Clearwater Analytics Holdings, Inc. Price & Performance (CWAN)

Water Analytics fourth quarter and full year twenty twenty four financial results conference call. Joining me on the call today are Sandeep Sahay, 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, intentions and expectations including in relation to business outlook, future financial and product performance, expectations for the timing of the Infusion acquisition and its expected benefits, 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 in 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 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 discussed in this call are presented on a non GAAP or adjusted basis unless otherwise noted. A reconciliation to GAAP results can be found in the earnings release that we have posted to our Investor Relations website. With that, I'll turn the call over to our Chief Executive Officer, Sandeep Sahay. Thank you, June. I'm pleased to report that Q4 twenty twenty four was an outstanding quarter for our company. Revenue for the quarter was $126,500,000 a 28% year on year growth. Which I'm sure you'll agree is spectacular.

ARR grew to $474,900,000.0 a 25% year on year growth. One of the highest increases since our IPO. Coupled with our strong gross revenue retention, this allows us to look ahead to 2025 and beyond with very high confidence. And finally, adjusted EBITDA was $41,700,000 33% of revenue and up 39% year on year. We continue to deliver very strong organic growth with increasingly higher unit economics and higher levels of profitability, on while investing heavily in strategic initiatives innovation. It was indeed an outstanding Clearwater. This growth was made possible by success across various dimensions of our business. Number one, NRR grew to 116%. As we have laid out on several occasions in the past, one of the foundations of our growth strategy has been NRR growth. It involves a strong focus on client satisfaction and delight, investment in innovation and product development, a robust commercial model, and dedicated teams focused on driving LRR growth. We are excited to deliver an NRR growth of 116% for the Clearwater, and believe that it provides a very strong foundation for sustained growth. Number two, widespread expansion across our increasingly diverse market segments and geographies. We have a single instance multi tenant platform and the ease with which it adapts to adjacent market segments and geographies allows us to chart a multiyear growth strategy with excellent visibility.

Growth without a focus on unit economics is never sustainable in the longer term And that's why you continue to see us incredibly focused on it. I'm pleased to report that our gross margin has grown exceptionally well. For the quarter our gross margin grew 190 bps year on year and 170 bps for the full year. These are significantly higher than the 50 bps per year improvement target we had set on Investor Day two years back. But at that time, we did not foresee the impact generative AI would have on our business. We believe that we can expand unit economics this year by an additional 50 bps, and we now believe that the long term target for gross margin is north of 80% The combination of strong execution our development of Gen AI use cases and the benefits of our network effect provide us with ample opportunities to drive this expansion in margin. Generative AI has the dual benefit of driving operational efficiency and providing customers with faster responses to the queries via self serve agents. We have continued to invest heavily in this technology and believe that we are at the very leading edge of innovation in our industry enabled by the fact that our platform uses a single security master, across all our clients.

It is gratifying to see the fruits of our labor come to life. On overall profitability, again, we see very strong performance driven by expanding unit economics and scalability benefits across various functions within our company. EBITDA grew by three fifty bps for the year exceeding the already ambitious 200 bps goal we outlined during Investor Day in 2023. The overperformance in unit economics flew through to the bottom line almost entirely. Finally, we expect to deliver another 200 bps in EBITDA growth in 2025. We are delivering a disruptive platform to the investment management industry. One that is constantly getting better because of a sustained investment in innovation. Our approach and plan for organic growth remains largely unchanged. We believe that having many irons in the fire for driving growth is the appropriate approach for delivering durable growth our business. We are comfortable with the pace of improvements that we have previously outlined in both unit economics and profitability expansion while we continue to make sustained investments to drive durable growth. The levels of growth are number one, driving new logos in North America. Where we have the largest cam and the highest right to win leveraging a high NPS and CSAT ratings.

All of these results in sustained strong win rates. Number two, continued international expansion to become the platform of choice for the investment management industry in Europe and Asia. Number three, focusing on back to base investments to drive one to four BIP expansion in our core markets. We actively manage our investments in new products, and are rigorous about unfunding investments that show limited traction. Conversely, we increased support for investments that resonate with our clients. Number four, expanding our reach to asset donors [indiscernible] traditional insurance companies and corporates, to now include state and local governments, foundations, Reit, pensions, sovereign funds and endowments. Number five, building an effective channel of growth through partnership with other software providers system integrators and advisors. This has been an underinvested area for us and many companies generate substantial revenue from this channel. We hope to see results later this year and in the years to come. Number six, continued selective M and A initiatives and ensuring that any potential acquisition aligns with our long term strategic goals. And number seven, we believe our core TAM stands at approximately $5,900,000,000 a figure derived from the segments where we have achieved a long term 80 win rate.

