Q4 2021 Clearwater Analytics Holdings Inc Earnings Call
For questions and answers at the end if you 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 Jr. 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, <unk>, Chief Executive Officer, and Jim <unk>, 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 1095.
Question of future goals, including business outlook expectations for future financial performance and similar items, including without limitation expressions using the terminology may will can expect San belief and expressions, which reflect something other than historical facts are intended to identify forward looking statements forward looking statements involve.
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 the conference call, except as required by law.
Our information please refer to the cautionary statements included in our earnings press release Lastly, all metrics discussed 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 Sandy <unk>.
Thank you John and welcome everyone and thank you all for your continued interest in Clearwater.
Finish 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 acceleration to our historic growth rates.
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.
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 planes last year.
Approximately 45% of them left a legacy competitor to move to a platform.
Some who were on the legacy platform for over a decade or more.
Barely finished implementations just a few years back.
We have also won across the spectrum of clients.
Now have 59 clients within the add on 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.
<unk> is a leading fast drilling an acquisitive European insurer that has assets across many countries in Europe .
And we are delighted to welcome them typically order platform.
To understand the 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.
The global portfolio everyday.
Our plan is to 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.
Bringing it altogether.
Good day.
Our platform aggregates reconciles and validates data for more than 2500 social daily.
And Leverages a single security Master.
Every security is validated ones.
And then used by all our clients using our very strong network effects.
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 securities Masters.
Data from all of those systems have to be brought together.
To build a comprehensive view.
Requiring armies of people often.
Leading unreliable levels of accuracy.
The power of the pure water single instance, multi tenant platform.
And being used by an increasingly wider set of clients.
The world.
Including insurance companies asset managers and corporations in North America, Europe and Asia.
One unique business value, we are not stressed enough.
Is that a platform.
True enabler of growth for our clients.
Investing in new asset classes and reporting in new geographies.
Required implementing new technologies and building out additional operations teams.
Our clients are able to scale globally and invest aggressively in widely whetting appetites acquire new businesses.
And then integrate them rapidly.
Because our solution provides infrastructure to do so on demand.
As <unk> told us after a $4 billion acquisition that they had the new securities staged on our platform and.
And ready for reporting.
Before the deal even closed.
Last year, we supported several clients as they integrated new assets from acquisitions.
<unk> saw significant growth organically and still others on boarded additional asset values.
But all had a constant and complete view of their portfolios.
The fact is.
Clearwater gives clients the freedom to grow into new asset classes, we ensure good fees and acquired new portfolios without having to spend months and implementing new systems.
Little has changed in our pesos, which provide us with multiple levers for continued future expansion.
First we.
We are focusing on maintaining our growth trajectory by deepening relationships with current clients, but in our core markets of interest.
<unk> asset Management Corporation.
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.
Our efforts.
Second we entering adjacent markets such as state and local governments here in the U S.
And expanding into Asia.
But also looking 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.
A wide variety of industries, including American century life insurance Carlisle companies, Inc.
Circle.
City, and county of San Francisco High bulk shell Madison Reed.
Okay.
Our competitive win rate is.
It looks at deals that have reached the proposal.
And strong at approximately $80.
Do you have to displace legacy solution.
High quality data and reporting.
In the ever changing world of investment accounting.
International expansion continued with the signing of many new clients, including for our first seven figure client in Asia, which we had announced.
Leadership, our guide three Raman President of our Europe and Asian operations.
International business.
The international market accounted for over 20%.
Of new leases.
We have good momentum and with approximately 40% of our total addressable market in Europe .
We're excited about the opportunities ahead.
On our new product offering we called Prism, which allows pure water to offer a modular investment data form.
In situations.
From the current infrastructure.
In a given country or for an asset class we.
We can use presumed to integrate.
Other data sources into Clearwater reporting platform to get a comprehensive view of the global portfolio.
For example.
A large insurance company can now view additional details about the mortgages on clear water for a single deal and due to the global multi basin portfolio.
We have a promising and growing pipeline for Brazil in 2022.
Maintain our technological advantage, we reinvested, 24% of our revenues into R&D in 2021.
We made significant strides with our product enhancements in Q4.
In 2020 , one we improved our product accessibility and usability kept up with the ever changing standards by solvency II NTIC Ifr as scheduled.
Others, so that our clients don't have to.
We also continue to introduce additional support for multiple construct capabilities.
The address alternative assets we have.
Believe that this product investment allows us to be increasingly comprehensive integrated technologies and continue to expand competitive moats.
With continued focus on client success.
All three of our operating centers.
Mr. Delaware 24 by seven operations these centers delivered.
Clients across the globe everyday.
And play an important role in Onboarding clients.
Of the leadership team, we have a tier one.
