Q1 2022 Clearwater Analytics Holdings Inc Earnings Call
We signed our first French insurance clients and our first European Foundation.
Both chose our SaaS platform to standardize the investment accounting operations across several countries.
These clients prove.
But the platform successfully addresses the needs of adjacent markets.
Our clients continue to adjust the portfolio.
As they look at the changing economic environment.
Given market market conditions.
We increasingly see our clients at alternative assets to.
With the investment portfolio.
But as you likely know.
Alternatives introduce complexity into accounting compliance and risk management.
And increasingly we see clients turn to our platform.
To handle that complexity.
The Clearwater platform because it is a single instance, multi tenant cloud based solution allows us to meet the needs of clients and support the dynamic investment goals.
We are not the only ones uncovering the need for improved automation for investment operations teams.
In the Lloyd's 2022 insurance industry outlook.
Report that found that 69% of phones.
<unk> planned to spend more on the investment data processing.
67% plan to spend more on analytics.
This data further supports our premise that as insurance companies grow.
<unk> and merge.
They need trusted partners to support their operations.
This is why organizations like Harvard mutual insurance cornerstone National insurance and citizens property insurance company are bolstered by going live on the <unk> platform in Q1.
A key area of focus for us is new product offerings.
We continue to gain traction for our new product Clearwater Prism, a modular data and reporting platform.
Let me describe some actual use cases.
Clearwater Prisms open architecture allows for seamless aggregation of data across all assets.
A large multinational insurer is utilizing clearwater prism and clear what is accounting solution.
To consolidate data across public and private assets.
And real estate.
Presume.
Enables this trying to get a comprehensive view of the portfolio, even though we have we will not be accounting for the real estate assets.
Clearwater Prism will enable investment in data aggregation without the need to build and maintain costly infrastructure for consolidated reporting and analytics.
The pension plan has chosen Clearwater prism as the foundation of data and reporting platform.
The combined total planned data from multiple sources.
Personal provides a solution even though.
Investment accounting for the majority of their assets.
Well initially not be done by cure.
And finally, a leading wealth manager has selected Clearwater prism to provide data and reporting across multiple portfolio management solutions.
Brachial order prism serves solely.
As the aggregation and client reporting platform, while doing none of the investment accounting.
Overall, we are very excited about the progress we're making.
We expect Clearwater prism to extend Clearwater is cloud based platform.
To new customer segments, and help us grow wallet share with existing customers.
We are proud to share that our chief client officer <unk>.
One the voluminous and technology and data awards by waters technology.
She was recognized independent professional of the year because she is onboard a large global clients to the <unk> platform.
And improve the operations of some of the world's largest investment fees.
We know this is a well deserved recognition of the impact.
She has had on our client success.
Before returning with a few closing thoughts.
I would now like to hand, the call over to our Chief Financial Officer, Jim Fox.
To provide more details on our first quarter financial performance.
As well as updated guidance for our second quarter and full year 2022.
Thanks, Andy and thank all of you for joining US today, we are very pleased with our continued strong financial performance in the first quarter.
Once again, our quarterly results exceeded our guidance for revenue and adjusted EBITDA, indicating the demand for our disruptive solution remains strong from both new and existing clients.
Moving now to our first quarter financial results.
Please note that our results will be discussed on a non-GAAP or adjusted basis, unless otherwise noted.
Revenue in the first quarter was $78 million.
24% year over year and largely in line with our expectation.
The continued strong topline growth was driven by a solid increase in total clients and continued strength in client onboarding.
As of March 31, 2022 annualized recurring revenue or <unk>.
<unk> reached $287 $1 million.
<unk> $54 7 million increase over March 31, 2021.
This represents a 23, 5% increase year over year.
Again, due primarily to continued strong client demand and revenue retention.
Speaking of revenue retention.
Revenue retention was a consistent 98%.
<unk>, yet again, the 13th consecutive quarter that we have reported a gross revenue retention rate of 98%.