With $474,900,000 in ARR, at the end of twenty twenty four, we have a long runway of growth ahead of us. Let's discuss some of our initiatives in greater detail. Our new product initiatives, which focuses on expanding into adjacent markets, are developed in partnership with our clients. These initiatives have played a significant role in driving engagement and growth in 2024. Our initiative is focused on platform modules that enhance customer efficiency, LPs mortgages, regulatory reporting funds risk and performance have borne helped grow our business Clearwater expanded its footprint with existing clients but also added marquee clients such as Imperial Fund Capital Partners, Invictus Capital Management National Association of Realtors Newcall Corporation, OpenAI, School Employees' Retirement System of Ohio State of Louisiana, United Nations Federal Credit Union, WCF Insurance and several other. In the insurance sector, our expansion among mega and large insurers continues. I would like to highlight a global commercial property insurance provider where our ability to deliver automated scalable investment accounting processes set us apart. Exposing the limitations of their legacy systems. We also welcomed a national property and casualty workers' compensation insurer serving businesses across The U. S. According to our client, our modern platform was the only solution that meets their needs for asset class diversification, streamlined operations and long term scalable growth.

In the asset management industry, a leading OCIO has chosen to replace the legacy system selecting us as the cornerstone of the long term expansion with the goal of growing their assets to $50,000,000,000 in AUM. Clearwater will replace six other platforms. Dramatically simplifying the technology infrastructure. Hassett owners beyond the traditional insurance and corporate segments, continue to expand in scope and scale. Leading organizations like Alameda County Employees Retirement Association So will rely on Clearwater for data validation shadow book of record accounting, and total plan reporting across the entire investment portfolio including alternative assets. In the public sector, we welcome the state of Nevada, and the state of Louisiana When faced with significant key person risk, and an internally built outdated local government investment pool system the state of Nevada selected Clearwater to manage their entire [indiscernible] and general fund portfolio. This state treasury team and the pool participants will be able to seamlessly navigate LGIP's complete with participant portal logins and statement preparation. All for one central secure platform. Additionally, the state Employees Retirement System of Ohio selected Clearwater for a powerful investment accounting solution that can do anything and everything with accounting across all asset classes.

These wins build on our reputation as a trusted partner for investment, and pension management solutions supported by teams dedicated to this market. Our expansion in Europe Asia and Africa, has brought new clients. One notable success in Asia Pacific involves a leading asset management company that adopted Clearwater to unify the insurance assets under a single comprehensive platform, We couldn't be more excited to support this asset managers ambitious expansion plans across multiple Asian countries, Our platform is designed to scale effortlessly and we are proud of the growth that it enables. To highlight one of our cross sell successes, I'm pleased to welcome a U. S. Investment management firm specializing in real estate and alternative investments that has selected Clearwater to empower its mortgage loan team. Our solution provides deep visibility into their expanded agency and non agency mortgage backed securities repurchase agreements and derivatives instrument. With Clearwater Clearwater, the investment professionals gain a comprehensive platform to drive growth and make well informed decisions throughout the entire loan lifecycle. From origination and deal management to analytics, accounting and reporting. This win exemplifies the single plane of glass experience our platform is designed to deliver.

These examples are just a glimpse of our expanding portfolio of new client wins. Showcasing Clearwater's unmatched ability to meet diverse client needs We are in the business of transformation. Simplifying complex legacy systems and empowering tribes to achieve bold ambitious growth targets. Our platform is precision engineered to deliver purpose built solutions that replace outdated inflexible, legacy systems. Keeping our clients ahead in a fast moving investment management landscape. We continue to build and support these initiatives and our investment in R and D will continue to grow in dollar terms. Even at the fall as a percent of revenue. Fully consistent with the plans we have discussed on earlier calls. Now let me turn to the acquisition of Infusion. Before I go any further, I believe that our first order of business is to ensure that the core Clearwater platform continues to perform and deliver the durable and efficient growth it has delivered over the past few years. That is a key message I've emphasized to our teams. We have had the opportunity to engage with the infusion leadership and subsequently with the entire team in a downhole setting. We've also had the opportunity to meet with several teams [indiscernible] I'm excited to report that all of us share the enthusiasm and commitment to jointly build a market leading front to back platform that can transform our industry.