Okay.
Working as a team we.
We are committed to building a truly special company.
That enables clients to transform.
Are they new investment accounting and 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.
Thanks, Sandy and thank all of you for joining US today, we're very pleased with what kind of financial performance for both.
The fourth quarter exceeded.
Our guidance for revenue and adjusted EBITDA margin on the strength of continued robust client demand as well as an acceleration.
Client onboarding activity.
As for my specific remarks today I'll start with you.
<unk> of our financial results for the fourth quarter and full year 2021.
Then wrap up with guidance for the first quarter as well as full year 2022.
Before detailing our core financial results.
Ill first address two items impacting the year over year comparability of our fourth quarter.
First you will notice that we recorded a $49 million.
One time recapitalization compensation expense charge.
We had a recapitalization transaction on behalf of the existing unit holders at that time.
These existing unit holders to sell their units to new investors and.
In connection with the transaction.
Selling unit holders contributed $49 million towards bonuses paid.
Two employees and related payroll taxes.
Next following the completion of a comprehensive review of sales tax reporting obligations across multiple jurisdictions in late 2020.
We recorded a provision of $9 1 million to cover historical sales tax liabilities in many states.
All of which was recorded in general and administrative expense in the fourth quarter of 2020.
Throughout 2021, we began collecting and remitting sales tax jurisdictions.
On behalf of our customers.
Contacting existing customers executing voluntary disclosure agreements across many state jurisdictions.
Some customers were able to crude usage outside of the taxing jurisdictions ultimately leading to a 2.0 million reduction and its outstanding liability during the fourth quarter of 2021.
Without the benefit of that reduction Q.
Q4, 2021, adjusted EBITA margin would be 25, 9%.
Consistent with the guidance, we provided for the fourth quarter.
Moving now to our fourth quarter and full year 2021 financial results. Please note that all of our results will be discussed on a non-GAAP or adjusted basis unless otherwise noted.
Revenue in the fourth quarter was $69 8 million up 27% year over year due to the successful onboarding of several large clients during the quarter and the growth in a number of existing clients.
Fourth quarter revenue was above our expectation as the investments we continue today to expedite client onboarding began to pay off sooner than we had anticipated.
For the full year for many years.
As of December 31, 2021 annualized recurring revenue or <unk> reached 277, 8 million a $28 $8 million increase over September 32021.
And represents a 26% increase year over year again. This increase is primarily related to the strength of our new sales throughout the year.
Gross revenue retention was a consistent 98% marking the 12.
Consecutive quarter that we have reported gross revenue retention rate of 98%.
Net revenue retention was again healthy.
111% up 210 basis points from the fourth quarter of 2020.
Due to strong overall growth.
Gross retention.
Price increases in upsell across our client base as clients continue to consider us a key enabler of that.
Their growth.
Gross profit in the quarter was $52 7 million and gross margin came in at 75, 5%.
Due in part to the strong quarterly revenue performance.
We were able to deliver these gross margin, while increasing investments to drive faster client onboarding and expanding our international delivery capability.
For the full year gross margin came in at 75, 6% up 50 basis points over 2020 for the full year 2022.
Research and development expenses in the quarter.
For $16 5 million.
Or 23, 7% of revenue and slightly below our expectations due to slower than anticipated head count growth.
The hiring market for top engineering talent remains very tight but.
But we are laser focused on multiple strategies for accelerating our hiring in this area in 2022.
For the full year research and development expenses came in at just over 24% of revenue.
We expect our 2022 research and development expenses.
Lastly on par as a percentage of revenue with 2021 as.
As we continue to make investments in this area to drive growth in our core market. While also investing in the future products and growth opportunity with Sandeep mentioned earlier in his remarks.
Sales and marketing expenses in the quarter were $9 6 million.
Or 13, 7% of revenue.
280 basis points year over year.
In line with our expectations.
For the full year sales and marketing expenses came in at 12, 6% of revenue representing an increase of nearly 370 basis points year over year.
And demonstrates our continued investment into our go to market capabilities, both domestically and internationally.
We're pleased that these investments help drive the Reacceleration of revenue that we saw in 2021, we plan to keep our 2022 investments in sales and marketing at a level similar to the fourth quarter of 2021 in terms of percentage of revenue as we believe we have made most of the key hires needed to execute.
Our growth strategy in the near term.
General and administrative expenses in the quarter were $6 5 million.
Or nine 4% of revenue down significantly year over year due in large part to the reduction of the sales tax liability.
For the full year general and administrative expenses came in at 10% of revenue.
Looking ahead to 2022.
We expect that general and administrative expenses will increase slightly as a percentage of revenue as we annualize the impact of incremental public company costs, resulting from our initial public offering. However, we continue to expect to scale our back office functions overtime, providing operating leverage to the business.
