Clearwater Analytics Holdings, Inc. Q2 FY2024 earnings
CWANQuarter ended Jun 2024.
Summary
Clearwater Analytics posted a strong second quarter of fiscal 2024, with revenue of $106.8 million, up 18.8% from $89.9 million a year earlier. Annualized recurring revenue reached $427.2 million as of June 30, 2024, up 22.2% from $349.5 million as of June 30, 2023. Gross revenue retention was 99%, compared with 98% a year earlier, and net revenue retention was 110%, compared with 110% as of March 31, 2024 and 109% as of June 30, 2023. GAAP gross profit was $76.9 million, and GAAP gross margin was 72.0%, compared with 70.0%. Operating income was $3.8 million, compared with an operating loss of $7.1 million, and operating margin was 3.6%, compared with negative 7.9%. Net loss attributable to Clearwater Analytics Holdings, Inc. was $0.4 million, compared with $10.9 million a year earlier, and GAAP diluted EPS was $0.00, compared with negative $0.06.
For the first half of fiscal 2024, revenue was $209.5 million, up 20.1%. Gross profit was $151.4 million, up 23.4%, and gross margin was 72.3%, compared with 70.3%. Operating income was $3.7 million, swinging from an operating loss of $13.4 million, and operating margin was 1.8%, compared with negative 7.7%. Net income attributable to Clearwater Analytics Holdings, Inc. was $1.5 million, swinging from a net loss of $15.3 million, and GAAP diluted EPS was $0.01, compared with negative $0.08. Operating cash flow was $54.0 million, up 85.6%, while capital expenditures were $2.9 million, down 10.5%.
Cash generation improved sharply in the quarter. Operating cash flow was $43.9 million, up 107.8% from $21.1 million. Free cash flow, a non-GAAP measure, was $42.4 million, up 116.9% from $19.6 million. Capital expenditures were $1.5 million, down 4.3%. Deferred revenue, current portion only, was $10.8 million, up 284.8%. Adjusted EBITDA was $33.4 million, up 34.7% from $24.8 million, and adjusted EBITDA margin was 31.3%, up 370 basis points. Non-GAAP gross profit was $82.7 million, a 77.5% non-GAAP gross margin, up 170 basis points.
Operationally, Clearwater completed the acquisition of an advanced analytics platform from Wilshire Advisors in April 2024. The company added or expanded work with names such as Erste Asset Management GmbH, M&G Investments, Galilee Asset Management, Franklin Templeton, and AXA XL. Product momentum included Clearwater PRISM, JUMP for OMS and PMS, and Clearwater for Stable Value. Management also said it continues to invest in generative AI to improve responsiveness, data quality, and revenue growth. The platform supports more than $7.3 trillion in global invested assets for over 1,300 clients, with more than 4,100 daily data feeds and more than four million modeled securities. Clearwater cites an approximately 80% win rate for new clients over the prior six years, an NPS of 60+, and at least 98% gross retention in 21 of the last 22 quarters.
Guidance points to steady growth. For the third quarter of 2024, management guided revenue to $113 million to $114 million, or 19% to 20% year-over-year growth, and adjusted EBITDA of $36 million. For full year 2024, management guided revenue to $442 million to $444 million, or 20% to 21% year-over-year growth, adjusted EBITDA of $140 million, and adjusted EBITDA margin of 32%.
Risks remain familiar for a high-growth SaaS company. Clearwater lists rapid technological change, including artificial intelligence, competition, market volatility, a downturn in economic conditions, and other factors that may cause negative trends or fluctuations in the value of assets on its platform. It also cites its ability to manage growth, attract and retain skilled employees, and ensure its solutions perform properly. Other named risks include disruptions and failures in computer equipment, cloud-based services, networks, and telecommunications infrastructure, failure to protect confidential information or intellectual property, claims of infringement, and factors related to its ownership structure and controlled company status. The MD&A adds that revenue can fluctuate with economic conditions and changing interest rates, and that clients contracted before 2022 may remain more exposed to asset-based fee volatility.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $106.8M | $102.7M | +4.0% | $89.9M | +18.8% |
| Gross profit | $76.9M | $74.5M | +3.2% | $62.9M | +22.2% |
| Gross margin | 72.0% | 72.6% | -0.6 pp | 70.0% | +2.0 pp |
| Research & development | $35.4M | $37.7M | -6.1% | $29.8M | +18.5% |
| Sales & marketing | $15.2M | $16.3M | -7.0% | $14.3M | +5.8% |
| General & administrative | $22.5M | $20.7M | +8.7% | $25.9M | -12.9% |
| Total operating expenses | $73.1M | $74.7M | -2.2% | $70.0M | +4.3% |
| Operating income (loss) | $3.8M | -$166.0K | +2415.7% | -$7.1M | +154.0% |
| Operating margin | 3.6% | -0.2% | +3.8 pp | -7.9% | +11.5 pp |
| Net income (loss) | -$430.0K | $1.9M | -122.7% | -$10.9M | +96.1% |
| Net margin | -0.4% | 1.9% | -2.3 pp | -12.2% | +11.8 pp |
| Diluted EPS | $0.00 | $0.01 | -$0.01 | -$0.06 | +$0.06 |
Risks
A portion of Clearwater's revenue is billed monthly in arrears based on a basis point rate applied to clients' assets on the platform, so revenue is subject to fluctuations based on economic conditions and the changing interest rate environment. While 77% of assets on the platform were high-grade fixed income securities and structured products as of December 31, 2023, and the Base+ model is designed to limit downside volatility, the value of client assets varies daily due to securities prices, cash flow needs, and client buying and selling.
Future growth depends on successfully entering new international markets and expanding the client base in current international markets. The cost to acquire clients internationally is currently greater than in North America because of less awareness of the Clearwater brand and product capabilities, and the company expects to invest more in sales and marketing internationally relative to North America.
Clearwater's strategy includes adding clients in more nascent end-markets such as state and local governments, pension funds, sovereign wealth funds, and alternative asset managers. The company expects sales and marketing expenditures in these new end-markets to be less efficient than in its established verticals.
Future growth depends on adding new clients and onboarding their assets, which takes time. Revenue generally increases as assets are added to the platform while the effort to serve the client is relatively consistent, so gross margins may fluctuate based on the relative size and number of clients being onboarded in any period.
The Risk Factors section notes that any failure to accurately report and present non-GAAP financial measures could cause investors to lose confidence in Clearwater's reported financial and other information. That loss of confidence would likely have a negative effect on the trading price of Clearwater's 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
Summary, forecast, risks and KPIs are extracted from Clearwater Analytics Holdings, Inc.'s SEC filings for Q2 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 1, 2026.