Both Clearwater and Clearwater share a strong multiyear growth track record powered by next generation single instance multi tenant platforms designed for an increasingly complex investment landscape. Both companies offer an end to end platform tailored to the needs of the market segments each of us focuses on and have been very successful in doing that. However, when viewed across market segments, sizes and industries, including all kinds of asset managers and asset owners our core strengths are entirely complementary. Infusion provides a best in class front office solution while Clearwater's platform excels in middle and back office capabilities. The strategic alignment will enable us to deliver integrated solutions that meet the diverse needs of the investment management industry. We held a multi day meeting of leaders from both organizations to align on the details of our shared strategy. Working together, we defined our priorities and they include number one, accelerate our goal of building a front to back platform for the entire investment lifecycle and thereby operate the lead for having multiple systems that need to be constantly upgraded. That by itself is a game changer. This should also dramatically reduce the need for reconciling data between the front, middle, and back office, which has been a long standing problem for our industry.

Another game changer. Using that same data [indiscernible] and regulatory reporting will alter the efficiency of these enabling functions [indiscernible] Number two, meaningfully improve adjoint right to win in the asset management industry. Across strategies, sizes and geographies. By combining the IP engineering and product teams of Clearwater, and Fusion and drug technology all under a unified dealership we expect to build a transformative and comprehensive platform for the largest dam we have. Number three, effectively offer Infusion's investment book of record or an IVR [indiscernible] and order and execution management system to clear order clients furthering our one to four big journey. Number four, refocus and dedicate product engineering, operations and GTM resources on the hedge fund market to enhance and grow Enfusia's leadership position is another key priority. Dedicated focus and teams And we believe that this realignment will result in faster Number five, use Infusion's greater presence in Europe and Asia to drive faster adoption of our platform. The international market represents approximately 50% of our TAM, and having additional resources across these geographies will help position us better. Number six, improving our gross margin and achieving cost synergies that will create a financially compelling [indiscernible] Ultimately though, this acquisition is about [indiscernible] and industry leadership.

We also expect to realize strong synergies and sustained improvement in unit economics. We are enthusiastic about the opportunity to collaboratively build a best in class platform for the entire investment lifecycle. One that we believe simply does not exist in our industry. Coming out of the leadership meeting, we have initial plans for each of these priorities and expect to hit the ground running when we close in quarter two. So what lies ahead? A comprehensive front to back platform that serves industries of all sizes. That is our promise. We are scaling with the Twilio vision excited about the journey we are on, and remain committed to delivering exceptional value to our clients employees, and shareholders. With that, I'll hand the call to Jim to dive deeper into our financial results. Thanks, Sandeep.

I'm proud to report an outstanding Q4 and full year which continued the impressive momentum from the prior three quarters of twenty twenty four. Among our many stellar results, it was most satisfying to report NRR a full year earlier than the goal we stated in our Investor Day back in September, 2023. Overall, our key metrics were exceptional across the board in Q4. With multiple record highs.

I'd also like to take a quick moment to thank our clients [indiscernible] who made this consistent track record of excellence possible. While investors have come to expect this performance as a routine In reality, it's quite an accomplishment and it takes the hard work and relentless dedication of individuals and the alignment of teams to our goals throughout the organization. To achieve these stellar results. Again, we achieved full year revenue of $451,800,000 of 22.7%. For additional perspective, revenue also comfortably beat the midpoint of the original guidance we announced back February 28, 2024, for full year 2024. By 2017, point $8,000,000 In addition, the year over year growth of 22.7% marked yet another year which Clearwater grew revenue by more than 20%. In Q4 twenty twenty four, we delivered $126,500,000 in revenue This translates to an impressive 27.7%. Year over year revenue growth. And beat guidance by $6,300,000 The NAIC made the most significant set of accounting and designation changes in over a decade. And those are effective in early twenty twenty five. Several of our insurance clients were somewhat unprepared and sought our help in ensuring compliance with these new rules. We plan to do the work in both Q4 twenty twenty four and in Q1 of twenty twenty five.

