Clearwater Analytics Holdings, Inc.

Good evening. Thank you for attending today's Clearwater Analytics fourth quarter and full year 2021 earnings conference call. My name is Selena and I will be your moderator. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, J.R. Ritchie, head of investor relations. Please go ahead.

Thank you and welcome everyone to Clearwater Analytics' fourth quarter financial results conference call. Joining me on the call today are Sandeep Sahai, Chief Executive Officer, and Jim Cox, Chief Financial Officer. After their remarks, we will open the call up to a question and answer session. I'd like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Expression of future goals, including business outlook, Expectation for future financial performance and similar items, including without limitation expressions using the terminology may, will, can, expect, and believe, and expressions which reflect something other than historical facts are intended to identify forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section of our filings with the SEC. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may have arised after the conference call, except as required by law. For more information, please refer to the cautionary statements included in our earnings press release. Lastly, all metrics discussed in this call are non-GAAP, unless otherwise noted. A reconciliation can be found in the earnings press release that we have posted to our investor relations website. With that, I'll turn the call over to our Chief Executive Officer, Sandeep Sahai.

Thank you JR and welcome everyone and thank you all for your continued interest in Clearwater. We finished 2021 strong. Revenue for Q4 was 69.8 million, which constitutes a year on year growth of 27%. For the full year, revenue grew 24%, which is a very nice re-acceleration to our historic growth rate. Gross revenue retention remains consistently strong at 98%, And I'm very happy to note that our net revenue retention increased to 111% in Q4, up 210 basis points year over year. We have continued to execute well, resulting in a gross margin of 75.5%, which in turn helped drive strong profitability in the quarter. We added 97 net new clients last year, and approximately 45% of them left a legacy competitor to move to our platform. Some who were on a legacy platform for over a decade or more, while others barely finished the implementations just a few years back. We also won across the spectrum of clients. We now have 59 clients with an ARR of at least $1 million. I would be remiss if I did not acknowledge another very significant win for us in Europe in the fourth quarter. Hathora is a leading, fast-growing, and acquisitive European insurer that has assets across many countries in Europe. And we're delighted to welcome them to the Clearwater platform. To understand this continued transition to Clearwater, I would like to talk about the value we bring to our customers. Simply put, Clearwater provides clients with a comprehensive, reconciled view of the global portfolio every day. Our clients invest in a wide variety of asset classes across many geographies and have reporting requirements across multiple regulatory regimes around the world. Providing a comprehensive view is a complex endeavor. Single clients can have investments in 60 different asset classes, 40 different currencies, and we bring it all together. every day. Our platform aggregates, reconciles, and validates data from more than 2,500 sources daily and leverages a single security master where every security is validated once and then used by all our clients, yielding a very strong network effect. Finally, This leads to a very high quality single source of truth, which is then used by our clients for making decisions about portfolio construction, risk, regulatory reporting, and tax. This technology and approach stands in stark contrast to the legacy providers who have multiple systems and multiple security masters. Data from all of those systems have to be brought together to build a comprehensive view requiring armies of people, often leading to unreliable levels of accuracy. The power of the Clearwater single instance multi-tenant platform is being used by an increasingly wider set of clients across the world, including insurance companies, asset managers, and corporations in North America, Europe and Asia. One unique business value we have not stressed enough is that our platform is a true enabler of growth for our clients. Investing in new asset classes and reporting in new geographies used to require implementing new technologies and building out additional operations teams. Our clients are able to scale globally, invest aggressively in widely varying asset types, acquire new businesses, and integrate them rapidly because our solution provides them infrastructure to do so on demand. As one client told us, after a $4 billion acquisition, that they had the new securities staged on a platform and ready for reporting before the deal even closed. Last year, we supported several clients as they integrated new assets from acquisitions. Others saw significant growth organically, and still others onboarded additional asset types. But all had a constant and complete view of their portfolios daily. The fact is Clearwater gives clients the freedom to grow into new asset classes, new geographies, and acquire new portfolios without having to spend months and years implementing new systems. Little has changed in our approach towards the three growth horizons which provide us with multiple levels for continued future expansion. First, we are focusing on maintaining our growth trajectory by deepening relationships with current clients and capturing more market share in our core markets of insurance, asset management, and corporations, and doing that both in North America and in Europe, where we have significant presence and strong track records. That is our foremost priority and takes the vast majority of our efforts. Second, we're entering adjacent markets, such as state and local governments here in the U.S., and expanding into Asia. We're also working to deliver adjacent solutions that we can upsell across our vast customer base. And third, we plan to provide deeper insights and help clients understand the best practice in this constantly changing world of investing. Our mission is to be the world's most trusted and comprehensive technology platform for investment accounting and analytics. And we believe that we can leverage our technology to eventually revolutionize the broader world of investing. Other business highlights? We had significant wins in North America across a wide variety of industries, including American Century Life Insurance, Carlyle Companies Inc., Circle, City and County of San Francisco, Highmark Health, Madison Ring, Sprinklr, and many more. Our competitive win rate? It looks at deals that have reached the proposal stage, remain strong at approximately 80%, and we continue to displace legacy solutions that cannot provide high-quality data and reporting in the ever-changing world of investment accounting. International expansion continued with the signing of many new clients, including Atora. This is on the heels of our first seven-figure client in Asia, which we had announced in Q3. Under the leadership of Gayatri Raman, president of our Europe and Asian operations, our international business continues to grow very nicely. The international market accounted for over 20% of newly signed business in 2021. We have great momentum, and with approximately 40% of our total addressable market in Europe, we are excited about the opportunities ahead. We have made significant progress on our new product offering we call PRISM, which allows Clearwater to offer a modular investment data aggregation and reporting platform. In situations where clients cannot move away from the current infrastructure in a given country or for an asset class, we can use PRISM to integrate other data sources into Clearwater reporting platform to get a comprehensive view of the global portfolio. For example, a very large insurance company can now view additional details about their mortgages on Clearwater for a single view into the global multi-basis portfolio. We have a promising and growing pipeline for Prism in 2022. To maintain our technological advantage, we reinvested 24% of our revenues into R&D in 2021. and made significant strides with our product enhancements in Q4. In 2021, we improved our product accessibility and usability, kept up with the ever-changing standards like Solvency II, NEIC, IFRS, Schedule BA, and others so that our clients don't have to. We also continue to introduce additional support for multiple gaps around the world and enhanced our capabilities that address alternative assets. We believe that this product investment allows us to be increasingly comprehensive, integrate new technologies, and continue to expand competitive modes. With continued focus on client success, all three of our operating centers are operating at scale, allowing us to deliver 24 by 7 operations. These centers deliver for clients across the globe every day and play an important role in onboarding clients. I'm especially proud the leadership team we have at Clearwater. Working as a team, we are committed to building a truly special company that enables clients to transform how they do investment accounting in an increasingly complex world. Before returning with a few closing thoughts, I would like to hand the call over to our Chief Financial Officer, Jim Cox, to provide more details on our fourth quarter and full year 2021 financial performance, as well as our initial guidance for 2022.