, Germany, France and the UK all in the same quarter. We feel really good the new leadership we announced last quarter is already adding value. We have identified new pockets of applicability for our platform, and I'm excited about the buildup of our pipeline. I'd like to talk about Clearwater for stable value funds. In Q1, we proudly announced that T. Rowe Price selected that platform to support the firm's growing Stable Value Fund with the core platform already addressed a vast majority of the need for the purpose. Built addition for that market allowed us to address the complex needs of stable value funds, streamlining critical processes for investment contract issuers and other third-party Stable Value fund providers will benefit from a unified SaaS solution that offers daily reconciled investment data to both front and back office teams.

Following up on that when we now have another significant client on this platform, we also introduced Clearwater for pooled funds this quarter featured Quip, state treasuries and the pool participants with a user-friendly web based portal that integrates seamlessly with what is accounting and reporting platform. Again, a vast majority of that need was already addressed, but we have added a purpose-built solution to address the specific needs already regarded as a best in class investment accounting platform for state treasurers offices and new participant portal simplifies navigation of local government investment pools, providing participant portal logins and staple preparation all within one place. One of Clearwater job platform wins is a company based in France and Luxembourg that manages assets, including equity, fixed income and private debt prior to partnering with us, they lacked full functional coverage for front middle and back-office operations and depended on extensive manual processes. Clearwater job closes these gaps by enhancing data accuracy, reducing manual processes through automation and providing regulatory compliance. Another client specializing in funds and wealth management, primarily in equity and fixed income, embrace Clearwater jump as its end-to-end asset management platform and the seamless coverage it provides across their front, middle and back office investment operations. This new client will use Clearwater to connect seamlessly with all its counterparties, leveraging critical market data and optimizing trading processes, our newest corporate cash clients, one of the world's largest pharmaceutical companies and listed our expertise to oversee the rapidly expanding separately managed account program as their investment operations have grown to include multiple asset managers, custodians and money market fund portal partnerships. They now depend on the Clearwater platform for streamlined operations and a consolidated view of the portfolio. We trust that these examples illustrate the very meaningful progress we are making on both the acquisition of new logos across an ever, increasing number of industries and geographies. And secondly, in our continued journey towards becoming a multiproduct company that can deliver a sustained NRR of 115 and beyond.

Switching gears, let me discuss progress on the addition of capabilities that will allow us to address more of the technology spend across the investment management lifecycle and not just investment accounting. We started with the acquisition of JO and the Clearwater job platform is doing well and resonating with our clients in precisely the way we thought it would be one, six clients this quarter and are now able to offer solutions for the front, middle and back this quarter, we were thrilled to announce we completed the acquisition of the risk performance and analytics platforms of Essure advice, Wilshire, Adshel, Wilshire, Atlas Wilshire, Abacus and Wilshire. I composite will now be integrated with Clearwater solution in the risk and performance space to create a powerful and compelling product for our clients. We are integrating these new capabilities into our risk and performance analytics platform, enhancing our capabilities manyfold, we can now offer our clients significantly enhanced capabilities that would have taken us years to develop in-house risk and performance model need to establish credibility by extensive use. It often takes years or even decades to achieve that. Simply put, this acquisition allows us to capture additional TAM immediately and scale the business. Our clients will benefit from a comprehensive suite of modular tools for portfolio construction, quantitative performance, attribution, risk analysis, stress-testing and portfolio analytics, all using the same underlying data from the core three were applied. Our vision is to create the preeminent investment management platform performance around the world and by partnering with Wilshire and bringing their robust time-tested models into our platform. We are one step closer to that vision. With the jump and Wilshire acquisitions, we are building people, technology and market leadership to establish Clearwater as the definitive enterprise platform for the entire investment management process.

Shifting to unit economics, we are very pleased to report that we have achieved this revenue growth while simultaneously increasing our gross margin to a new record high for the Company. At 78% are generated via programs have started to positively impact our ability to deflect customer inquiries and enable our client servicing teams to deliver faster and more comprehensive response we feel very confident about our march towards our stated long-term goal of achieving 80% gross margin perhaps meaningfully faster.