But we were able to utilize some third party resources to assist us to deliver those services more quickly than we had planned. Customers were delighted to get the work completed before the end of the year. There was about $3,000,000 in incremental revenue in the quarter relative to our expectations when we provided our Q4 guidance. The third party expenses associated with that additional work was also booked in Q4. Because these services are not expected to reoccur they were not included in the amounts reported for ARR.

Or [indiscernible] Annualized recurring revenue or ARR at the December 2024 was a record $474,900,000 representing a robust year over year increase of 25.3%.

From the $379,100,000 the prior year.

In addition, as of 12/31/2024, the Clearwater platform processes and reports on [indiscernible] Point $8,000,000,000,000 in assets daily. Which represents an increase of $1,500,000,000,000 over the prior year. Additionally, We grew the number of clients with over 1,000,000 in ARR to 100 from the prior years 86. Achieving an impressive triple digit in Clearwater clients with over 1,000,000 in ARR. We expect to further increase these record breaking numbers in the future we continue to both win new logo clients [indiscernible] also win cross sell initiatives and layer on additional assets with existing clients. As well as cross sell additional products to obtain more of our clients' wallet share. The program we call one to four bips.

Now let's turn to profitability. We've continued our strong margin expansion path by delivering $145,700,000 in EBITDA in the full year 2024.

With an impressive year over year growth rate of 37.6%. And an EBITDA margin for the full year of 32.2%, comfortably beating our guidance for the full year 2020 full. In Q4 twenty twenty four, we achieved an EBITDA of $41,700,000 with a record high EBITDA margin of 33%. That beat our guidance for the quarter by $3,200,000 Our strong margin expansion path. Was also reflected in our gross margin. With a record high 78.2% gross margin for the full year 2024 and Q4 twenty twenty four and gross margin of 78.8%. This consistent achievement in margin expansion underscores the continued profitable unit economics efficacy of our growth initiatives and the strong value add that we provide to our client. While free cash flow in the quarter was a negative $29,800,000 In December 2024, our unaffiliated shareholders approved the one time payment to terminate the company's tax receivable agreement. Which was $72,500,000 plus approximately $6,500,000 in third party expenses. Absent that change, our working capital continues to noticeably improve with our AR day sales outstanding, decreasing to seventy seven days in Q4 from eighty six. In Q4 of last year. We ended Q4 with $285,800,000 in [indiscernible] cash equivalents and investments.

Current total debt is $45,900,000 and that result in net cash holdings of approximately $240,000,000 As I previously mentioned, we increased our net revenue retention rate to 116% from the prior year's 107%. This really represents a significant achievement especially ratifying given it occurred twelve months ahead of our original scheduled target date. Of the end of twenty twenty five. Achievement of these results starts with our world class and consistent gross revenue retention 98% again. In Q4.

Upsell of the core platform across clients was very strong at nearly 7%. While new product cross sell was 3% of the growth.

This year, we yielded nearly 5% price increases across [indiscernible] While AUM expansion provided the remainder of the growth were 98% at gross retention to 116%. Of net revenue retention. At Clearwater, it is incredibly important to set out and achieve ambitious goals. And so we are very proud to have achieved this goal for the first time. However, the goal was not to achieve NRR 115 once.

But to achieve it reliably, and consistently with the durability our investors expect in all aspects of our business. And we know there is more work to do to deliver these results, consistently In addition to the terrific revenue and non GAAP results, We achieved GAAP net income and a pretty impressive one at that. We reported $420,300,000.0 for GAAP net income in Q4, That compares to a GAAP net loss of $3,400,000 in Q4 of twenty twenty three. As much as we appreciate the very large GAAP net income, it was created by the release of the deferred tax valuation allowance in Q4, We now have an approximately $600,000,000 deferred tax asset on our balance sheet. And as a result, our cash tax payments will be very limited. Over the next few years. Now let's turn to guidance. For the full year 2025, we expect revenue to be [indiscernible] $535,500,000 Two, $542,000,000 on a standalone basis. Representing an initial year over year growth rate of approximately 19% to 20%.