Net revenue retention was a healthy 107% despite significant market volatility in the quarter.
And existing clients continued to add new assets to the Clearwater platform.
While healthy.
Especially for our asset management clients.
This quarters net revenue retention rate was lower in Q4 for two reasons.
<unk>.
Growth from acquisitions within our global insurance clients was broadly lower in the first quarter with one specific large clients early 2021 acquisition now being fully annualized into the retention rate.
In addition, we observed an unfavorable impact to our clients fixed income security prices due to the recent change in expectation for future interest rates.
We have incorporated the impact of those changes into our forward looking revenue guidance.
Gross profit in the quarter was $52 5 million and.
And gross margin came in at 74, 2%.
Gross margin continues to be strong even as we continue to invest.
Head of new client demand in Continental Europe and Asia.
As well as new client vertical, including pension and foundation in fact, we're really pleased with the progress we're making internationally.
And we are further encouraged by seeing our international revenue growth to 13% of revenues this quarter compared to 9% in the first quarter of last year.
With this success and a key growth driver, we expect to continue to invest to further establish our presence in these adjacent markets. As a result, we expect gross margin to remain at similar levels in the second quarter.
Research and development expenses in the quarter were $16 8 million or 23, 7% of revenue and slightly below our expectation as the labor market for top engineering talent remains tight.
As we noted last quarter, we remain committed to investment in R&D and are advancing our efforts to accelerate hiring and third party resources in this area.
Sales and marketing expenses in the quarter were $8 6 million or 12, 2% of revenue up 110 basis points year over year we.
We expect increased investment in this area over the coming quarters as we rollout all of our planned marketing program, including hosting our upcoming in person user conference in September .
Therefore, we anticipate an increase in sales and marketing expense as a percentage of revenue starting in the second quarter.
General and administrative expenses in the quarter were $8 $3 million.
Sure.
11, 7% of revenue up two.
280 basis points year over year, as we continue to annualize the impact of incremental public company costs, resulting from our IPO last fall.
Looking ahead, we expect the general and administrative expenses will remain at a similar level in the second quarter before falling slightly as a percentage of revenue in the second half of the year.
Adjusted EBITDA in the quarter came in above our expectations at $18 9 million or 26, 7% of revenue.
Largely to the favorable revenue performance in the quarter.
I'll touch on our overall adjusted EBIT expectations for the second quarter later in my remarks.
But first let's turn to the balance sheet and cash flow.
We ended the quarter with $263 $7 million in cash and cash equivalents and $52 4 million and total debt.
Free cash flow in the first quarter was $4 7 million and included $2 2 million of capital expenditures, which were primarily made up of capitalized software development costs.
Focusing now on guidance for the second quarter of 2022.
We expect revenue to be in the range of 73.
$2 $73 $5 million this quarter, representing 20% year over year growth.
We expect second quarter adjusted EBITDA to be in the range of $19 million to $20 million with adjusted EBITDA margin expected to be roughly flat to the first quarter of 2022 as.
As we continue to make targeted investments.
Specifically and addressing new markets, while also increasing the pace of client on boarding and absorbing incremental public company costs.
Now, let's talk about full year guidance for 2022 based on our performance in Q1, we are raising our full year revenue guidance, which is now expected to be in the range of.
303 million to $305 million, representing 21% year over year growth at the midpoint.
We continue to expect our adjusted EBITDA to be in the range of $80 million to $82 million.
The guidance, we provided the biggest play for all other measures remains unchanged.
So let me summarize.
We're very pleased with the performance of the business in the first quarter, we once again exceeded our expectations for revenue and adjusted EBITDA.
As the demand for our disruptive solutions remained strong both in new clients and with existing clients. We continue to see ample opportunity to expand the application of our platform across different regions and market verticals and are therefore, it should lead to continued to invest even in the face of a lot.
Certain macroeconomic environment.