Thank you for your continued support, and we look forward to sharing more about our product offerings and the latest innovations at Clearwater Connect in London on June 19th, a great event where we expect hundreds of institutional investors will gather to learn about new technologies and solutions that can help grow their business. With that, let me turn it over to Jim to review our financial results in more detail.

Thanks, Sandeep, and thank you all for joining us and delighted to report that 2024 is off to a great start with exceptional results in Q1 across various key metrics in the first quarter we decisively beat guidance for revenue by 2.2 million and adjusted EBITDA by $3.4 million. Our organic revenue growth reaccelerated to 21.4% over Q1 of 2023. Revenue in the quarter was helped by incredibly low churn, resulting in a best ever reported gross retention rate of 99%. In addition to limited churn. We also expanded our relationships with our existing clients through sell of products, increasing our share of our clients' investment books on Clearwater and growth in our clients' AUM. When you put that together, it result in net revenue retention of 110% and solid revenue growth. The impressive improvement in both net revenue, retention rate and gross retention rate is reflective of our market leading competitive position. Our single instance multitenant product was stronger than ever in the first quarter versus legacy tech incumbents. Strong revenue results flowed through to both gross margin and adjusted EBITDA, we achieved adjusted gross margin of 78% and an adjusted EBITDA margin of 31.3%, which is a stunning increase of 470 basis points from the first quarter of 2023. The unit economics of the single instance multitenant platform are simply phenomenal when you compare the EBITDA growth over the last year to the growth in revenue. The marginal EBITDA expansion is 53% over a year. And during that time, we increased research and development spend by 13% so we are investing more in developing new products and generated more than 50% of EBITDA for every incremental dollar of revenue with profitability. Characteristics like that, investors can have high confidence in our long-term EBITDA targets of 40%. It was also satisfying to see tangible progress on our path to NRR. one and safety with our net revenue retention rate increasing to 110% as of March 31st, 2024. I want to remind investors that we expect our NRR. one 15 plan to progress directionally upwards in future quarters, but not necessarily in a linear fashion.

The first quarter continued to show good signs of progress in upselling, and we believe that the positive momentum in upselling should continue to increase beginning in the second half of this year as we roll out new products and modules developed by the more than 60% of R&D capacity we are focusing on these growth initiatives. In addition, jump progressed nicely in Q1 with the key booking wins, as Sandeep mentioned, jump has proven to be a good proof point as our first ever acquisition. And we continue to explore tuck-in acquisitions like John and Wilshire platform that can allow us to harness strategic functionalities adjacent to our core strength and bring those functionalities to market more quickly for our clients. As of March 31st, 2024, ARR increased to $402.3 million, representing a reaccelerated year-over-year increase of 19.3% from the prior year's $337.4 million. This year-over-year growth is purely organic. Furthermore, ARR grew sequentially by $23.2 million our highest ever sequential quarterly growth in ARR.

Now let's turn to profitability results on the heels of BLOCKBUSTER results in margin expansion throughout 2023, we made further tangible progress on our margin expansion path in the first quarter of 2024. This displays the power of our profitable unit economics and shows the true leverage of our business and the clear pathway towards our long-term adjusted EBITDA margin goal of 40%. In Q1, we achieved gross profit of $80.2 million and 78% gross margin, an increase of 210 basis points over Q1 of 2023. This result demonstrates that we are progressing quite nicely towards our long-term gross margin goal of 80%. In addition, we reported $32.2 million in adjusted EBITDA and 31.3% adjusted EBITDA margin in the first quarter, which handily beat our EBITDA guidance expectations and improve over the prior year's EBITDA margin by 470 basis points in line with prior quarters. The outperformance in our revenue flowed straight through to EBITDA, having already achieved our EBITDA margin full year guidance target of 31% in the first quarter. We expect to moderate the EBITDA margin expansion in the second quarter of 2024 to prudently reinvest some of that excess profitability back into our growth initiatives in R & D, including the integration of the acquisition of the Wilshire platform, which recently closed on April 25th, additionally, we will continue to lean heavily into the investments in international go-to-market activity. They are producing results and we see an addressable market that is right for the same disruption. We've been able to achieve in North America. As we have indicated in the prior quarter's earnings call, R&D spend as a percent of revenue will continue to moderate over time since we have already completed our migration to the public cloud last year. In Q1, R&D dollar expense was up 13%, but as a percentage of revenue, it decreased 24.9%, which was 190 basis points lower than Q1 2023. In Q1, equity-based compensation was $28.5 million, a decrease of 4 million from Q1 of 2023. As we noted in our Investor Day presentation in September 2023, the high watermark of equity-based compensation as a percentage of revenue is behind us going forward in future years, including 2020 for this percentage should continue to trend down, lower equity-based compensation expense as well as lower income tax and tax receivable agreement expense in the first quarter contributed to GAAP net income being positive in the first quarter.

