Clearwater Analytics Holdings, Inc. Q1 FY2024 earnings
CWANQuarter ended Mar 2024.
Summary
Clearwater Analytics reported first quarter fiscal 2024 revenue of $102.7 million, up 21.4% from the prior-year quarter. Gross profit rose 24.7% to $74.5 million. GAAP gross margin reached 72.6%, up 1.9 percentage points. The operating loss narrowed to $0.2 million. Net income attributable to Clearwater was $1.9 million, a swing to profit. Diluted EPS was $0.01, also a swing to profit. The company said the top line benefited from $9.9 million of growth from new clients and from changes to existing clients' assets. Average assets billed increased 17%, and the average basis point rate billed increased 2.4%. Annualized recurring revenue was $402.3 million, up 19.3% from March 31, 2023. Gross revenue retention was 99%. Net revenue retention was 110%, compared with 107% as of December 31, 2023. The company has reported a gross revenue retention rate of at least 98% for 20 of the last 21 quarters.
Non-GAAP results showed stronger profitability. Adjusted EBITDA was $32.2 million, up 42.9%, with a 31.3% margin, up 470 basis points. Non-GAAP gross margin was 78.0%, up 210 basis points. Non-GAAP net income was $26.2 million, up 48.8%. Non-GAAP net income per diluted share was $0.10. Operating cash flow was $10.0 million, up 26.5%. Capital expenditures were $1.4 million, down 16.2%. Free cash flow was $8.6 million, up 38.3%. Deferred revenue was $5.9 million, up 70.8%. The cash flow figures are separate measures: operating cash flow is GAAP, while free cash flow is a non-GAAP measure.
Operationally, Clearwater completed the acquisition of Wilshire Advisors' risk, performance, and analytics platforms on April 22, 2024. The deal added Wilshire Axiom, Atlas, Abacus, and iQComposite to its front and middle office offering. The company pointed to cross-sell and upsell momentum. Aegon Asset Management went live on Clearwater PRISM. More clients used both JUMP OMS/PMS and Clearwater's accounting and reconciliation solution. Clearwater launched CWIC LPx, a generative AI-based solution. MSIG Singapore selected Clearwater for investment data management, portfolio analytics, and reporting. France Active implemented the platform after a five-month onboarding period. Clearwater won the IFRS 9 Solution Provider of the Year award, the Technology Provider of the Year Excellence Award, and the Best RegTech Platform award. The platform covers more than $7.3 trillion in assets, over 1,300 clients, more than 4,100 daily data feeds, and more than four million securities. Clearwater also cites an approximately 80% win rate for new clients over the prior six years and an NPS of 60+.
Guidance points to steady growth but slower sequential expansion. For the second quarter of 2024, management guided revenue of $105 million to $106 million, or 17% to 18% year-over-year growth, and adjusted EBITDA of $31 million, a 29% to 30% margin. For the full year 2024, revenue guidance is $438 million to $442 million, or 19% to 20% growth. Full year adjusted EBITDA guidance is $137 million to $139 million, a 31% margin. The full year outlook includes $106 million of equity-based compensation expense and related payroll taxes, $11 million of depreciation and amortization, a 25% non-GAAP effective tax rate, and a diluted non-GAAP share count of 258 million. The guidance excludes certain non-recurring items, and the company does not provide a full reconciliation to GAAP. Risks include market volatility and economic downturns that could reduce the value of assets on the platform, since revenue is tied partly to asset values and interest rates. Contracts are generally cancellable with 30 days' notice without penalty. Clearwater also faces rapid technological change, including artificial intelligence, competition, growth management, hiring and retention, system failures, data security, and intellectual property claims. The company has a full valuation allowance on U.S. net deferred tax assets, and a future release could affect tax expense and the tax receivable agreement liability. The company also expects to invest more in sales and marketing internationally relative to North America.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2024 | Q4 FY2023 | QoQ | Q1 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $102.7M | $99.0M | +3.7% | $84.6M | +21.4% |
| Gross profit | $74.5M | $70.7M | +5.5% | $59.8M | +24.7% |
| Gross margin | 72.6% | 71.4% | +1.2 pp | 70.7% | +1.9 pp |
| Research & development | $37.7M | $33.7M | +11.7% | $28.1M | +34.1% |
| Sales & marketing | $16.3M | $16.3M | -0.0% | $14.7M | +11.0% |
| General & administrative | $20.7M | $18.1M | +14.8% | $23.3M | -11.1% |
| Total operating expenses | $74.7M | $68.1M | +9.7% | $66.1M | +13.0% |
| Operating income (loss) | -$166.0K | $2.6M | -106.4% | -$6.3M | +97.4% |
| Operating margin | -0.2% | 2.6% | -2.8 pp | -7.5% | +7.3 pp |
| Net income (loss) | $1.9M | -$4.4M | +142.8% | -$4.4M | +143.3% |
| Net margin | 1.9% | -4.5% | +6.3 pp | -5.2% | +7.0 pp |
| Diluted EPS | $0.01 | -$0.02 | +$0.03 | -$0.02 | +$0.03 |
Risks
Revenue is partly billed monthly in arrears based on a basis point rate applied to clients' assets on the platform, so it is subject to fluctuations from economic conditions, market conditions, and the changing interest rate environment. Although 77% of platform assets were high-grade fixed income securities and structured products as of December 31, 2023, asset values vary daily due to securities prices, cash flow needs, and client buying and selling.
Future growth depends on retaining and expanding relationships with existing clients, but contracts are generally cancellable with 30 days' notice without penalty. Gross revenue retention was 99% as of March 31, 2024 compared to 98% as of March 31, 2023, and net revenue retention was 110% for Q1 2024 versus 106% for Q1 2023.
Growth depends on entering new international markets and expanding existing ones, where client acquisition costs are currently greater than in North America because of less brand awareness and lower historical sales and marketing investment. The company expects to invest more in sales and marketing internationally relative to North America, which may pressure margins.
Growth strategy includes adding clients in nascent end-markets such as state and local governments, pension funds, sovereign wealth funds, and alternative asset managers, where sales and marketing expenditures are expected to be less efficient than in established verticals.
Future growth depends on continued solution expansion to retain clients and attract new ones. The company may increase research and development investments faster than revenue growth to maintain technological and competitive advantages, which could reduce profitability.
Accounts receivable increased $4.7 million in Q1 2024, including $1.3 million from aging of receivable balances for certain customers due to short-term deterioration in days sales outstanding, which management continues to believe are collectible.
Tax receivable agreement expense increased 172% in Q1 2024 due to an increase in estimated taxable income for the year. The company may be required to pay 85% of certain tax benefits realized from increases in the tax basis of CWAN Holdings, creating potential cash obligations and expense volatility.
The company presents non-GAAP financial measures and intends to continue doing so. Any failure to accurately report and present these measures could cause investors to lose confidence in reported financial and other information, likely negatively affecting the trading price of Class A common stock.
SaaS KPIs
All quarters →Net Revenue Retention Rate
Adjusted EBITDA
Adjusted EBITDA Margin
Free Cash Flow
Non-GAAP Gross Margin
Total clients
Gross Revenue Retention Rate
Annualized Recurring Revenue (ARR)
Summary, forecast, risks and KPIs are extracted from Clearwater Analytics Holdings, Inc.'s SEC filings for Q1 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.