In the long term.
Adjusted EBITDA in the quarter came in above our expectations at $20 1 million or 28, 8% of revenue.
Up $13 $3 million from the fourth quarter of 2020, primarily due to the strong revenue performance as well as the favorable adjustments to our sales tax liability.
For the year adjusted EBITDA was $72 7 million or 28, 8% of revenue.
Representing an increase of nearly 80 basis points year over year as we continue to drive robust form.
I'll touch on our overall margin expectations for 2022 later in myeloma.
But first let's turn to the balance sheet and cash flow.
In the quarter with $254 6 million in cash and cash equivalents.
And $53 million and total debt free.
Free cash flow for the fourth quarter was $10 9 million.
And included $1 5 million of capital expenditures.
Which was primarily made up of capitalized software development costs.
Focusing now on guidance for the first quarter of 2022.
We expect revenue to be approximately $70 million this quarter, representing 23% year over year growth from the first quarter of 2021.
We expect the first quarter adjusted EBITDA to be in the range of 17 million to $18 million.
With adjusted EBITDA margin expected to come down sequentially from the fourth quarter of 2021.
We continue to make targeted investments specifically in client Onboarding and in research and development, while also absorbing incremental public company costs.
Now, let's talk about guidance for the full year 2022.
Building on our strong Q4 results.
$10.
Representing just over 20% year over year growth at the midpoint.
Some investors have asked about the potential negative impact of higher interest rates on the value of our clients fixed income holdings today.
Hey.
We have yet to see it.
Strong signal that the expectation for higher interest rates has had a significant impact on our revenue.
But plan to continue to monitor the impact and we will provide you with additional commentary throughout the year as we update guidance.
We expect our adjusted EBITDA to be in the range of 80 million to $82 million.
With adjusted EBITDA margins likely ramping up throughout the year as we plan to invest more heavily.
The late fourth quarter.
Equity based compensation expense is expected to be approximately $66 million.
Depreciation and amortization is expected to be approximately $5 million and.
And we expect interest expense of approximately $2 million.
29%.
Okay.
And we project full year fully diluted weighted average share count to be approximately 255 million shares to summarize we are very pleased with the performance of the business in the fourth quarter as well as for the full year of 2021.
We produced accelerated topline growth and maintained strong adjusted EBITDA margin.
All while making targeted investments and driving future sales growth and increased client Onboarding Steve.
Entering 2022.
Our revenue retention remains consistently strong while our healthy pipeline makes us optimistic about the accelerating demand for our solution in the marketplace.
We're very excited about the significant opportunity in front of us.
With that I'll turn it over to sandy to provide some closing thoughts.
Thank you Jim.
As you can see we continue to run a strong disciplined rule of 50 plus countries.
We are proud of the many achievements we made throughout 2021.
Including ending Q4 on a strong note and going public in Q3 without letting the process through our business.
We believe that we have a disruptive platform.
In an industry that is ripe for change.
We plan to methodically marched down the three parts of growth that we've outlined.
We're looking forward to 2022.
Continuing to execute.
Turning to delight our customers.
And continuing to build a special company.
And all of us are proud to call out.
With that let me turn it over to the operator for questions.
Thank you if you'd like to ask a question. Please press star followed by one on your telecom keypad. If for any reason you would like to remove that question. Please press star followed by Keith again to ask a question Christa online.
A reminder, if you are using a speakerphone. Please remember to pick up your handset before asking your question. We will talk to you briefly ask questions or it gets started.
Our first question comes from Kevin Mcveigh with Credit Suisse. Please proceed.
Thank you so much and congratulations really really exceptional results.
I guess sandeep for Jim.
In terms of the 2022 guidance can you help us understand what type of AUM is embedded in that and.
I know, it's probably difficult, but is there any way to think about what type of interest rate assumptions are in there just because it sounds like youre getting that question a little bit in terms of what type of rate assumptions are factored into the guidance.
Sure sure Kevin. Thanks, This is Jim.
So let me just start with Q1 right, we're guiding to 23% revenue growth and we're actually picking a single point $70 million for Q1.
Which is unusual right that that's kind of acknowledgment that we're further into the quarter and our confidence levels are naturally higher right. The.
For full year guide to 302 to three or four.
Inc.
Is $7 million more than the street consensus for 2022 at the midpoint, there and it's totally consistent with our growth.
Growth rate of being greater than a 20% grower.
Yes.
You referenced interest rates, but that's one.
Really just.
A totally handful of things that.
We make these really unusual times.
The invasion in Ukraine.
Volatility in equity and commodity markets inflationary pressures as well as the 25 basis point change in interest rates and let's not forget about COVID-19 right.