Let's turn to the balance sheet and cash flow. Operating cash flow was $10 million in Q1, a 26.5% increase year over year. Free cash flow was $8.6 million for Q1, which again was a year-over-year improvement of 38.3% due to the seasonality of free cash flow. The conversion rate of EBITDA to free cash flow is generally lower in Q1 than other quarters. However, as previously mentioned, when looking at this conversion rate. On an annual basis, the steady state should be approximately 70%.

Taking into account quarterly seasonality in free cash flow, we ended the quarter with $296.5 million in cash, cash equivalents and investments. This total cash amount reflects the payment of $28.8 million in taxes for the net settlement of equity awards which is a financing cash flow and was completed to reduce share count dilution from the issuance of equity awards. Total debt was $47.9 million, thereby resulting in net cash holdings of approximately $249 million. We closed the Wilshire risk and performance product acquisition on April 22nd, and we paid $40 million from our bank even with this payment, we have plenty of dry powder, should we choose to execute another tuck-in acquisition.

Now let's turn to guidance for the full year 2024. We have meaningfully raised our revenue guidance to $438 million to $442 million, representing an improved year-over-year growth rate of approximately 19% to 20% This represents an increase at the lower end of $7 million and at the higher end of $5 billion. This full year guidance has incorporated both the outperformance in revenue in the first quarter and the forecasted uplift of revenue from the Wilshire acquisition. When we announced the acquisition, we indicated the asset run rate was approximately $7 million. So you can assume two-thirds of that amount or $4.5 million have been incorporated into our 2024 annual guide for the second quarter of 2024. We expect revenue to be in the range of $1.5 million to $1.6 million, representing a year-over-year growth rate of approximately 17% to 18%.

Q2 2023 is a tough comparable a very large client, went live in April of last year, resulting in 22% growth last year. For the full year 2024, we have also raised our EBITDA guidance by $2 million to $137 million at the low end $239 million at the Hyatt, which provide an adjusted EBITDA margin of 31% and an uplift of approximately 260 basis points from 2023. We continue to have confidence in our margin improvement for the remainder of 2024 because of the significant efficiency improvements we are continuing to see throughout the business, including our JNI activities.

In the second quarter of 2024, we expect adjusted EBITDA to be $31 million or approximately 29% to 30% adjusted EBITDA margin. For the full year, we remain committed to our 31 plus percent EBITDA margin and we do remain committed to greater than 200 basis points improvement in EBITDA margin over 2023.

In summary, we are excited about our very clear first quarter in 2024 and look forward to utilizing this excellent start to build on our revenue growth, continue on our NRR. one 15 path and deliver on margin expansion for the rest of 2024. With that, I'll turn it over to Sandeep to provide some closing thoughts.