As always we remain committed to driving consistent.
<unk> and profitable growth.
With that I'll turn it over to sandy to provide some closing thoughts.
Thank you Jim.
As you just heard from Jim Q1 continue to provide further validation.
Of the disruptive nature of our platform.
We continue to win new clients across the globe.
With new clients in the adjacent markets and finally win new clients to solve diverse business problems.
Besides winning new clients, we continue to make our clients successful.
Last week I had the pleasure of meeting more than 70 clients and prospects in London.
Let me tell you the energy was possible.
We look forward to riding that wave of energy.
We executed on our goals for this year and beyond.
With that let me turn it over to the operator for questions.
Thank you Anthony we would like to ask a question. Please press star followed by one on your telephone keypad is there any reason you would like to terminate that question. Please press star followed by two.
Again to ask a question press star one.
Youre, assuming today's call please dial in and interest of one.
As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question, who will pause here briefly ask questions are registered.
The first question is from the line of Gabriela Borges with Goldman Sachs. Your line is open.
Wow.
One more question.
Hoping that you can point Jos.
That's our expectation.
Okay.
They're right on top.
With all of the wells from our yards platforms on OXXO.
Paula.
Pulling up all of us on one line.
And Cadbury ally.
That's it.
It's a great question and so I think.
When you think about a raising interest rate environment.
And.
Sorry, Gabriel did you want me to talk to our guidance or did you want to talk to the interest rate sorry.
Or just really briefly.
So.
Sure.
That's helpful.
1000 <unk>.
Well spend what you expected.
What's the optimal path.
But that's something that all of them yet.
That's.
<unk> on some levels the high $8 1 million despite a wealth.
No.
Perfect perfect. Thank you so so thank.
Thank you for clarifying that for me I appreciate it sorry, as we jumped on so I think I think you are right I think that you would say that the expectations around interest rates in the month of March.
In April have gone down relative to where they were in the beginning of the year. When we spoke to you at the beginning of March and so you are right generally we talk about AUM gentle tailwind to us and now as we're looking at with those changes where we're not seeing that gentle tailwind, we're seeing a gentle headwinds.
To that end, but just for perspective right when when we've seen the most kind of volatility in the markets. We've seen this ranging call it kind of 2% plus or minus so I just wanted to manage everybody's expectations around that.
Underlying that to your point, we see an incredible we had great bookings in Q1.
And we feel really strong pipeline and good demand environment in Q2, which helps us offset that.
And so I would say that those are part of the pieces to think about with respect to that other things just to remind everyone.
Contractually.
And our we have minimums in our contracts, we have tiers in our contracts and by the way our clients are also moving their assets between these asset classes.
And that ameliorate all of those kind of straight pricing changes that we see.
John .
If I can.
Yep Okay.
So if you look at our guidance at the beginning of the year materially 60 days back and so we came up with the guidance and really when you see us increase it by $1 million. That's really just an acknowledgement of the fact that we over performed in Q1.
So you're just increasing the guidance by $1 million, we think it's a bit early to do anything to the EBITDA, we still expect to come in what we had laid out which was between <unk> 2 million.
So thats really has been more than that.
Almost said I'll start and then the follow up that cost will be for that.
Ill call it the rates environment.
Whatever the high combined Boston public like a tonne since you put on hold on one moment.
What are the pieces that all local market, let's call. It up on the allowance and trials are higher from here and much like the postal we cannot plan.
If our business and we've looked at.
What you should be thinking about is that the interest rate expectation for the rest of the year is priced in.
We look at the value of the assets we have on our platform that is already priced in so unless something changes materially and what the fed does.
It looks like today, we did a little bit better than we thought so you would not see further changes on that the other point I wanted to make was.
We already see on our platform in alpha for clients rebalance the asset mix.
Because even if you understand who our clients our insurance companies' cfos of corporations and asset managers and there will always be balanced to try and take out volatility and so that also should have a positive influence on how we think about it but I do think the current covenant situation this price trend.