We thought that would drop off the line.
So.
The macro environment is pretty difficult to read.
Two or three quarters into the future.
And so we really wanted to standby guidance that we can stand behind.
In light of that uncertainty.
And so when you're thinking about that and remember we have.
A variety of minimums and and things within our contracts.
We we've.
Really looked at that guidance and contemplated.
What we see within our business model and our pipeline today. So we would expect the.
Continued AUM growth that we've seen through adding new customers growing with Ari.
Existing customers.
And doing more for our clients.
As we as we go forward.
I guess the last thing I'd say is when you think about <unk>.
Please go ahead Simon.
Please go ahead.
Okay.
Yes, I was going to say Kevin was if you look at our client base.
With the whole investment strategy has evolved around protecting the asset pool, we've been there for the team.
So traditionally have had very low volatility.
You may recall during the IPO Road show, we think we.
We had gone through the 2020, what happened, which was frankly, a big disruption all the time, but the impact on our assets under manager bonus was minimal.
Interest rate started to change and that we expectations at the start of the change in November of last year, and we launched do you expect to be.
Big change an answer as to <unk>, we continue to watch it but we just don't notice it and clients are moving assets, a little bit and we sort of see whether they're moving it.
But the one of the big volatility continues to be really really low.
And I would almost think sandeep given that.
Kind of.
You see some incremental volatility we're thinking about that right.
Yes, I did have one more thing Kevin if you think about the level of those uncertainties.
Variable cost base, and that's southern accelerates movements with cloud move into managed services and things of that ilk.
That's really what what you would want if you were to use it or the other side right.
Totally agree thanks, so much great job.
Thanks, Thank you Kim.
Thank you Kevin.
Question comes from Michael <unk> with Wells Fargo. Please proceed.
Michael are you on mute.
Hello.
Michael.
Okay.
We can add yes, okay.
Hi, This is Michael Berg on for Michael.
Congrats again on a fantastic year in first.
Couple of strong quarters as a public company.
One thing I wanted to kind of double click on.
If you look at the numbers and guidance.
Colored commentary on expenses in fiscal 'twenty, two makes it seem like a pretty sizable step up in sales and marketing expense.
Anything in particular Youre investing for you mentioned.
Onboarding.
Any geos or vertical is to think about what are you exactly spot sales and marketing and can we think about that potentially driving higher growth.
Yes about the 20% level moving forward.
Sure sure Michael that peso.
Tony.
So going through each and treasury.
Sure.
So just make it easy.
This is the last time, where both goodness alright, yes, I totally agree.
No.
So we feel really good about the opportunities we have and so as you think about where are we investing we last year, we continue to accelerate our investment internationally. We saw great returns on that so we continue to lean in.
As we mentioned in the prepared remarks, we have the leadership teams in place and we will be able to drive those.
Those teams.
Through throughout the year and we'll continue to build there. We also are leaning in on.
Our marketing spend we have a great new CMO.
And.
Susan is doing a great job and we have a.
The event in.
In London for our European clients.
In April of this year, and we're going to lean in.
Unrelated marketing spend that we have on.
Throughout here.
We also obviously have done a bunch of investment throughout 2021 to build out those teams so part of that expansion.
Year over year is mainly the annualized nation of those times.
I would just add a few things Michael to that one is the investment industry is consistent with the Q4 levels, but when we spoke to you all in Q2 Q3 actually.
Remember, we said, we're going to invest more in the operation side to onboard clients and frankly as product pricing you saw in Q4 those numbers are really good.
And you ultimately just quickly mention that.
And one of these offices et cetera.
In Continental Europe , and in Asia still has to blossom fully right. It's not like we are.
Contributing very much of the 2021 growth because there was setup.
Contribute to growth in 2023.
So we still feel the 13 and 14% for the marketing I think is as good.
Continue to believe that we can manage EBIT.
The levels you would like why are you making that investment.
So why not right.
Got it thank you.
One quick follow up.
Can you quantify the number of quota carrying reps.
<unk>.
We.
We have not historically disclosed that.
And so.
So Michael I can tell you lots of money lots of money being spent on it good Lord I look at that and say Oh My God.
We are adding a number of chosen.
I'll, let joel distribute effectively on boarded and contribute to growth. So we look forward to and look forward to them doing that in 'twenty, two and like I said have a much larger impact.
2003.
Great. Thank you and congrats again.
Thank you Mike.
Thank you. Our next question comes from Jackson Ader with Jpmorgan. Please proceed.
Great Hey, guys. Thanks for taking my questions.
No.
I wanted to ask about the Onboarding investments that you made and.
I'm just curious.
Because I think a lot of time to sign a customer and you will run Clearwater in parallel for some pilot timeframe.