Thank you, Jim. As we reflect on our Q1 results, I want to express my deep gratitude to our dedicated team toward the tireless efforts and commitment to innovation as allowed us to delight our customers and partner with them to build new products. Our achievements highlight not only our dedication to client success, but also our ability to grow and evolve. We are more excited than ever about the future and remain focused on our strategic part of customer-driven innovation, operational excellence and market expansion. As we push ahead into the second quarter and beyond. I'm confident in our Company's ability to maintain its moment, our strategic acquisitions from conversion have laid the groundwork for continued growth and expansion into new markets. Together with our industry-leading client retention rates and growing portfolio of innovative offerings, we believe the company is uniquely positioned in the market. Our focus continues to be on creating meaningful value for our shareholders, clients and employees.

(Operator Instructions) Rishi Jaluria, RBC.

Oh, wonderful. Thanks, Sandeep. Thanks, Jim, for taking my questions. Nice to see the NRR uptick again this quarter on maybe to first, Sandeep, maybe you could take a little bit into Wilshire on the acquisition made there strategically. Can you help us understand kind of what it brings to the table that you felt that developing in-house? What I guess what superior to developing something in-house and what's the path to integrate the assets you're buying there, especially given the learnings that you have after a relatively successful acquisition with job and I've got a quick follow-up.

Yes, thank you, Rishi. So about the virtual platform acquisition. So the first thing is strategically, we want to address more of the investment management technology versus just investment accounting. So if you go back to the Investor Day, we talked about changing our ability to address full depth of what our clients spend instead of one day one large bucket of that investment performance. And if you think about risk and performance, it needs to reconcile accurate and timely data, and we do that already now we could have built it, but building risk and performance is expensive and cumbersome. But the most important point is Rishi that these models have to be out in the market for a period of time. People have to use it quite extensively and then they mature that particular years. It could take us decades to get the right amount of respect, if you will, in the market so given all of that, we had the opportunity to partner with Berkshire and go and buy this. We felt it was, frankly, a no-brainer in one of the items you were planning to build was risk and performance. So we can now take that integrated into what we already do. So we already do restaurant performance for our clients. This just takes it to a completely different level. So it's not super strategic, and we are very cannot be more delighted with being able to close this deal earlier this month.

Opening last one, wonderful That's definitely helpful to me. And then maybe one for, I guess, both Jim and some of the just thinking through the guide, especially for Q2. Jim, I understand your comments on you know, having a tougher comp in Q2 last year, but I mean, factually, right, we saw ARR accelerate this quarter to a really healthy level. We saw NRR tick-up and when I look at the guide, you're talking about an organic two year cadence or is that still implies meaningful deceleration from what you saw in Q1? Were there any one-time factors or maybe can you help us understand the puts and takes of the Q2 guide?

Thank you.

So I'll give you my perspective.

And Jim, maybe you can add to that. So firstly, we feel really confident about our annual plan. While in Q1 churn was meaningfully lower. You've never seen a churn this low and is lower than the 2% historic number. So certainly we expect churn to go up, but we just don't model this kind of churn.

Third thing was that one of our larger clients, we expected to go live in Q2 and it went live in February instead. So that's good news, but it pull some revenue from Q2 into Q1 now. So having said all that, obviously, the MRR is a contributing factor, and that is driven mostly by new products. So I went through a whole litany of examples, but the point is we just feel that new products have a little bit difficult to predict exactly when that will happen and it'll happen in the aggregate. We feel yes, it this revenue annual days is really good. But quarter by quarter, we're still a little level, but I will feel concerned about projecting too high. Now Q1 was great. We had said, I think the 100.5, if I remember correctly, and we came in with a very good number. And so we do feel we should conservative on a quarterly level while free feeling really confident at the end of that original yet.

Great.

Wonderful.

Thank you.

Thanks.

Dylan Becker, William Blair.

You guys have stayed on for Dolan. So I could start with maybe a more high-level question. But as on we move back to base sales and engineering talent and the prioritization of the platform innovation, how should we think about the ramp cadence of these different initiatives and how to benchmark the success and progress evolving throughout both this year and beyond?

So Joe, just a question, but I do want to just say something quickly, which is I don't think there's any letup in choosing new logos, but we don't see any difference in the market. We continue to see a demand for new logos to be quite high and robust. And the question is, should we also be building new products, which we can take to current times and also use them to open new logos. Jim could provide a bit more detail about the products we're investing in and just the size of those and what it could be at stake.