Thank you for the call.
Thank you may extend references.
The next question is from the line of James <unk> with Morgan Stanley . Your line is open.
Great. Thank you very much.
Really good obviously to see kind of close to mid <unk> or mid <unk> revenue growth.
How should we think about what kind of scenario.
You would need for that level to be sustainable over the long term, especially since many folks are looking for something more in the low 20%.
Brian is it things like uplift from pros.
Unexpected horizon, two initiatives et cetera.
Yes, hi.
Thank you for the question James So service and Jim. So I think if you look at our performance with a not so many years.
For instance can be delivered in the <unk> right. If we look at.
Quarter, one we think we had a really great booking quarter looking was great I think.
The pipeline continues to show the impact of.
Potential inflation potential problems with Ukraine, but we don't see that at all right now in the pipeline.
Now, having said that we're obviously being very watchful about Q2 through Q4 about seeing what happens and finally, we also worry a lot about <unk> gross revenue retention that's pillar <unk>.
88%, but in our business, we do think we can deliver.
20% plus to go within a sustained basis. So the fundamentals James about is the platform disruptive absolutely we win more new clients than.
Most of the industry sort of expect do we win against competition, absolutely and consistently so we don't see any change in the.
Either the economic environment or the competitive environment right.
So we still think we can continue to deliver what we had laid out last year and in the beginning of this year, which is revenue growth and the trainings are 20% revenue growth. Good solid EBITDA, because I think that is really important to us.
<unk> talked about for many quarters now is between profitable growth is key and sort of just growth for the sake of growth and we don't quite see any change yet James.
<unk> I think we have increased our alco by a million bucks because.
<unk> performed a $1 million, we cannot do that but we continue to be watchful about.
Potential impact from macroeconomic issues I think.
Similarly, the evidence of that.
James It's a bit of the same story right. So how do we keep going how do we keep accelerating what do you have to believe we have to continue to win in key North American markets insurance and asset management, we've had great momentum internationally over the last few quarters. So we continue to feel good about that we need to kind of see.
That accelerate and and then we have all of our adjacent markets that we are seeing good early progress on but they arent yet meaningful yet we want these adjacent markets to become meaningful.
Both drivers.
And so it's a bit too.
Finish up there really February okay.
Fair enough.
In our comments presume just seem to be opening markets.
We would not have otherwise had access to and so we continue to get wins on prism and so that is that this is exciting like Jim said, we are excited with the international things a little bit faster than we thought and we had said the prism because delivered faster than we thought.
Got it got it got it and then just.
Jim I think you laid out really well kind of what was moving the net revenue retention rate.
What's reasonable for us to think about in terms of how quickly we can get back to more of that 111% to 112% range.
Between.
The price increases in upsell et cetera, and one of the things that we should be tracking perhaps in the macro.
<unk>.
That could move that number as well as there are just changes in interest rates and the impact on assets or just one question, we understand kind of how to take that into account.
Sure sure so I think what I.
What I mentioned I mentioned two factors. So one thing that I didn't mentioned that I think it's important to understand it.
Our strategic asset management clients that have traditionally and historically since we've been talking to public company investors have been kind of a great source of that net retention growth within that segment that continues.
That the momentum there continue what we saw a different was within the insurance.
Market place and when we dug in and looked at that you could see and we have a little less control over this in the insurance market continues we get the entire book of an insurance company, but when a reinsurer goes and acquires another book of business.
And they put that on our platform and we enable that right that that's really the benefit of Clearwater is they can they can think about these strategic acquisitions without worrying about the operational burden.
Well that is a little bit less in our control right. Because we are waiting on our client to take that action and so so that moves around a little bit our long term how do we get that.
I'm just going to be aspirational here, James how do we get that NR up to a world class level like our gross retention.
We really need to.
Got it.