We currently expect the infusion acquisition to close in the second quarter of twenty twenty five. And we'll update all our full year guidance to reflect the combined company at that time. For the full year 2025, we expect EBITDA to be $182,000,000 to $185,000,000 representing an adjusted EBITDA margin of 34% for the year. For the first quarter of twenty twenty five, we expect revenue to be $125,000,000 representing a year over year growth rate of approximately 22%. Which is a strong start to the year. For year over year growth. Please note that approximately $3,000,000 of revenues and associated expense related to the NAIC project expected to be recognized in Q1 of twenty twenty five.

Was recognized in Q4 of twenty twenty four.

In terms of adjusted EBITDA guidance, for the first quarter of twenty twenty five, we expect EBITDA to be $41,500,000 representing an adjusted EBITDA margin of 33.2% or approximately 200 basis points higher than the prior year Q1.

For the year, we currently expect equity based compensation and related payroll taxes to be $106,000,000 basically flat for the third year in a row. With our continued revenue growth, we expect equity based compensation will now represent less than 20% of revenues. For 2025. Depreciation and amortization, before considering the impact of the Infusion acquisition will be $13,000,000 in 2025.

Although we will pay only a limited amount in cash taxes, We will continue to utilize a non GAAP tax rate of 25%. For 2025. Lastly, we expect our share count for the year again, absent the impact of acquisitions to be $263,000,000 shares.

On a fully diluted basis. With that, I'll turn it over to Sandeep to provide some closing thoughts before questions. Thank you, Jim.

This quarter's stellar performance and record revenue growth bolstered by a 116% NRR, reflects a remarkable execution of our strategic initiatives and the trust that our clients place in us. We are not only responding to market needs, but also actively shaping the future of investing with a powerful scalable platform. I'm proud of our team's dedication our shared commitment to operational excellence which positions us for sustained revenue growth and value creation for our clients employees, and shareholders alike. With the acquisition of Infusion, we are bringing together two very strong companies. And we plan to build a truly transformative platform for the investment management industry. We look forward to building on this momentum and delivering on our plans in the quarters and years to come. Thank you.

We will now begin the Q and A session. The first question is from the line of Rishi Jaluria with RBC. Your line is now open. Wonderful. Thanks so much for taking my questions. Nice to see a continued solid execution. I've got two. First First, I wanted to start with just kind of the upcoming infusion deal.

Obviously, you're limited in what you can do. But Sandeep and Jim, as you've been talking to your existing customers and including these impressive new logos that you've been landing, what has been early feedback from those customers around the potential to have the two of you together, the potential to bring some of the front office solutions and retool them and integrate them. Any color you could share there would be helpful. And then I've got a quick follow-up. Yeah. Thank you, Rishi. So the first thing is that people are generally very excited about what we have done. So what are they excited about? We have talked about one to four bps for a long time. And our ability to bring a market leader such as Infusion into the play is I think very exciting for clients. So we feel that it does accelerate a one to four bit journey It's not super easy though. We obviously have integration work to do. But the point here is that from a customer point of view, to get both pre trade and post trade from the same vendor is just very, very interesting and exciting.

Got it. Thanks. That's really helpful. And then maybe I just wanted to think About margins here, you're showing continued nice margin expansion. I know you've talked in the past about leveraging AI to drive greater efficiency and margin expansion. Maybe two pieces to this. Number one, as we think about the glide path towards a long term margins and we can leave infusions out of the discussion for right now, but if you just think about that, how do you think about maybe the potential headwinds that you may get from Gen AI over time as you incorporate more of the technology and productize it, in the set of solutions, especially just given how resource intensive the technology is, And maybe related to that, Sandeep, you made a comment on your prepared remarks about how sometimes you find projects that you deem because they're not demonstrating ROI. You give an example of maybe what has been one of those projects historically and how you come to make that decision. Thank you.

Yes, thank you. Look, our Q4 margin was 78.8% right? So that is obviously very close to 79 Our long term target was 80% And so we feel we don't find it very challenging to to tell you that it's going to be north of 80%. Now is it going to be much higher think that is something time will tell. But I do think that the comment about Gen AI we feel it pays back very, very quickly often within the year. So when it comes to margin expansion, we don't think there's any headwind at all. In terms of Jennie I sort of lowering the margin profile of the company. So that's how we think about it. Now where did we get improvement because of these initiatives and these R and D investments everything that was adjacent to Rishi, worked well. And everything which was sort of two steps removed did not do well. And so at a broad level, that's how we sort of allocated resources in 2025 I want to make one final point is the R and D investments we make in dollar terms continues to grow But last year, we had approximately 60% of those investments focused on roadmap and new product for current clients.