So So just at a high level, think about one of the key elements of driving to NRR. one, 15. It is really adding these incremental products back into our client base and we have four products of the many that we're developing that are in market now, and we feel like we're getting good traction with them. You won't be surprised by this because you've heard these names before in LPS, Sandeep talked about the good traction we're getting there. Prism funding talked about the big win we had in Prism in Europe risk. That's very aligned to the Wilshire acquisition, but also we're already delivering on that and jump, which was an acquisition from 2022. Those are in the market, and we see those doing very well. And as we see those continue to grow, we will continue to see ultimately and our one 15 with that metric traction tracking there.

But those aren't the only R&D initiatives that we are driving to.

There's a couple that are more focused on new logos where we actually have a great solution. One of the best thing about the Clearwater platform is that it is so flexible and has proven to be market leading not only in corporates and an insurance company and an asset managers. And now in government and we move forward from there. There's two areas where as we add incremental functionality to the platform, it opens up those new camp areas. And to those examples that Sunday spoke to one is the pooled funds, right? The second is stable value funds and those are in one instance in a pooled fund, very an area that facilitates state and local governments interacting better together and opens up that government market in the Stable Value Fund market. That's another element within the broader asset management complexes that we're able to drive. So we'll see what you'll continue to see traction. And you'll listen to us as we talk about those new logos in those markets. And you'll also be able to see traction through CNR. one, 15 at the highest level you might say, hey, wait a second. What what what are the size of those markets?

I think we've talked about we get excited about $100 million market. So as you think about those, many of those are $100 billion market, but others of them are smaller, but like, for example, stable value but we are so close to being able to achieve that. It makes sense for us to add that incremental functionality to add those customers was one data point that just as a reference point in Q1, about 25% of our total bookings in Q1 were related to these GO initiatives. So we won't share that all the time because we don't want to get into disaggregating all of that information. But I think that's useful for you to understand that pleasant trajectory we're seeing from these development initiatives, but I'll switch here.

Okay.

No, that was all super helpful. Thank you, guys. And then with a quick follow-up question, if I could just curious with the shift to the T plus one settlement coming off at the end of May? And how might that be causing any stress to the capabilities of legacy systems and workflows? And you've been seeing anything from a pipeline perspective about this change? Is it causing any anxiety with customers or any incentives to maybe push through some transformation and innovation a little bit quicker?

Yes, that's a that's a great color.

And yes, it does. Obviously that is helpful, right, but it's one of a million different changes, regulatory changes and environmental changes that our clients and more importantly, our prospects are feeling every day another one, for example, is there are huge changes to NAIC reporting that we're helping our clients build for it. T plus one is also important to folks. And so I would say that it's just another example of this long term trend that prospects not on Clearwater Solutions, feel more pain and the more pain, the better we feel about our ability, Paul I often think that's it for me.

Thank you.

Our next question today is from the line of James Faucette of Morgan Stanley.

Please go ahead, your line is And Ron, it's Michael, on content for James.

Sure.

Taking our question, Jim, you had previously mentioned last quarter that your objectives for NRR for 2024 were roughly in line with 23 levels sort of in that 1.6, 1.7 range, obviously, really strong results in NRR this quarter. Do you think that 1.61 0.7 level is conservative at this stage? I know you called out quarterly variability, but would be great to hear how you're thinking about it.

Yes, I think if I can just help clarify it was my fault.

Yes, I said, hey, as we thought about our annual guide right for the year, we thought about and are looking like that. And obviously, we were very happy with the result that we saw in Q1 and we feel optimistic about the whole year. Having said that, Michael, you're exactly right. It don't draw straight line anywhere, but we are definitely trending. And I think it is fair to say that we feel like 1.61 0.7 would be conservative.

Yes, got it.

