Clearwater Analytics Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Clearwater Analytics fourth quarter and full year 2022 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. And now I would like to welcome June Park, head of investor relations, to begin the conference.

Thank you and welcome everyone to Clearwater Analytics fourth quarter and full year 2022 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 to a question and answer session. I would 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. Expressions of future goals, including business outlook, expectations for future financial performance, and similar items, including 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-backed reception 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 arise after this conference call, except as required by law. For more information, please refer to the cautionary statement included in our earnings press release. Lastly, all metrics assessed on 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 Sahar.

Thank you, Jun, and welcome, everyone. Let's start with the numbers, because we are delighted to share robust results for both Q4 and the full year 2022. Revenue for the full year grew 20.4%. Gross revenue retention stayed at 98% for the 16th straight quarter. Net revenue retention climbed to 106%. Gross profit was 75.7% in Q4. EBITDA margin for Q4 was 29.4%. We generated free cash flow of 16.6 million in this quarter. And in the last 100 days of 2022, two more of the 20 largest insurers in North America chose to move to the Clearwater platform. That, I hope you'll agree, is very compelling execution. Looking back at the year, I could not be more proud of our team. As all of you know, Like other FinTech firms, we faced headwinds throughout the year. And I believe the urgency and effectiveness with which we reacted and executed was very strong. And we didn't just address the challenges we faced. In fact, we made our business stronger and more resilient by working with our customers to craft a modified commercial model. Given what we accomplished in 2022, we have renewed confidence that our overall plan, our commitment to building disruptive technology, our product strategy, and our customer-centric approach will stand the test of time. Let's dig a little deeper into the fundamentals of the business. When we completed our IPO in September 2021, we laid out five pillars to guide us and we continue to build upon them throughout 2022. Given the new year, we want to provide an update on those pillars, which are largely unchanged. Pillar number one is consistent, reliable and durable growth. This is the first pillar for a very good reason. We want an ever increasing number of clients to choose our platform And for those who are already on our platform, we want them to grow. Consistency and predictability in our growth is important to our ability to invest in the medium and long term. Our Q4 revenue was 82.7 million, and full-year revenue was 303.4 million, which represented year-over-year growth of 20.4%. This accomplishment in a turbulent and challenging time is testament to the resiliency of our business and the ability of the team to navigate challenges as they arise. With strong booking in Q4, booking for the year 2022 exceeded the budget we had laid out in the beginning of the year. That allows us to look forward to 2023 with confidence in our plans, and we expect to deliver another year of 19 to 20% growth. We continue to watch the economy and the market conditions, and we'll remain vigilant and agile in our response. More specifically, we will look to our booking to guide our continued investments. Pillar number two is our sizeable total addressable market. We have always approached the sizing of the market opportunity with a lot of rigor because our GTM investments are determined by it. We have built a detailed view of our TAM by market, some markets, and geographies, and have previously communicated a market opportunity of $10 billion plus. In addition to using our own teams to validate this on a continuous basis, we work with leading consulting firms to further validate and refine this estimate. More importantly, they help us define areas for TAM expansion. It is easy to be content with the long runway we have in our current markets, but our ongoing investments in R&D is in service of finding adjacencies that can continue to enhance the TAM on an ongoing basis. An example of actions related to this effort is our acquisition of Jump Technology. Not only does it double our European presence, it also enhances our TAM by one billion by allowing us to develop front office systems including order and portfolio management to current and new clients. 157 new logos went live on our platform in calendar year 2022 and is proof of our ability to capture them. In addition to the two large insurers we spoke about earlier, our new customer wins from Q4 include Adventist Health System, Bimini Advisors, Homestead Advisors Corp., Meter Investment Management, Payden & Retail, Robinson Capital Management, and Westcap Management, just to name a few. Geographically, we encouraged with our early continued successes in Asia, and in Q4, we signed Avalis Investments in Singapore, MSIG Insurance in Thailand, and PT Assurancee MSIG in Indonesia. These organizations joined a growing group of clients in Asia and Australia. In a majority of these cases, we continue to replace legacy solutions and clients get a daily, reconciled, comprehensive view of the portfolio across asset classes and geographies. This is where a third pillar comes in, our competitive next generation platform with deep competitive modes. Across the industry, investment operations teams face real challenges when they deliver to the businesses. That's just a fact. They have to deal with multiple systems that are narrowly focused on a given geography, a given asset class, or a business function like risk. And they have to bring all that together for the business who want to see a comprehensive view of the assets. Then there is data quality. They have to ingest and reconcile and keep track of ever-changing regulations and regulatory reporting requirements. Operations teams need to manage all of that and deliver on time. Our single instance multi-tenant architecture is truly the next generation technology that has been proven in industry after industry. The value of the single instance architecture results in a constantly updated software platform that