Clearwater Analytics Holdings, Inc. Q3 FY2024 earnings
CWANQuarter ended Sep 2024.
Summary
Clearwater Analytics reported third quarter revenue of $115.83 million, up 22.4% year over year. Gross profit was $84.47 million, up 24.9%, and gross margin expanded to 72.9%. The company swung to an operating profit of $7.34 million, an operating margin of 6.3%. Net income attributable to Clearwater Analytics Holdings, Inc. was $3.63 million, and diluted EPS was $0.02. For the first nine months, revenue was $325.34 million, up 20.9%, gross profit was $235.91 million, up 23.9%, operating income was $11.02 million, net income was $5.10 million, and diluted EPS was $0.02.
Cash generation stayed strong. Operating cash flow was $49.56 million in the quarter, up 57.7%, and $103.52 million for the first nine months, up 71.1%. Capital expenditures were $1.49 million in the quarter, up 93.8%, and $4.44 million year to date, up 9.2%. Free cash flow, a non-GAAP measure, was $48.1 million, up 55.6%. Current deferred revenue was $12.02 million, up 246.0%, partly on professional services invoiced ahead of delivery.
Operating metrics held up. Annualized recurring revenue reached $456.9 million as of September 30, 2024, up 26.1% from $362.4 million a year earlier. Gross revenue retention was 99%, compared with 98% a year earlier. Net revenue retention was 114%, compared with 110% at June 30, 2024 and 108% a year earlier. Adjusted EBITDA was $38.3 million, up 34.3%, and adjusted EBITDA margin was 33.1%, up 290 basis points. The platform covers more than $7.3 trillion in assets for over 1,300 clients, with more than 4,100 daily data feeds and more than four million securities modeled.
The company kept adding products and people. At Clearwater Connect in September, it launched Clearwater Insights and a CP Issuance tool, along with a rates research module and a reporting engine. Fleur Sohtz joined as chief marketing officer, and the EMEA leadership team was expanded. La France Mutualiste selected Clearwater to modernize its investment operations and reporting. Management also cited an approximately 80% win rate for new clients over the prior six years in deals that reached the proposal stage, a net promoter score of 60+, and at least 98% gross retention in 22 of the last 23 quarters.
Clearwater agreed to terminate its Tax Receivable Agreement for one-time settlement payments totaling $72.5 million. Those payments would resolve all accrued and potential TRA liabilities, including $28.8 million reported on the balance sheet as of September 30, 2024. Management believes the termination will save roughly 29% ($29 million) of estimated aggregate TRA payments over the next five years and about 88% ($542 million) of an estimated total possible TRA liability of $614 million. The deal only closes if a majority of unaffiliated shareholders approve it.
For the fourth quarter of 2024, the company guides revenue to $120.2 million, up 21% year over year, and adjusted EBITDA to $38.5 million at a 32% adjusted EBITDA margin. For the full year 2024, guidance is revenue of $445.5 million, up 21%, and adjusted EBITDA of $142.5 million at a 32% margin. The full-year outlook assumes equity-based compensation expense and related payroll taxes of $106 million, depreciation and amortization of $12 million, a non-GAAP effective tax rate of 25%, and a diluted non-GAAP share count of 258 million.
Risks cluster around the TRA buyout and the core franchise. The buyout needs unaffiliated shareholder approval and carries transaction costs, management distraction and possible legal proceedings, and the savings depend on taxable income that can fluctuate. The company operates in a market with rapid technological change, including artificial intelligence, and faces competition, possible market volatility that affects asset values on the platform, execution risk in international expansion, and the need to attract and retain skilled employees. Revenue is 100% recurring, excluding professional services and license revenue from JUMP, and most contracts are cancellable with 30 days' notice without penalty.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $115.8M | $106.8M | +8.5% | $94.7M | +22.4% |
| Gross profit | $84.5M | $76.9M | +9.8% | $67.7M | +24.9% |
| Gross margin | 72.9% | 72.0% | +0.9 pp | 71.5% | +1.5 pp |
| Research & development | $36.6M | $35.4M | +3.6% | $32.3M | +13.5% |
| Sales & marketing | $17.9M | $15.2M | +17.9% | $15.0M | +19.1% |
| General & administrative | $22.6M | $22.5M | +0.4% | $26.3M | -13.9% |
| Total operating expenses | $77.1M | $73.1M | +5.6% | $73.5M | +4.9% |
| Operating income (loss) | $7.3M | $3.8M | +90.9% | -$5.9M | +224.6% |
| Operating margin | 6.3% | 3.6% | +2.7 pp | -6.2% | +12.6 pp |
| Net income (loss) | $3.6M | -$430.0K | +944.0% | -$1.9M | +292.1% |
| Net margin | 3.1% | -0.4% | +3.5 pp | -2.0% | +5.1 pp |
| Diluted EPS | $0.02 | $0.00 | +$0.02 | -$0.01 | +$0.03 |
| Customers | 600 | — | — | — | — |
Risks
Although the company adopted its Base+ model in 2022, clients are still billed a basis point rate applied to assets on the platform, and revenue is subject to fluctuations from economic conditions, market conditions and the changing interest rate environment. Contracts are generally cancellable with 30 days' notice without penalty, and clients contracted prior to 2022 and not amended may see revenue fluctuate more significantly with changes in their assets.
On November 4, 2024 the company entered Amendment No. 1 to the TRA providing for one-time settlement payments in a gross amount of approximately $72.5 million, to be funded by an aggregate cash distribution by CWAN Holdings of approximately $81.6 million, and it expects to pay the $81.6 million in the fourth quarter of 2024 if unaffiliated stockholders approve. Effectiveness is also subject to the absence of regulatory orders or laws prohibiting the Amendment.
The filing warns that any failure to accurately report and present the non-GAAP financial measures the company intends to continue presenting in future SEC filings and public statements could cause investors to lose confidence in reported financial and other information, likely negatively affecting the trading price of the Class A common stock.
The company has a full valuation allowance on U.S. net deferred tax assets and believes there is a reasonable possibility that sufficient positive evidence may emerge in the foreseeable future to release all or a portion of it. Any release would trigger recognition of the TRA liability and an increase in pretax expense in the period recorded, with timing and amount dependent on profitability actually achieved.
Growth depends on entering and expanding in international markets where awareness of the Clearwater brand and product capabilities is lower; cost to acquire clients internationally is currently greater than in North America and sales and marketing expenditures in new end-markets such as state and local governments, pension funds and sovereign wealth funds are expected to be less efficient than in established verticals.
Gross margins may fluctuate in any period based on the relative size and number of clients being onboarded at that time, since revenue generally increases as assets are added to the platform while the effort to serve a client is relatively consistent over time.
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 Q3 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.