That's helpful. Maybe Sandeep one for you not really nice when we say gone on the Prism side, I was just hoping you could level set with us in terms of the customer profile or the use case on the Prism side today and sort of how that's incremental functionality to the core Clearwater platform?

Thanks.

Yes, thank you, Michael.

For essentially the functionality helps asset managers provide a better service to their clients and thereby improving the AUM inflow. So in that use case, it is really a prism is helping build client reporting functionality for their clients. And so really if you think about data that comes in and makes up our entire plan to report data from internal systems and data from accounting systems and systems and several other components from within the Company. And what Prism does is takes all of that indium intermingled, what Clearwater does and other bodies do and come up with one comprehensive view of data and one comprehensive report. So as you can imagine, it makes the client's reporting very easy. When you can do that, people tend to provide give you a more assets, if you will, when you go for the RFP. So it's something which helps clients improve client service and therefore attract more Mura.

Got it.

Thank you both.

Thank you.

Our next question today is from the line of Michael Turrin of Wells Fargo. Please go ahead. Your line is now open.

Hey, guys, thanks for taking the question. And David, I'm glad for Michael turn tonight and just one for me, guys. So you mentioned in the prepared remarks, you're seeing some financial investments having a positive impact. Can you just remind us how we should think about the percentage of spend for Gen-i that's going to revenue versus expense efficiencies?

Thanks.

Yes, look, I think your question is that I think that JNI is really some really strategic initiative within the Company and like you pointed out the two different streams. One is it can it make us more efficient and that we've continued to see progress on that. And if you notice what we said on Investor Day about gross margin and the improvement we thought we would get we had talked about 50 basis point improvement every year and down. We already have 78%, which is what we thought we would be in 2025. And definitely some of that is coming from Chennai.

So what does it really do for us. The two points. One is can deflect find and creates. So when a client has a question can be can they go to the agenda item they have and get that question answered and the following and ask that obviously makes us more efficient. And the second one is when they ask the question, can Jenny, I sort of propose a response to our client service rep said, this is a fully comprehensive response as a client service that reviews it and feels it's the right one, they can click it so much more efficient so the the case for helping us improve gross margin is very clear, frankly, going a whole lot faster than we thought that you're starting to see a little bit on the P&L. Second one is this quick suite of products with applicability across various personas in various industries that you haven't started to see, though, in the sense that they are being built so that we can drive revenue from them. So right now, they are very much in the trial design stage, which means you've got client partners who are helping us design this product and bring value from it. So that I would say is still several quarters out of being able to see meaningful improvement in rents. So I think if you remember, Jim, spoke about six products didn't mention quick because of that. It is a big area of investment for revenue growth. Also it just as they did not getting traction from a revenue point of view today, do we expect that in three and four quarters? Absolutely. But do we expect that in Q2 and Q3 results, so that just gives you a wholesome response that makes sense.

Appreciate that detail.

Thank you.

Our next question today is from the line of Brian Schwartz of Oppenheimer. Please go ahead. Your line is open.

And this is Ari Friedman sitting in for Brian Schwartz.

I'm just wondering like with the Wilshire transaction, could you talk a little bit more about the customer profile of that you're kind of getting from the Wilshire advisors, are they similar to the height that you guys already have a little bit different? Is there a good opportunity there to tell them on like more of the Clearwater platform products? Thanks.

Thanks, Ari.

This is Jim. So so that is one of the very interesting attributes. Obviously, the most interesting elements are those models time tested and stress tested over time to really benefit us there, but less than 20%, their clients are also Clearwater clients.

So to your point, we have initiatives to how do we cross-sell Clearwater to their clients and how do we then obviously cross-sell those Wilshire solutions into our clients once those integrations are done?

Yes.

I think the also the interesting part here is when you think about risk models and performance models used by asset owners such as asset owners. They use them for exactly that performance and attribution, but they also use it for regulatory reporting so we feel like it could be taken to a wide swath of keyword appliance or simply address risk, obviously is used pretty extensively across the entire universe of clients. So we feel like there's strong applicability of these models to the Clearwater client base. But we also think that we could take that to what a platform and sell it to the current lines of the analytics. So we think there is a potential to do both. But what we expect to do is not expect we have already merged for these two businesses and coming out with one comprehensive reporting around risk performance and attribution. So we feel like we have a real strong proposition for it for the client.