keeps pace with changes in accounting and regulations, obviating the need for costly and time consuming upgrades. Clients no longer need to watch the tens of thousands of regulatory alerts that come out every year. They simply rely on KWR. I was talking to a client recently who left a competitor to join us and asked them why. They said they had been following our regulation and compliance advice for years. So they came to the conclusion that they would benefit from it being baked into our software. Multi-tenancy is changing the data quality landscape. Our platform fosters a network effect that allows for the highest data quality. Instead of each client having to ingest and reconcile their own data, we do it once for everyone. But we are not content or complacent about our position. We continue to invest in our product to further deepen our competitive mode. In 2022, we invested 25% of revenue in R&D and plan to continue this level of investment in 2023 before moderating that in subsequent years. Moving to our fourth pillar, expanded product offering. We believe that the continued and sustained investment in R&D allows us to bring additional products to market. When you first met us, Clearwater was predominantly a single product company. But that has and will continue to evolve as we build a best-in-class commercial model. Today, we offer multiple adjacent products which can be used independently of Clearwater Core. Clearwater Prism continues to get greater market acceptance. Clearwater Jump OMS PMS for order and portfolio management. Clearwater Jump for the full investment management lifecycle. And we offer add-on modules, which can be used alongside Clearwater Core. Clearwater LPX. Clearwater LPX Clarity. Clearwater Performance Plus. Clearwater unit-linked funds. Let's take them one by one, starting with PRISM. We are proud to announce that in Q4, two of our largest clients nationwide and JPMorgan Asset Management chose to use Clearwater PRISM. The Clearwater platform combined with Clearwater PRISM aggregates data and performs a series of calculations and data validations and generates reports that allow JPMorgan Asset Management to comply with the daily regulatory reporting obligation. We're also excited to share that we have signed our first significant seven-figure PRISM deal in Europe, expanding our offering for one of our largest clients. This client will be able to use PRISM to generate reporting for their end clients. representing over $290 billion in AUM. Next is Jump. As you will recall, we closed the Jump acquisition in November of 2022. In December, we sold the Jump platform to Luxembourg-based insurance provider Cardiff LuxWe. This key new client win in EMEA demonstrates that the combination of Jump and Clearwater constitutes an attractive offering to the European asset management market. We look forward to supporting Cardiff Lux Re with the investment performance, regulatory compliance, and reporting needs. We also expect additional customers in our core markets to be attracted to our combined product offering. In addition to Jump's standalone offerings, we have integrated Clearwater and Jump's development and product teams for defined products so that we can offer integrated solutions for unit-linked funds and an enhanced, feature-rich performance module to existing Clearwater clients, which brings us back to adjacent products like Clearwater LPX. Clearwater LPX are products focused on limited partnerships, is being well received and gaining traction with both existing clients and net new logos in the market. We added more than 40 clients to the Clearwater LPX offering in 2022. As you can tell by its rising popularity, the solution is being selected because it helps organizations dig deep into their private equity investments, providing them the visibility they need to understand long-term returns. Clearwater LPX Clarity takes it one step further to convert unstructured data to structured data to provide our clients' front office teams with underlying portfolio exposure and look-throughs, including investment and risk analytics. PRISM was our first adjacent product. and it is now starting to deliver meaningful booking and revenue. We similarly expect our other expanded product offerings to create increasingly higher impact in 2023 and beyond. The fifth and final pillar is Clearwater's client-centric approach. The ultimate value of any tech platform rests in the value it delivers to clients, the impact it has on the business, and overall client delight. In Q4, we once again received an NPS score in excess of 60%. That is simply the best in the industry. We work hard to ensure that our tech and our global teams are working towards a singular goal of client delight. Truly, client satisfaction is at the heart of everything that we do. In Q4, as a testament to this fact, Clearwater won numerous awards. The Tech Provider of the Year Award for Excellence from Insurance Asia News, the Best RegTech Solution from Insurance Post, and the Technology Firm of the Year from Insurance Asset Management. These honors acknowledge the profound impact Clearwater is having on a client's investment operations in the U.S., Europe, and the Asia Pacific region. We are happy to report that Clearwater's CMO and CHRO both won awards for their leadership in marketing and HR innovation, respectively. Now, looking forward, many of you might ask how we expect macroeconomic conditions to impact our business. We are not reacting by laying people off. Rather, we are growing in line with our business. We are not cutting corners in R&D. Rather, we are consistently investing. We are not afraid to expand geographically or through acquisition. But rest assured, we are watchful of the economy and the markets. We will be led by bookings and not by economic forecasts about what might or might not happen in the coming quarters. We stand steadfast on our pillars. Consistent, reliable, durable growth. Focus on TAM. Enhancing our SaaS platform. Innovating our product offering. And dedication to clients. Little has changed in our philosophy, approach, or culture, except that after weathering 2022, we have proven our resiliency and therefore have even higher convictions. Before returning with a few closing thoughts, I would now like to hand the call over to our Chief Financial Officer, Jim Cox, to provide more details on our fourth quarter and full year financial performance, as well as updated guidance for our first quarter and full year 2023.