Build in this multi product strategy. We're in the very early innings, there, but theres more that we can do for our clients and we need to expand within those clients across various different.
Product verticals, they need us to do more for them and and.
We need to deliver for them.
So just a good thing this is Cindy and I do think this is.
The program within the company there was something you kind of do in quarter, one quarter, but gross revenue retention I'm sure you'll agree as low class.
Net revenue is not and that happens when a price increase in multi product pricing differentiator asset class pricing. There are several variables, but you have to do this in a sustained way so that as you look out a year and two years.
If we can get a meaningfully higher than than where we are.
Both just becomes so much easier.
Benches larger numbers.
But you have to get this.
We don't see it as a multi quarter effort.
That's great. Thank you both.
Thanks, Jim.
Thank you Ms <unk>.
The next question is from re CGM Maria.
RBC capital markets. Your line is now open.
All right wonderful. Thanks, Thanks, Tim I appreciate you taking my questions.
I appreciate all the detail I wanted to start by asking another question on NR, but just thinking specifically as you are seeing more customers new opportunities land on prism.
And that opens up doors that you couldnt opened before really encouraging to see as that becomes a bigger part of your land and you start to get success.
Using the core platform as a as an expand once you have your foot in the door.
Of impact should we expect that to have on <unk>, especially as that becomes a more significant part of the business and new logo lands and I've got a follow up.
Yes. Thank.
Thanks, very much but this is exactly the point ratio as you know we used to go into our client base.
We think for one price and levels at.
And that is.
While you can eat kind of model right.
Sure. What we are trying to do is get a beachhead and then expand and presumed is exactly that so our expectation is that going in with prism should improve in the coming quarters and years. So it is not just also present.
It is about how does the company become more multi product.
Some of it from just disaggregated, what we sell and how we sell and other things building new products clients' needs. So I think both of those have to be done to sustainably grow this over the next several quarters.
Okay.
Mr. <unk> was perfect got it.
Hi, guys.
Yeah.
Yes.
Why was that.
Great really helpful.
And then I just wanted to think about the current environment, you're right you laid out why maybe the rising interest rates and bond markets.
Maybe headwind, we're seeing but the flip side I think we have to ask is there's obviously been a huge pull back in some of these what we're quite frankly egregious valuations around how are you thinking about.
The potential to take advantage of this and more importantly to expand your platform and value prop to customers via inorganic opportunities. Thanks.
So if I can just make one point and Jim mentioned only preliminary M&A, but some of the I.
I think fundamentally in uncertain times and you would describe right now the institution right now is somewhat uncertainty about economic growth inflation period, not quite sure what to do.
It should do well for companies like us right when people move to the cloud when you're uncertain only because.
There is no large upfront investments.
You sort of pay by the drink a little bit. So obviously, it's a better business model people search for efficiency and cost reduction okay.
It was really good at that.
And really in managing risk risk is suddenly.
Really important to people and so our proposition should play well 2014, I don't think it quite seen it yet we have a big pipeline, but to start like the pipeline is massively bigger than what it was 60 days back when we spoke to but those should lead to arps trends is what I think to be able to talk about M&A, though.
Yes, I think that we're obviously.
When you think about our multi product strategy that that becomes a very important element of it and so we're actively.
Actively.
Looking at does nothing to announce at this point or talk about the way we view it as part of our.
Got a real long term strategy for delivering for our clients.
One place that.
When you talk about some of these valuation it we're hopeful that for our employees.
Clients really appreciate this.
Solid durable business model that we have we make money they can rely on us they can count on and that's really important for clients. It is also important for employee employees like the fact that they.
They understand that.
And.
And frankly.
Yes.
We're really interested in.
More employees and so we hope to be opportunistic in and thinking about that savings. You think you know frankly I don't know if you look I think there is definitely more activity. There is no question about that I think when you look at it in Q2 of last year.