All client changes one, So I do feel we have lots of room to invest in innovation as long as that is driving growth, we are happy, more than happy to continue to make them. So I do feel our investments are well timed, but this comment about unfunding things that don't work we're also very, very stringent about that. If some program runs for six to nine months, and doesn't get customer traction, We're going to cut it. And so we feel that we have a good path right now and a good balance if you will between investments and returns from a shareholder point of view, but also from a client point of view.

Thank you. The next question is from Brian Schwartz with Oppenheimer. Your line is now open. Yes. Hi. Thanks for taking my questions. This afternoon, Congratulations on a real strong finish to to the year. Sandeep, I wanted to ask you about the NAI regs, kind of the effectiveness in that core insurance market. I'm just wondering if that mandate is still going to be a tailwind for replacement activity or other aspects of the business in 2025 or did that demand boost mostly play out in 2024? Yes. Thank you, Brian.

Regulatory reporting is always been a bit of a tailwind for us. As has compliance, as has additional assets being brought in because of acquisitions, So we do think of regulatory reporting as a big tailwind and we continue to make investments in that space. I think what Jim was referring to was usually this is pretty broad based, every country is doing something every region is doing something, NAIC made a massive change this year. And so that was that felt a little bit onetime ish. And that's why I think Jim called out that there was $3,000,000 of revenue which we thought would come in Q1, that actually came in Q4. And so we felt it was different enough that we wanted to call it out, but do we expect to continue to see regulatory changes all through 2025 and 2026 heck yeah, Absolutely. It doesn't mean there'll be more regulations in every country, but changes are literally done all the time.

I don't know, Jim, I think only thing I'd add, Brian, is this tailwind I think it persists, right? And here's why it persists. When you were faced if you were at Clearwater client and you were faced with this significant NAIC change, we solved it for you. If you weren't a Clearwater Clearwater, You probably had to do a bunch of, I'm not exactly sure what you had to do. But I'm reasonably certain it was gymnastics. And they may still be doing it. And so I think when you think about being on a modern platform, a single instance multi tenant solution where you can make these changes across you know, the entire ecosystem of your clients. The benefits of that are meaningful. Of course, people may switch in order to solve that problem. But I think as Sandeep mentioned, there's always the next problem. And so understanding the pain of that and then realizing that you don't have to feel that pain As a Clearwater client, we think we'll continue to be a tailwind into the foreseeable future.

Yeah.

And Brian, I would just add that if you talk with Clearwater clients, and you also talked with other midsize insurers I think the Clearwater client would tell you the NAIC change was a non event. It just got done. While the other were not Clearwater a client would definitely tell you that, oh my lord, there's so much work to be done I would tell you today, many, many of them have still not completed. The NAIC work at all. So I do feel that weighs over time to say, if you were a Clibora client, and you continue to see regulatory changes around the world, it just is a better platform for handling those things.

Switching gears for my follow-up question. Just one on infusion. Sandeep. How fast do you think you can get going on working to achieve the synergies of the deal rash The reason I ask is there something about the similarities of your two businesses or maybe the familiarity as competitors that could speed up the synergies achieved when the deal closes.

Yes, Brian, I don't know whether I should say this, but starting off, acquisitions always look really good in Excel spreadsheets. It's nice and easy. But I do want to say that we have had really detailed meetings with the infusion leadership And I'll tell you the knowledge the quality of the platform is very, very impressive. I do think that the integration is hopefully easier because we are both cloud native single instance multi tenant platforms, The technologies we use is very, very similar. So we feel very confident that we can get things done done relatively quickly. I do think we have provided guidance around our growth expectations and around margin expansion and everything we have seen till now just allows us to say that we absolutely believe that those are completely doable. Arunji, whether you would add anything to that?

Thank you. The next question is from Kevin McVeigh with UBS. Your line is now open. Thanks so much and I'll add my congratulations.

Jim, I think you talked about kind of the NAIC was about $3,000,000 I think you exceeded leased The Street by $7,000,000 Is there that incremental four to call out there that drove the incremental $4,000,000 revenue Yes.