Thank you.

Thank you.

Our next question today is from the line of Alexi Gallup of JP Morgan. Please go ahead. Your line is open.

Hi, this is Alice methanol, Aksys team calling in. Thanks for taking our question. So first, Jim, I know you've said many times before the hour fluctuate quarter to quarter, but I was wondering if there was anything to call out for that 110%.

Sorry, Ella, I'm so excited about it. I'm all choked up.

Sorry. So number one, obviously, we always had tremendous, but we always had tremendous gross revenue retention at 98%, but not but we got an additional one as an additional percent to 99% the best ever and really terrific there. So that up that helped on the margin. Secondly, we saw a nice uptick of the cross-sell of those solutions that we were discussing. I think I mentioned earlier, it's about 25% of our bookings in the quarter. Now, not all of that is reflected in the NRR because we have to onboard and get those assets flowing. But that was that was another important piece.

And then the third element is IT. As we have always historically done, we've grown as our as our clients have growth. And so we were able to it help with those additional assets our expansion as well. And the last thing I would say is we were not hurt and with the market changes at our client base over the last few years, they and we certainly weren't helped dramatically by that, but we weren't hurt, which was helpful.

Yes, very clear.

Thanks so much for that, Jim and Sandeep, maybe for you. So earlier, Jim had mentioned that you have enough cash on hand for additional tuck-ins. How are you thinking about your decision framework moving forward about when you buy versus organically build new technology?

Joe, thank you for the results. As you know, we haven't done this programmatically and systematically, but we did announce two really senior executives. We've gotten the company to do this on a more systematic way. And so when you think about how we look at these things First, remember, the bond is always very high because we don't go mess up a very clean business model that we have, but would we do it in the service of improving DOWN?

Yes.

What are you doing in the service of improving geography coverage?

Yes.

Could we do it and the service of improving 1.2 for OpEx?

Yes. So I don't think we have changed anything here, but we just expect to become more programmatic about. So I think you should expect us to do now is at two tuck-ins and A. or whatever that number is, but do it in the service of what our clients want and the basis of it is we have a really satisfied client base really high NPS, so they would like us to do more. And so we have to I feel our job is to go find out what caused the bone pain and can be developed seems to both solve that. Now our first instinct, unfortunately, is always to build it, but sometimes we recognize also that building, it will take too long. And when that occurs, then we do the M&A team and you've got to go find something. And the problem is often hard to find things which sort of fit nicely. So we don't just do deals because we wanted to do deals, but we do expect programmatically.

Do you do such tuck-in deals?

Very clear.

Thank you so much.

Thank you.

Our next question today is from the line of Gabriela Borges of Goldman Sachs.

Please go ahead.

Your line is open.

And thank you, David and Jen. Over the course of the last several months, we've announced the handful of high-profile leaders, particularly in the go-to-market functions. I'd love to hear the feedback that these leaders are giving you as they get in the weeds as they talk to customers. And in particular, there are a couple of initial play. We've got from a leadership team coming back and saying we should be doing a few things to really jumpstart the next phase of our growth.

Sorry, you broke up a little of Gabriela.

So Sandy, if I could just add new new sales leaders, new high-profile leaders, what's the early feedback? What's that early? What's the sort of what are the automation?

Yes, thank you.

Because you have a lot different and I think there's no question that the first order of business is to continue the growth in North America. So we were quite excited to say that the North America this quarter year on year basis grew at 20%. So we feel good about that. But the question is Where else do we see progress? So Europe is really really interesting because of the immediate applicability on what our platform can do and the proof points we have already sort of produced and sort of announced. So we feel Europe is priority. One would be well, Asia also is a really high priority, especially with a really strong leader we brought in last quarter. So I feel like those two priorities are really going to drive growth for us for a period of time. So those are the two not in terms of what products or what areas customers are most concerned about alternative assets. So we talked about the extra that in a comprehensive reporting for clients, we talk to our Prism lots and lots of discussions about risk performance and attribution. So in other words, should help with that. Obviously, the OMSBMS. until jump functionality. So just top of mind, we think about North America when we think about Europe between Malaysia, Singapore, OBX, presume restaurant performance and finding jobs. So if you were to ask me what are the biggest ones you worry, but those are the sort of think about what we can do to drive growth.