I think everybody has different ambitions and I think youll see a lot more activity right now without question and the ballroom in Shanghai, We really think that if you look at Q1 and you look at last year.
It's a good.
Executing well so we want to be careful about any kind of acquisition, which sort of.
And it takes some months away. If you will so think of it as a high bar, but yes as the comps, we've got $260 million of cash and more.
And so we think about capital allocation Chris history.
Got it.
Secondly, Jim.
Thank you. Thank you. Thank you.
<unk>.
The next question is from Pete Heckmann with da Davidson. Your line is open.
Good afternoon, and thanks for taking the question of why I was wondering about is.
Prism.
Yes.
Can you remind us where you expect to see the most success both by industry vertical and industry.
So our industry vertical and geography, but where do you think that can get to as a percent of revenue, let's say by the end of next year.
You.
Make a forecast there.
So in a word Pete no im not going to make a forecast for that because everything is growing.
Reasonably well, but we want to we want to think about that a little bit more.
So talking through the market verticals, where it naturally fits so obviously we had success.
It fits across a variety of different.
Verticals, depending on the different use cases as sandeep spoke to in the prepared remarks.
We think it makes a ton of sense and various asset management client and it fits perfectly.
And then the other place where it fits very well is within Mega insurance clients, who feel somewhat like they also have a portion of their business that feels a little bit like an asset management and so those are the two places where we found success, but we see success across.
A lot of.
Different vertical Sunday.
Interesting.
Real life examples in the prepared remarks, we're a little bit about them everything with insurance clients was large.
There may be willing to have us come in and do 80 facility accounting and reporting, but maybe the real estate assets on a different system in the company that will look like yet, but normally we would've walked away from that but.
But today, what we can do is because of presume we can bring all of that together and give Glenn comprehensive view some mega insurance claim basketball relevant that's one when you think about asset management typically equation.
There you have clients institutional clients of these asset managers and they typically will have multiple systems for different asset classes and perhaps even different countries again, we only get a portion of it not.
And we would have had a hard time, giving you a comprehensive view with prism, we can bring all those pieces together and so in the.
Asset management side, specifically client reporting on the institutional side, you'll see a lot of activity in <unk> sector and finally, the last one retailers talking about one as well.
And the deal. We just won we don't even do accounting for any of them.
We just for their clients, we can bring together all of those account.
Accounting numbers and provide one comprehensive deal so put some dose stuff on the insurance side on the slightly larger insurance clients.
Across the board or does a lot of the asset management side and definitely gives us entre into into the wealth space and so again. These were just finding more and more applications for what we are building.
With prism.
Okay. That's helpful and then just in terms of.
Yes.
Hearing on wage inflation higher attrition, you mentioned, a little bit of a delay in some of your planned hiring.
How are you incorporating that.
In your guidance and how you think about the marketplace and you see further.
Acceleration from here or do you.
Okay.
We've reached a level that may be made.
Enough for advertising.
Sure Pete.
I don't think we're alone in saying that we had seen wage inflation within our employee base and so we're committed to being competitive in attracting top talent and so so we're going there.
Our we do have some benefits right. So we have a pretty diverse employee base.
Queen our operation Center in Boise and in Edinburgh.
And in India, we have we have some optionality around that and so.
So we see that that helps.
I mean, these inflationary pressures are.
Are enormous and our rail.
As it relates specifically to our guidance everything is in our guidance.
Thought about it and we still are able to make the investments we want to make we just need to be thoughtful about how we make us.
Not only does have you sold some.
We did make changes in twofold, a cluster of zinc in Q1 of this year.
Don't see anything else changing for a period of time right now.
We did see some kind of pressure on hiring new R&D staff I don't think that was a little bit harder than we would've part right and I think on the operation side.
We did really well I think as is reflected I think in the gross margin as I'm sure you can actually.
<unk> very good Arctic quickly, but so I think we can do that though but I do think on the technology side.
<unk> been thinking about hey, what do we do.