Next to their legacy systems and I'm curious.
It would be our morning investments.
Try to drive faster time to that parallel running or were they trying to shorten the amount of time that that.
Pilot period with less.
I'm, just trying to get at kind of the sustainability here of that of that.
Onboarding.
Tailwind to growth.
Yes, so Justin this is sandeep. So thank you for your question.
Listen I think we've seen them on onboard in the first thing is you can't ship time.
I mean, you can get kingdom motor really quickly and yet you have to be the pattern.
To be confident about that right.
The system will lag. So so you can't treat that time secondarily, though.
If you don't build a really solid organization.
Linear ability to execute around the world for us.
And as you know, we sort of lump sum deals a little bit.
Liquid sold in Asia and in Europe , So we have that.
That's again, Jim is talking about building out today, you could get programs and projects literally anywhere in Europe and in Asia, I think we can execute right and we can give them the speeds. So I'll return to become a little bit more efficient incrementally, yes, and that's always the case rate, but do we now have.
Leadership.
Which which knows how to execute very large programs and the answer is yes. We now have leadership at the senior most level at the next level and those have been built out they have been in the organization for reasonable periods of time that we feel more.
We're confident about.
Kilograms of any size and magnitude of it I mean, we send out a press release you may have seen about Vittorio.
It's a really significant win in Europe , and we feel completely comfortable that we can we can implement that.
Julian anything you would add to that.
Gotcha, Okay now.
Thanks.
Okay Alright, great.
And then just a quick follow up I mean is there.
Is there any kind of.
Seasonality.
And markets that we should think about in terms of RFP cycles, I mean is it.
Just your typical fourth quarter it tends to be the heavier or is there anything we should be thinking about as we head into 'twenty two on replacement cycle.
Not really diligently there's no real reason to do it at a certain time or not right.
All of these.
Yes, im not quite sure.
Sure I can point to any seasonality about decision making.
I don't know would you.
The only thing I would caveat for that is is in the natural thing that happens across a lot of.
Their software and SaaS businesses in Europe in the third quarter gets a little.
Biotech.
And then and then because we're doing accounting and people may not over on the Onboarding process. There is also.
<unk>.
People like cap clean years, and so we've been able to kind of manage.
Through through that process people would want a full year of data on the platform.
Trajectory we are still.
Right right yes.
Im talking about like deals.
Deal flow and bookings that's right okay. Thank you.
Thank you.
Thank you Jackson.
Next question.
Bob and Teri with William Blair. Please proceed.
Hey, guys can you hear me okay.
We can.
Great.
Loud and clear congratulation.
Great set of results.
Certainly excited about the outlook here I guess I wanted to touch a little bit.
On.
Your product side here.
You've obviously had you brought in a new CTO.
A little bit.
I would go.
As you think about two weeks and you think about the AI machine learning we've discussed in the past I'd love to understand how key and you were thinking about the potential leverage some of the AI ml capabilities to gain additional insights from the assets on the platform can you talk a little bit of a longer term plan already had some times. It about what you could do with the data and the asset the platform to drive additional product sets.
Yes favorite question of mine. Thank you Mariano it's almost like a call you before this Josh.
I think.
You did reaffirm that can take it.
Great.
No.
We are thrilled with bringing on <unk>.
They bring really complementary skills.
It's clear the market and the industry.
There was little.
Didn't quite understand the dots have been under for a long time, and Charlotte consumer really strong technology background and again in terms of scale in terms of machine learning AI Rps, those committees and how to really get value from them.
So we are really excited about what we're doing here.
One big source of insights to what the clients want.
They want to insights data and I don't have to say that we are continuing to make really good progress, but one of the biggest things you get insight.
This too is to bring all the data together in a normalized.
This way and Thats why Youll see Jimmy pushing so much on prism because I presume does is.
<unk> is easy, but then people have other systems in other countries or there is something else or a real estate theres something else for <unk>.
For derivatives, perhaps and and so what presumably gets.
Very enhanced.
<unk> shines can get insights into our global global portfolio right sorry.
We continued as a contributor.
<unk> sort of invest in that.
And we will contribute so for all of next year.
Gotcha.
Okay. Let me, let me give you one or two.
Yes of course.
Sorry, sorry, I was just kind of give you a little example of like bringing this data together all into one place.
And any example, so.
On Monday, we ask the data science team whats our exposure to Russia Securities because we thought maybe someone might ask a question about that.
And they were able to come back to us and say Oh, it's.
Zero, 3% are securities that are either.
And body.
Security Master in Russia, or denominated in rubles, and trying to understand that so you think about that that's across the $5 9 million sorry.
Trillium and assets on the platform you can you can figure those things out.