I think we had a nice bookings Clearwater. In the fourth quarter. And I think we've been very pleased with how our bookings are converting into revenue. [indiscernible] focused on that for a long period of time. To try and get that faster and faster. We started to see that grow [indiscernible] is obviously helpful and better than if you recall just last quarter, it's a couple of points better than that. And so, going into the quarter, we wouldn't necessarily expect that to improve. But we were hopeful and pleasantly surprised. By that as well. I think it was a very solid beat under any circumstance.

Yes. Kevin, I would add that obviously, Jim and I went to the board and reported results for Q4. And if you think about it, we obviously thinking about 114, we got one hundred and sixty sixteen that gives you 2% and that's very real money. And the conversion from booking was very strong I think the onboarding was very strong. So literally every element of the business outperformed what our expectation was. So very thrilled with what we were able to deliver In Q4, That's a fantastic outcome. And then or Sandeep, I know you talked about the 116 a year early. If you think about what drove that relative to your expectations, Yes. I think the main driver that was Obviously, we have teams that are prosecuting against this, but was a very pleasant piece was and I mentioned it in the results is the upsell of the Clearwater platform across to other divisions and the and helping our clients grow was 7%. That would be, helpful and frankly, higher than what we would probably put in our base algorithm for that. We see and and, you know, some of that, like, obviously, that's really hard work, but you're also a little, reliant upon your clients to win that business.

To grow, to do those acquisitions and those activities that they do. The other piece that I'm proud of right, is the 3% of cross sell. Right? So that's kind of we talked about the go initiatives and all of these different initiatives and we're seeing that back into our base. I think the thing to remember about these new products is we're also selling them within our new logos as well. And so don't underestimate the power of these additional products. Flowing through I don't have the number in front of me, but I think it was, you know, 28% or something like that. Of bookings. For the year was in these additional products, which is meaningful you think about growing 20%. That's a meaningful growth driver for that. So those were the pieces that worked well. I'd also say that I'm very proud of the team that executes price increases. We have normalized price increases across the entire portfolio. We haven't asked for more from clients but we're asking for it from all of our clients consistently, and we're doing it in an automated and regular So that is feels very sustainable.

The next question is from Michael Infante with Morgan Stanley. Your line is now open.

Hi, guys. Thanks for taking my question on Matt's results. I just wanted to ask on Jim, you obviously gave some color on cross sell and price, but at a high level, how early are you just in terms of tapping cross sell and levering price across the base? It seems like the third quarter was really the first quarter where it started to have a noticeable impact on the and L and we clearly had some nice flow through in the fourth quarter. So just any high level thoughts there would be helpful. And then I have a quick follow-up.

Yes. I think that when I think of the sustainability of NRR-one hundred and 15, I think we'd like to see that cross sell. Be higher than 3%. We'd love for upsell to be 7% and cross sell to be 7%. Then everything is easy. At that point. But I do think the teams have become energized around it. They understand the value of it and and and obviously seeing the benefits of it. So I think We're pretty pretty optimistic about our ability to execute against against those plans going forward. Jim? As Jim laid out, look, NRR is what does it depend on? It depends on good retention, starts from there, And then Jim laid out additional assets new products, [indiscernible] and some AUM growth. Right. And our job I think is to make sure all of them can operate at full potential. Now we don't expect all of them to work every quarter. And if all of them work, that'd be great, we get to a really high number. But the point here is we want to try and deliver 115 on a consistent and durable way and we're most happy to see additional assets at 78% and new products at a similar number.

And that's what we hope to get. I did want to just sort of add one more point. We really thought new products would mostly go towards NRR. And what we have found is a lot of it was used to drive new logos. And that's just not what we had expected. We had thought new products would first go to current clients and then new clients would sort of incorporate them in their in what they were buying. But we have really seen a pretty strong uptick from their business on from new clients.

Very helpful, Sandeep. Just another quick follow-up on infusion. It would be good to get your preliminary thoughts on how you're thinking about the pricing model there and how it may evolve post close, if I think about the hedge fund industry broadly, they have in general priced on seats and we've seen little incremental expansion in headcount in the industry over the last couple of years. But I'm curious if you sort of think about some of the early work that you've done and the ACV differential of infusion versus some of the incumbents in the space, whether or not that affords you the opportunity to begin to explore pricing on assets for CIF without any meaningful uptick in churn. Thanks guys.