Especially in the Seattle, and California markets those tend to be.
Should we see a little bit more competitive.
Quarter, four and quarter one than we expected.
Got it.
Don't see it continuing.
Don't see a continuing trend would say there's a lot of this is getting worse something of stock I think we are.
We do a reasonable job of assessing employee satisfaction and we will go out and get anonymous views from the whole company.
Literally 90% of the company, who participate in this survey, which literally closed on Friday, and so we have a reasonable bounds on whether people can debate, whether the appropriate and I think at this point we are in a good shape.
Makes sense. Thank you.
Thanks, so much.
Yeah.
The next question is from Saree <unk> with William Blair. Your line is open.
Hi, Thank you for taking my question I just wanted to follow up on the macro commentary in 2020, despite the market falling more than 30% from peak to trough. Your AUM stayed relatively flat. So can you talk to your level of visibility into demand today relative to prior.
Market downturn and in what ways might macro headwinds to your AUM growth be worse or better than it was early in the pandemic.
Yes, so so I think what we said was historically, we saw kind of pay.
At the highest level of negative two to negative to positive two was kind of the range is historically see that March of 2020 was that negative 2%. So.
So we have not seen.
The other thing that happened in March of 2021 demand got very client, we certainly have not seen that we have the pipeline is full of people are active in fact were out traveling again meeting clients and trying to drive business.
So.
So it doesn't feel the same way.
A 2020 April of 2020 felt when we were in <unk>.
During the Covid crisis.
Okay.
Sure.
Just a follow up.
So.
Just a follow up.
On.
Quota carrying headcount grew headcount very rapidly in 2021.
Can you just update us on how the ramp of the new reps that trended versus your initial expectations and how you think about the growth for the rest of the year.
Yeah. So I think that what was great about the end of 2021 was we had enough quota carrying head count in their seats at the beginning of the year.
If we're honest with you everybody says they want to do that and usually it ended up happening in February March. So so we've done really well there I think.
So I think we've built that out and now we're starting to look.
To try and grow that platform for this kind of call. It the sales of our platform.
For 2023 and.
I would say.
We are incredibly successful at hiring in North America, and I would say that our brand is still relatively newer internationally. We are seeing good success, there, but we.
Continue to have an opportunity to grow that team and that would be very much a focus of ours.
Now the one thing we told all of you last year was it's going to take US a year to get Asia going and then we announced it.
And then we also last quarter.
You want to deal with Mitsui Sumitomo MSR.
<unk>.
Again these are a little bit ahead of when we expected them.
But I do think that.
Really the platform seems to be.
Fact of an impactful just across the globe I'm trying to get across markets and there's been discussion about.
So should we just continue to grow this because because it seems to be.
It seems to work across industries and our approach is yes, it does cost us a little bit on <unk>.
Gross margin, because you're sort of putting people out of Singapore, and putting people out and all kinds of applications, but that's something I think we are doing because we feel it's worth.
Putting the platform out there for us when you're trying to maybe markets, where we can find.
Got it that's very helpful. Thanks, and thanks again for taking my question.
Thank you so much.
Thank you Mr. EMEA Lazard.
Next question is from Brian Schwartz with Oppenheimer. Your line is open.
Hi, David.
For Brian Thanks for taking my question.
Yes.
Quick question on your competitive landscape and particularly around whether anything has changed since your IPO and then are you seeing any.
Or you can.
Certain vendors evolving.
Certain areas or any new entrants potentially and then I guess to lay on top of that.
As you think about your multi product strategy and new functionality to see to add there.
Any areas you find more attractive or less attractive just from a standpoint of competitiveness.
That would be helpful. Thank you.
Thank you.
So look I think what has changed is that we are not no longer under the radar everybody knows about us and when does it get what are they going to go out and compete hard right.
Yeah.
I think a couple of other things that we continue to spend 24% of our revenue in R&D, because we think we are disruptive.