Just throwing that one that was AD hoc right.
That's the benefit of.
To your point talking about kind of what's the opportunity for those insights that's just one more.
A quick example.
We went through.
Thanks.
That's really helpful. I wasn't going to ask that question, but thank you for.
And I'm sure some of them.
Let's touch on competition really quickly any update on kind of environment is it still status quo I guess, how do you see most of the freight cost maybe some sense of when rates would be helpful.
Yes.
Asking all the questions. So I think we think about.
But.
Understood.
But the 80% Mark.
And this is one proposal gets written.
And how many of those do we win it's 80% has been 80% for a period of time.
It wasn't to Fiona earlier, and now that is superior so that as that as one team.
We continue to see under.
Under the radar anymore, right, but albeit straight for the last two or three years I think.
Everywhere. We go there is some competitive.
The pressure about.
The legacy provider fighting back and that happens very often.
Sure.
Turning to an RFP, but enough times declines don't do an RFP.
Sort of simply move ahead with two water. So I don't we have not seen any change in any of these sectors in terms of win rates.
Now our job I think is kind of in that.
24% of our revenue, we're going to continue to put it into R&D right.
And we want to continue to be more comprehensive do you want to be continue to be comprehensive in asset classes is in countries and accounting basis. So.
Our whole agenda heavily <unk>.
Continue to push contributor inbound can we continue to innovate.
<unk>.
Literally as of last month.
Sure.
We haven't seen in competitive.
Win rate degradation.
Gotcha.
So what's your budget that's great guys. Thanks for taking my questions. Thanks for the detailed in depth.
Congratulations.
Thank you.
Thank you Bobby.
Next question comes from Gabriela Borges with Goldman Sachs. Please proceed.
Good afternoon, and thanks for taking my question and congrats on the quarter.
Quick follow up on your.
Commentary.
And specifically.
Sure.
Just space and now in the process up to that how aftermath of it does that at all.
B malls.
Next plan.
But it sounds like the key things happening not only asset managers.
Alright that sounds it sounds <unk>, but it sounds like 10, IRR, but when asked.
Asset manager with Wolfcamp.
But I'm wondering if you could just talk a little bit about what you have.
And any updated thoughts on higher thinking about marginalizing. Thank.
Thank you.
Hey, guys. Thank you for the question.
So look I would.
I think I said in my remarks, we're quite excited about this.
210 basis point increase in the MLR. So if you think about <unk> right.
So.
What's happened because of the one of two reasons one is generally generally both of that.
Personnel.
That's one thing second one is.
<unk> declines are digging into it.
US into more divisions of the business as you know some of these asset managers broadly speaking if you call them asset managers, they are British lines of businesses.
So the pension.
All kinds of business to growth and that that's one.
The second one <unk>, which is very interesting.
<unk> companies desperately have become more acquisitive.
And so.
Tier one set of wins.
And even higher proportion of those because if you buy very U S based insurance company and you buy assets in Germany.
And told you on all of our reporting.
Don't care, whether you would have to go design on the central about all of it and it will be hard until we can just simply turn it on obviously doesn't mean, it's that quick but different Chinese is right off the bat. So we are starting to see MLR growth come from insurance clients as much as we see it from asset managers, having said that as a mandate.
Images are meaningfully bigger sites.
Great them, but we continue to.
Bump up it so happened because of insurance.
Insurance clients also buying pools of assets around the work Jim would you add anything to that.
Belgium.
Yes, and I think every year.
You are correct that as new right.
That is that is a phenomenon that we saw evolve throughout 2021.
To help with that.
That's helpful.
Good morning.
You are right.
When we win on the road initially in the IPO, We really did talk about strategic asset management and this is.
Just as important for.
Global insurance companies, who have aspiration.
Missions to acquire and grow as well.
Got it that's helpful. Thank you and as a follow up can you have a comment in your press release.
RST 100, new clients more than 100 clients.
45% macro legacy from Canada, maybe just ground that price relative to history.
Five years ago.
The remaining 55% of that greenfield connecting all of that color.
Bob.
Customers are not leaving behind.
Again, it's a matter of fact.
Paul just a little more of that thank you.
Yes. Thank you for the question. So look I do think we have had this half and half mix sort of raise your on time, if I can.
<unk> right, we really get 11% growth from from current lines and sort of.
Even though that's sort of a good situation to be in so the question is if we get 45% from new logos and legacy competitors.
What was the rest of the 55 getting before that rate and where did it come from so.
Several of them one is custodians right so the way.
They were getting that accounting from custodians for certain certain asset classes and under the custodian for another asset class and so they had multiple custodians doing the accounting for them in this sort of transition material water.
So thats one.
People have internal systems showed so that happens quite a bit is that people have just big data.