Yes, thank you. That's a really good question. I think I'll just start by saying that Infusion delivers an absolutely industry leading platform for the hedge fund industry, it absolutely does that. Number two is the client servicing and the operations team have really improved I think over the next over the last July and is very close to being world class. So I think those two things just happen to be true. I do think the commercial model could use a lot of help. I do think that if you look at Clearwater, we executed on that very swiftly and very I think in a very responsible way in 2022. And so in all of our discussions with the infusion leadership, we have discussed how we might think about commercial model but I do think it needs to evolve. Obviously, we want to evolve it in a responsible way, in a thoughtful way, such that clients see the value of it. But I do think that the current model just has room to drive NRR. And driving NRR within the Infusion client base is sort of a really important objective we have. And so today, I couldn't tell you what exactly we might do at the commercial model, but it will be done obviously in partnership with the infusion leadership but we do have lots of ideas.

We have worked on and frankly our NRR of 116 is testament that it works. And it works in a sustainable way. So we expect to expect to discuss it and execute on it in the coming quarters.

Thank you. The next question is from Aleksei Gogolov with JPMorgan. Your line is now open.

My congratulations with great results. And Jim, I was wondering if you have any thoughts for us in terms of FX headwinds that you are incorporating into your 2025 guidance what would your growth outlook be in constant currency basis both on revenue and EBITDA?

Thanks, Alexi. So although 1819% of our revenues are international, The vast majority of of those revenues are in U. S. Dollar. Currency. There are some in euros and some in pounds. How we think about it, Alexei, is looking at the currencies as well as the costs that we align to those. And and so we create kind of a natural hedge between the revenues of clients in that currency and the expenses within those currencies. So it's de minimis on as it relates to EBITDA. Okay? How then in addition, I think it's we are not impacted so much by FX On the revenue basis, as we think about it, because we build monthly, And so therefore, I think our views on that will change. But obviously, it is a slight headwind as we sit here today. But we would hope that rates would revert more to a mean throughout the year.

And so that would ameliorate over the over the year.

I just wanted to add that we now have [indiscernible] number of employees in India and as you might know, even infusion has a significant workforce presence in India And the currency does strengthen as it has I think that will obviously help the cost base. Matching format works for Europe and other locations, but Given the significant presence presence in India, I do expect it to be a mild tailwind. Okay. Thank you, Sandeep. Thank you, Jim. And Sandeep, a follow-up for you. You listed a number of new clients in the quarter. Maybe you can give us a few more use cases on what you do for those clients I was specifically interested in OpenAI that you included Can you elaborate what exactly you do for them? Yes. So the thing about Alexi is we don't do anything different for any of these clients.

We do the same data ingestion for them. We do the same data reconciliation. We do the accounting, we do the reporting, So I wish I could give you some nuggets about what is different for OpenAI or any of these corporate clients, we do exactly the same thing for them Now how they use it and what they use it for for example, when you look at asset managers, they use it very heavily for third party client reporting.

Right?

People in the insurance industry may use it very much for reporting and regulatory reporting and compliance corporates may do it for corporates like OpenAI may use it for just consolidating reporting from multiple managers But the work clearly what it does and the platform what it does for them is really not different at all.

And so again, there are nuggets here. Now over time, Alexei, we do build visualization for other clients. So for example, if you go to the government sector, they see things a little bit differently. So we may build visualization for them about how they like to do reports how they like to think about returns and how they want to report on that. So you may change that even there, nothing has changed in how we ingest data, reconcile it, account for it, we go to other industries in Europe and they may want to see some things that are different. In The U. S, they may want to see NAIC differently, but the platform is already doing all of those calculations. The question is what do clients normally like to see? So yes, nothing different from any of the other listed corporate clients we're doing for OpenAI.

Thank you. The next question is from Michael Turrin with Wells Fargo. Your line is now open. Hey, great. Thanks very much. Appreciate you taking the questions. Sandeep, I want to ask the infusion question from a higher level and maybe just listen to you articulate how you ensure you can continue to execute and keep momentum On the core business that we're seeing moving in a good direction while also working to integrate a larger acquisition than you've historically done at the same time? What are the things that you're kind of making sure in place so you can continue to walk and chew gum throughout this?

Yes, this is look, I just wanted to say that this is obviously meaningful