Clearwater Analytics Holdings, Inc. Q2 FY2024 earnings call

• Revenue growth was balanced across new logos, regions, and products, with ARR growth outpacing revenue growth.
• New products showed incremental growth in bookings, with 50% of new product bookings coming from new logos.
• The company achieved an industry-leading 99% gross revenue retention for the second quarter in a row.
• Adjusted EBITDA margin for the quarter was 31.3%, a significant improvement year-over-year.
• Free cash flows were strong, with $42.4 million generated in Q2.
• The Clearwater JUMP platform and integrated Clearwater Wilshire platform drove growth, with notable deals in Europe and APAC.
• The company is investing in GenAI to improve onboarding and margins, with early benefits seen.

In Q2 2024, Clearwater Analytics reported revenue of $106.8 million, a 19% year-on-year increase. ARR grew 22.2% year-over-year to $427.2 million. New products were an incrementally higher contributor to bookings. Gross revenue retention was an industry-leading 99% for the second consecutive quarter. Adjusted EBITDA margin for the quarter was 31.3%, and free cash flows from operations during the quarter were $42.4 million, 116.9% higher than the prior year. The company used cash generated from operations in Q2 to substantially pay for the Wilshire acquisition.

• Full-year 2024 revenue guidance raised to $442 million to $444 million, representing a ~20%-21% year-over-year growth.
• Q3 2024 revenue expected to be in the range of $113 million to $114 million, a ~19%-20% year-over-year growth.
• Full-year 2024 adjusted EBITDA guidance raised to $140 million, with an adjusted EBITDA margin of approximately 31.6%.
• Q3 2024 adjusted EBITDA expected to be $36 million, with a margin of 31.7%.

• Risks associated with forward-looking statements, including potential differences between actual results and projections.
• Market uncertainties and competitive landscape that could impact client spending and growth.
• Dependence on successful execution of new product development and integrations, which may face challenges.

Q: Brian Schwartz on new product cadence sustainability A: Sandeep Sahai states new product addition is deliberate, NPS drives adoption, and there is potential to accelerate new product activity as clients want adjacent solutions solved by the company.

Q: Chris Fountain on GenAI impact on new business A: Sandeep Sahai says GenAI has promise, with efficiency gains seen in margins but incremental revenue impact so far, though 10 clients have signed on new products using GenAI.

Q: Alexei Gogolev on organic revenue growth and NRR A: Jim Cox discusses organic ARR growth exceeding 20% even excluding Wilshire impact, and NRR components, expecting expansion as new products mature.

Q: David Unger on R&D margin impact and gross margin outlook A: Jim Cox and Sandeep Sahai talk about R&D efficiency, with a glide path to 80% gross margin, and GenAI investment contributing to margin improvement.

Q: Michael Infante on rate cuts and new product impact on win rates A: Sandeep Sahai says new products help close deals faster, with a high win rate maintained, and new products enhance the value proposition for clients.

Q: Gabriela Borges on sales and marketing productivity A: Jim Cox talks about hiring globally, refreshing reps with more solutions, and being comfortable with sales and marketing investment as a percentage of revenue.

Q: Dylan Becker on $1 million ARR customer count A: Jim Cox notes the $1 million ARR customer count is a starting point with significant runway for upselling and solving client problems.