Data warehouses, if you will to sort of pull all of that.
Inflammation.
And provide some level of reporting there so that also happens quite a bit.
And then is there some movement from XL beyond.
Believe it or not especially on the lower end of the segment people continue to use excel.
<unk> Jain Exxon macros and.
And so people transition from that so I think custodians internal systems XL set of other tree, where you would normally see the other 50% 55% of logos come from.
And then the last piece that you have in there.
That is really truly the greenfield.
So these are people who are now investing for the first time, so those IPO companies.
Our or someone decides to actually take a different approach in their investment philosophy around that excess cash for corporations et cetera.
Got it.
Thanks.
Wanted to touch a lot about.
Good morning.
With and growing internationally and international.
Capabilities et cetera, I'm wondering if you could talk a little bit about.
Youre expecting from that.
Contribution from international to grow seems like.
Roughly.
International stores contributing less than 10% of revenue but.
Even Europe itself is probably 40% of Tam so.
How should we think about the international mix and should we expect it to to develop first.
Asia or what that composition is likely to look like.
So you are at.
Thank you thank you Budd.
So go ahead sorry.
I know you should.
Sure. So you are accurate that the revenues as a as a percentage of revenues right because that kind of has 20 years of business involved in it it's less than 10%, but this last year.
As a percentage of our new business, it's 20%.
So obviously any change there right its accelerating and we're seeing the returns from the <unk>.
Okay.
And then I think long term when you think of Tam being 40% that you would see.
Long term debt.
Your contributions over time would that would ultimately.
Move today.
To the relative ratio of your overall total addressable market.
Sure.
Jim Thank you Larry.
Yes.
I think the best news that we've learned this year is that the needs in Europe .
Those needs are consistent.
With the needs in North America, and so that the same drivers that we see I think we have a lot of conviction.
And so we think that.
Is it really great opportunities alright, sending policies.
So now all of that is going to edge into the executive <unk>. Jimmy is that if you look at our larger clients they already have assets around the world.
So it's not like you look at our largest client only investing in the United States or North America with investing in Europe , we invested in Asia already.
We've always had a need for the acquired forest in there you look at.
All of the reporting on to Continental Europe , all of those have already been built.
While back now does that mean, we don't have any work of course, we do so we just released such gap. For example, now we didn't have done Chapel Hill.
Tiger can be done as Tiger earlier, so I think there is work to be done but the needs are.
It's not exactly the same if not more acute and that's because when you think about North America at least it's all one regime. If you will right, but you go to Europe , and you've got German GAAP and Dutch happening, but every gap just a little bit different.
And when you think about Asia did the need is even more acute because Japanese GAAP and hi, Catherine almost nothing in common right.
Different so so sorry.
We think the need is more acute on that side, but it takes time there James It takes time to build it out.
We are going through it very purposefully built our officers are both out pre sales capability delivery capability locally and otherwise and so it's a bit of a march.
Yes that makes sense and I guess kind of along similar lines it seems like.
At least your horizon two initiatives.
Expansion into adjacent end markets in APAC have gained traction earlier than anticipated or at least earlier than we had anticipated, especially in Asia.
While that opportunity was categorized as medium term in the IPO process.
Are you now dual tracking those initiatives in a sense and is that part of where youre. We should think about the incremental investment going into 'twenty two.
I think in 2022, James you will see a full flooded offers being set up and it has been set up in <unk>.
Each of these locations so I'll be going after for example state local government. Okay. We have a dedicated team which have been working on this for the last 678 months. So I do expect all of these drags into if you will to be fully funded and fully working today, they're working today now with the contribution we really high end <unk>.
We're going to be really significant 23, thats, our expectation and so we are not we are doing tracking exactly like you laid out and you see the increase in sales and marketing costs as a result of that and.
We have EBITDA, we had the growth in.
We want to push while maintaining EBITDA.
So we don't want it to go down further, but we want to use the growth dollars. If you will to drive further growth as we did in Q4 in Q4 was a good test to release that credit cycle because of that.
That's great. Thanks, a lot.
Thank you.
Thank you James the next question comes from Rishi <unk> with RBC capital markets. Please proceed.
Wonderful answer Dave again.
Nice to see acceleration in the quarter.
Two questions I wanted to ask a quick one first on gross margins.
Maybe can you talk about the longer term opportunity.
Spansion in the model.
Second.
Just wanted to maybe your philosophy or attitude.
Towards stock based compensation.
Alright, because based on the guidance SBC.
It's going to go right.
The departure I think from what we may have been expecting can you maybe walk us.
As to how Youre, how youre thinking about SBC and how should be thinking about that long term. Thanks.
Okay.
It's something that.
Pardon.