But we want to continue to stay ahead and make investments to stay ahead. So that's the first thing just on a macro level do.
Do we think.
Competition is.
As more aggressive somewhat yes, do we think that we continue to win as much as we have always one absolutely.
So.
But it makes a difference is even better.
We have the.
Only I think a lot of the only single instance.
Multi tenant, but the single security Master the oldest network effect, we talk about all these efficiencies we talked about that comes because not because you're on the cloud.
It doesn't come because of its single instance, multi tenant it comes because we have a single security master, which all our clients use.
And.
That is what makes us unique.
In the market and frankly drives the network effect, which drives efficiency and which drives feature functionality for one client that we built it in Hong Kong.
<unk> for new clients, that's what everybody has that at the same time. So we don't see anyone else coming out of the model of that and I think a number of our competitors have put the software in the cloud.
And that you want to see some of the announcements and Thats interesting.
I think a number of our clients.
Thinking about starting something in managed services.
<unk>.
That's that's most interesting, but I do see both as a validation of what we have built is that the model of the future.
Is on the cloud single instance, multi tenancy, but a single security Master and a complete business solution, which is includes managed services. So I do feel all of these wounds, which you'll see announcements on from our competition.
I think we see that a validation of our model.
And so yes.
We are very watchful, then im sure Youll, often before and we said look we're going to continue to spend 24% because we don't take this for granted.
<unk>.
Continuously thinking about what else, we can do to be more.
Responsive declined beats I don't know Jim would you add to that.
The only question the only incremental.
Great.
Additional item would be.
It would be kind of the M&A question that you had and so I think that we do think about those levels of functionality, but you, but sandy hit the nail on the head we have the single instance, multi tenant single security Master single.
And so we need this is why we have such a high bar we need this solution that we deliver to our clients to be elegant and consistent with that and so thats fair work.
Yes, so just to sort of.
To elaborate the lenses for one more second we believe the accounting engine business model 10 years back.
And this is reasonably complex and calculated which is why even after we had built eight mcf with clients on are different in the tens and hundreds of them we.
We have continued to spend that much money to make sure. It handles the complex to be needed by many large client small client medium sized clients global clients and so it isn't quite that easy I think to just suddenly say, okay. I'll go boom.
This yes, it takes a little doing ASIC.
Great. That's very helpful. Thank you.
Thanks, so much have banking tissue art.
The next question is from David <unk> with Wells Fargo. Your line is open.
Great. Thanks for squeezing me in appreciate it most of my questions have been asked I just wanted to touch on when rates you guys have historically had a tremendous win rates and I just wanted to say Andy.
Any color you can provide how things have been trending.
Thank you.
Thank you this is <unk>.
That's a nice question, though we have this.
This competition question I didnt want to be.
And do not want to sound.
Too aggressive there, but our win rates are frankly very very unchanged.
So we when we go out and compete we win and we win a very vast majority of the time when rates haven't changed very much I think obviously in newer markets is different but overall when you look at Q autos win rate has been sort of talked about before it's very unchanged, so and thats why the commentary around we think that we have a disruptive platform.
We think it is a large tam and so we can continue to grow in.
Continue to get organic growth at a pace, which is.
You laid out in the past so when rates continue to be literally as Jim said I think considerable pipeline the pipeline.
It continues to be robust.
And we continue to build operating capability, a little bit little bit ahead to service that.
That's great color. Thanks Sandy.
Thank you Mr Ankur.
Okay.
That concludes the question answer session I will now pass the conference over to Sandeep for any closing remarks.
Yes, I just wanted to say thank you all for your interest in <unk>.
We know you have maintenance and just taking the time to cover us as we bring tank will pull that we think we have a <unk>.
Really good grade durable story and so again, thank you for your interest in us.
Thank you.
Goodbye.
That concludes the Clearwater analytics first quarter earnings conference call. Thank you for your participation you may now disconnect your lines.