Got it.

Thank you. And just as a follow-up, you mentioned about 25% of total bookings statistics related to cross clinicians. It should clarify for us how you're calculating that and what products are in that. And I know you said you're not going to give it up consistently for all, take the opportunity to ask what has been historically or give us some kind of grounding in history. So we can understand and measure success they are putting.

Thank you add that as good, a good callout, Gabriela, and that's very fair. So why would we grow about 25%? It could have been about 10%. If you look back and what are those, what are those managed?

Okay.

It's LPS. It's because it's the segment. If you just identify LTX credits, John, our portfolio management, middle office does at Tetra Tech start-up.

Yes, in terms of I will give you a view. It is a little bit earlier than we thought you said, just because you sell something. It doesn't mean it shows up in any of our randomized. But yes, we are I use the term sort of booking data show that we're making progress. But yes, we can answer that with innovation is always shopping. We are obviously happy about where we are, but we do feel too worried about people drawing a straight line.

So it's not there's no reason to be cautious.

It's just we feel it's the right way two to make sure investors know and excellent. Congratulations on the quarter.

Thank you.

Yun Kim, Loop Capital.

Our first congrats on a strong execution on Sandeep last year on what's marked by the influx of alternative assets. I believe that you mentioned that 40% of new AUM was came from that from the alternative assets? And do you see that trend continuing this year? And is that also driving the multiproduct product adoption?

Yes. Thank you so much for that question. So I don't have a percentage for you, but I do know that in the sales process, almost the first things client talk about is the difficulty in managing alternative assets. So a lot of our sales are of some of the discussions about how do a large alternative asset reporting with public securities and give a comprehensive view. So I still think it is really, really important for our business. And if you look at it, one of the first products we always talk about is LP, which has limited partnerships and how do you process them more effectively. So I continue to believe that that is a really important one. And then Prism, what it does is it brings public private all of it together and gives you one comprehensive view. So we continue to see a really big impact from the growth of alternative assets from other sites. I just don't have a percent of how much it grew in the US, what we can get you there.

Okay.

Great.

Because I think the word alternative assets were not mentioned as much this time around, but just lost your thoughts like that.

I ask Tom, if he can also talk about the mix between asset managers and insurance companies. Is that mix skewing towards one or the other? And Ian and is that changing your go-to-market motion on at all?

Yes, I will definitely begin. Allergan more selective. I don't think is changing very meaningfully at all, but is it moving up 2% this way and that yesterday's. So I think that these are quarterly numbers from a market perspective. We think it hasn't moved very much at all.

But would it be two percentage points up in one sector versus another sector for the given quarter, absolutely pass down to say that it remains very consistent.

That same trend remains very consistent, but one notable thing is that we talked a little bit about the US portals, right? The investment portal at the government agency. And I think we've seen nice momentum where that's off of a small number. It's growing nicely as a percentage of revenue in the state and local and Okay, great.

Thank you so much.

Thank you so much.

Yes, thank you.

With no further questions in the queue. This will bring us to the end of Q&A. At this time, I would like to hand back to Sandeep for any closing remarks.

We would like to thank all of you for your continued support and interest in Clearwater. We would also like to acknowledge the tremendous partnership we've had with Welsh Carson 12, which invested in Clearwater in 2016 and fully exited their position in March of 2024. We know that they continue to have a significant investment to Welsh Carson, 13, which invested in our company in 2020. So thank you all, and we really appreciate the support.

Of course.

This concludes today's conference call. Thank you all for joining. You may now disconnect your lines.