Okay.
So that's opportunity there.
80% gross margin business.
Healthy SaaS business with an 80% plus gross margin business and we see that having said that that's not the plan.
And we're kind of staying consistent.
Which is healthy.
The SPC.
Yes.
If you look at Q4.
$70 million, so actually 66 is coming.
Now and the reason why it's coming.
That had an impact.
On revaluing, a bunch of options for stock based compensation purposes, which really has no economic impact.
And you will see that taper off over over a number of years as those <unk>.
Amortize and so so I think.
We have a philosophy I'll, let <unk> speak to the philosophy that we have but I would say that we.
The nice thing about being a public company as we've been able to expand.
<unk>.
Pool of employees that are.
<unk> equity and I think that that has been very useful in both attracting and retaining employees and so I think that that has been a great tool, but I would say that.
We guided to that just so that everyone would know that but I think there are some.
Historical elements to it that.
We'll run out over over time.
<unk> funding.
Yes, I really wish you do two things there one is.
Definitely we are looking for on the tech side as leading edge, if you will sometimes right.
There's a bit of a reward for that talent.
What we do is we we have Todd.
Hardly work with.
Compensation consultants and sort of look at these 20 companies or so who are in our space right. So device software.
We do and we want to stay very much we've been naturally there is nothing extraordinary we feel we want to do or need to do to attract talent. So.
We go back and look at these these companies and see what they do how much the.
What our issue that provide people and we don't and we try and I guess, that's still very much within that lean and we don't find the need to do anything extra.
Extraordinary there right and so at this point, 100% of people in the company.
Issues in the.
And we feel it is nice and sticky.
As Hudson region talents to Hudson, attracting talent and.
And Thats our thinking there.
There was something more revolutionary issue isn't thinking is.
Look at what our competition does and so it's David and blame there.
Some of it got it that's really helpful. Thank you so much guys.
Thank you.
Thank you Rishi.
The next question comes from Yung Kim.
Capital. Please proceed.
Sure.
Alright. Thank you congrats on Stephen Chin on I am very strong finish to the year.
We continue to make progress on the international thought what are you seeing in terms of the overall land and expand motion there.
Perhaps maybe smaller initial land deals.
The U S.
Faster expansion velocity afterwards thanks.
Yes. Thank you for the question.
<unk>. This is Jim said, 20% of new business set of contributors. This.
This new expand it is all new business. So it is actually even more.
We can definitely more impressive when you sort of thinking about that right now.
Ordinarily when you go to a market you would think of doing small deals and bigger deals some bigger deals, but we have we talked about the leadership of dietary.
The abuser one is significant we will be doing a press release iPhone Arturo.
That is a significant deal.
A press release, when we've gone I think earlier in the year.
Those are not small deals at all and so we continue to see that.
And with very large clients there.
Is it a little bit surprising perhaps liquidity contingency.
Significantly.
So if you look at the concert with Okay great.
Pretty much all Bob.
But.
Yes.
The other question that I have is whether or not.
Talk about one particular industry, maybe does asset manager reinsurance and that it's growing faster than your expectation.
Just like just a couple of quarters ago.
Any meaningful.
And based on pricing trends that you're seeing in any particular vertical.
Okay.
Okay.
Yes, Jim I don't know the accountants look the pricing since we don't so we're able to price. What we think is appropriate and I think as you said the price a little bit to trying to get to 80% steady state and we can achieve that and we haven't seen.
We haven't seen push them back right. So we continue to be able to get this growth rate, while continuing to get this done.
On the brokerage gross margin right. So should we continue to sort of see that.
Jim or Dan Snyder.
Yes, I think that that.
I think it's really the same story, obviously, we're growing really nicely and insurance.
And.
And.
Local state and local government has grown really fast.
A smaller number.
And asset management has really continued to figure out whether that was growing.
Actor.
When we went public and continues to grow very quickly.
It's good news across models.
Mark.
Thank you Glenn good to hear thank you so much.
Okay.
So <unk> has been our last thank you Mr. Kennedy.
Okay.
Yes, that's our last question Sandeep, Pat do you want to just give a quick closing remarks.
Or I was just sandy before we did a one one administrative things to share with everybody. Its just just our lock up releases next Monday from the IPO just wanted to share that.
That was an 8-K go ahead Tony.
Another thing I just want to thank all of you clearly from the questions.
We all understand our business and we're really happy about that because it allows us to be very very transparent about what we are doing and why we're doing it. So I hope you continue to contribute.
Continue to support <unk> I want to thank you all for your questions and we really really appreciate it. Thank you.
That concludes for clear Wonder analytics fourth quarter and full year 2021 earnings conference call. Thank you for your participation you may now disconnect your lines.