Clearwater Analytics Holdings, Inc. Q1 FY2025 earnings

Clearwater Analytics reported first-quarter 2025 revenue of $126.9 million, up 23.5% from the prior-year quarter. Gross profit was $92.9 million, up 24.7%, and GAAP gross margin reached 73.3%, up from 72.6% a year earlier. Operating income was $7.1 million, a swing to a profit from an operating loss in the prior-year quarter, and operating margin was 5.6%, up from negative 0.2%. Net income attributable to Clearwater Analytics was $6.5 million, up 243.0% from the prior-year quarter. Diluted EPS was $0.03, up from $0.01.

The operating picture looked better than the GAAP income statement alone. Annualized recurring revenue was $493.9 million as of March 31, 2025, up 22.7% from $402.3 million a year earlier. Gross revenue retention was 98%, down from 99% a year earlier. Net revenue retention was 114%, up from 110% a year earlier and lower than 116% as of December 31, 2024. Adjusted EBITDA was $45.1 million, up 40.0%, and adjusted EBITDA margin was 35.5%, up 420 basis points. Non-GAAP gross profit was $100.1 million, or 78.9% of revenue, up 80 basis points. Operating cash flow was $24.5 million, up 144.1%. Free cash flow was $23.0 million, up 167.8%. Capital expenditures were $1.5 million, up 2.1%.

Acquisitions define the next chapter. Clearwater completed the Bistro asset purchase on March 31, 2025, the Enfusion acquisition on April 21, 2025, and the Beacon acquisition on April 30, 2025. Management says the deals should accelerate a unified, real-time portfolio view and a cloud-native front-to-back solution for investment management. Guidance for the second quarter of 2025, excluding Enfusion and Beacon, points to year-over-year revenue growth of 21%, adjusted EBITDA of $45 million, and adjusted EBITDA margin of 35%. The acquired businesses are expected to contribute an additional $8 million of adjusted EBITDA in that quarter once their results are pro-rated from the closing dates. For the full year 2025, including the acquisitions from their closing dates, Clearwater guides to year-over-year revenue growth of 59% to 61%, adjusted EBITDA of $230 million to $235 million, and adjusted EBITDA margin of 32%. Other full-year assumptions include $139 million of total equity-based compensation expense and related payroll taxes, including one-time charges, depreciation and amortization of $100 million to $120 million, a 25% non-GAAP effective tax rate, and a diluted non-GAAP share count of $303 million. Management also noted that the company's metrics will reset after the acquisitions close.

Risks center on execution. Clearwater must integrate Enfusion, Beacon, and Bistro, retain their clients and employees, obtain third-party data rights, repay debt tied to the deals, and meet related financial covenants. The company also faces rapid technological change, including artificial intelligence, competition, market volatility, a possible economic downturn, and data security and intellectual property claims. The business depends on keeping clients and adding assets to the platform; gross revenue retention was 98%, and net revenue retention was 114%, so expansion relies on existing accounts rather than new logos alone. The quarter's revenue growth came from new clients, existing client asset changes, and the Wilshire Technology acquisition. Management noted that average assets billed to new and existing clients increased 13%, and the average basis point rate billed to clients increased 5.5%. For now, the core platform delivered improving margins and strong cash generation ahead of a much larger combined business.