Q2 2023 Clearwater Analytics Holdings Inc Earnings Call
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Ladies and gentlemen, please me in holding the call will begin momentarily. Once again, please remain holding the call will begin momentarily.
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Right.
Good afternoon, ladies and gentlemen, thank you for standing by and welcome to the clear water analytics second quarter 2023 financial results Conference call. At this time, all participants are in listen mode only after.
After the speaker's presentation, there will be a question and answer session and now I would like to welcome John Park head of Investor Relations to begin the conference.
Thank you and welcome everyone to Clearwater analytics second quarter 2023 financial results Conference call.
Joining me on the call today are Sandy the high Chief Executive Officer, and Jim Cox Chief Financial Officer.
After their remarks, we will open the call 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 provision of the private Securities Litigation Reform Act of 1995 expressions of future goals, and pensions and expectation, including in relation to business outlet future financial and product performance and similar items.
Without limitation expressions using the terminology may will and expect and believe in.
And expressions, which reflect something other than historical facts are intended to identify forward looking statements.
Looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section of our filings with 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.
As required by law.
More information please refer to the cautionary statement included in our earnings press release Lastly, all metrics discussed on this call are presented on a non-GAAP or adjusted basis and include the result of jumped technology since the acquisition on November 32022, unless otherwise noted.
A reconciliation to GAAP results can be found in the earnings press release that we have posted to our Investor Relations website.
That I will turn the call over to our Chief Executive Officer Sandeep Hi.
Thank you Joan and welcome to our Q2 earnings call.
Allow me just start by saying that I'm incredibly proud of.
The entire Clearwater team for outstanding execution in Q2.
There are four key areas, where we executed very well.
One <unk>.
We successfully brought both large.
And small clients live.
And even more impressively, we saw best ever customer satisfaction and NPS scores.
The sales team had a very good quarter.
And they continue to win against competitors, who largely offer legacy solutions.
Hey, Rick.
Continuing to see positive impact from the commercial model, we rolled out last year.
And fourth we continue to innovate and deliver products that address our customers' pain points.
Let's dive into each of these.
First let's start with operational excellence.
We have been investing in increasing the majority and scalability.
Our onboarding team.
In Q2 was a testament to how far the income.
Aviva is fully live on our platform.
As you know Aviva is a leading UK provider of insurance.
In retirement products.
Serving over 8 million customers.
They have the global assets on our platform and we provide a daily comprehensive view of the portfolio.
Consisting of more than 350 billion pounds.
AUM.
Achieving this milestone is very significant because we had to build.
Unique functionality.
Vic to Europe .
Including asset class coverage.
Coverage for local accounting standards.
And regulatory reporting four countries across Europe .
With this accomplishment we are proven to the market that we can handle.
The highest level of complexity in Europe .
Combined with a multi country onboarding of FWD in Asia.
Our platform is now used by large sophisticated customers across the board.
Other major go lives in Q2 included income neutral insurance.
<unk> investment management and Highmark health.
Just a few.
In Q2, we saw average go live time decrease.
With average time taken to bring customers live on our platform was approximately six months.
The network effect of a single instance, multi tenant platform allows us to continue improving this process.
And bring value to clients faster.
As you all know.
Our NPS is one of the highest.
We'll find in the industry and it is.
He is a metric we are incredibly proud off.
In Q2, we exceeded our already industry leading numbers.
And recorded our highest NPS to date.
To me it says that our customers are happy with the platform.
The access we provide to best practices.
And then the acknowledgment of the care.
Our client services and Onboarding teams to provide.
It is a giant team effort and.
And we are thrilled that our customers acknowledge that and.
And placed their trust in us.
That allows us to continue growing.
With significant support from references provided by a 100 clients.
Second, let's discuss the demand environment.
We and our customers.
While working with legacy systems in the industry is significant.
We continue to close deals and saw our pipeline build throughout the first half of 2023.
Our growth has been fairly even across our key industries of insurers.
Management corporate and government.
In the second quarter.
Spaniard our footprint with existing clients and added marquee clients such as Ebola Syndicate.
<unk> capital.
Delta dental of Wyoming.
Finance incorporated limited intaglio therapeutics.
Medical Protection Society limited.
Kneecap group.
<unk> therapeutics.
Invest in asset mortgage capital Corporation.
We announced a strategic partnership.
With JP Morgan asset management.
Integrating our platform.
The mortgage money.
Global trading platform.
This allows.
Initial users.
Usually navigate between both systems.
The joint solution will make it easier.
For financial professionals to have a global connected view.
The investment portfolio and empower them to make real time investment decision.
On the Clearwater and mortgage money platforms.
We continue to see strong sales of our add on products.
Like Clearwater, LPX and tourism.
As an example, one of our large existing reinsurers.
Signed on to use prism for reporting.
Which led to flying to more than double.
The AUR in the Clearwater.
Europe had a very strong first half with several deal wins in northern Europe , and the French embedded ups market.
This included both mid sized clients.
<unk> large institutions in the insurance and asset management industries.
We've had several successes here in the U S with jumps.
<unk> front to back platform.
These are ultra successful with an offering that pad.
<unk> front office suite.
With Clearwater for accounting and reconciliation.
As you May recall Clearwater acquired jump with a vision to revolutionize the entire investment lifecycle.
And we are executing on that plan.
These deals underscore the value of funds received from both our platforms working together.
They also validate our premise offering expanded Tam.
With our combined product offerings.
Overall, our product continues to resonate across the globe.
And we don't see any change in the competitive environment.
Our sustained investment in our platform continues to set us apart in the.
Mark.
Thirdly on a commercial model, we continue to be pleased with the changes we drove last year.
And the impact it is having and can have.
On a growth trajectory.
As you might recall last year, we made the leap from a pure <unk> based model.
<unk> plus model.
We couldn't be happier with the results.
And the commercial model has now become the default way.
The contract with clients across industries and size.
With Qwizdom LPX and jumped modules.
Increasingly acknowledged by our customers.
A multi product company capable of providing solutions across the value chain.
Our strong NPS.
Clearly helps customers feel confident in purchasing more software from us.
Clearly our approach continues to create a win win for both our clients and for Clearwater.
Fourth our executive and sustained investment in R&D allowed us to expand the platform to address the needs of clients in both Europe and Asia.
We have invested in building products to solve the needs of existing customers here in North America.
Many of these efforts involve using fine design partners.
And that gives us confidence that our investments will continue to pay off.
I already mentioned Clearwater, LPX and Clearwater prism.
But also in Q2, we began a beta program with Clearwater MLS.
Which is a solution designed.
To improve the visibility and detailed accounting for commercial and.
And retail mortgage loans.
We expect to launch Clearwater M&A in Q3.
Another frontier of investment could.
It would be to bring front office and front to back functionality to the U S. Using the Clearwater jump platform. We are delighted that we already have north American customers, who want to work with us.
Next we are working on additional capabilities, including self service.
Allowing our customers to configure and manage the growth of their accounts.
We are also enhancing intraday data in recon.
Which is sometimes referred to as T plus zero processing.
This will help us improve how we deliver same day investment book of record for clients that need near real time visibility.
We have to talk about the work we are doing with generate of AI and the potential to transform and disrupt the market.
You may have seen our recent press release on this topic.
Where we announced that is put up our one instance.
For large language model.
Which we're calling Clearwater GPT.
We are working on rolling out new Gen, AI, driven solutions and dramatically improving the way we service clients.
Clearwater GBT is the first solution of its kind that seeks to address the full investment lifecycle.
We see this effort as both adding to the revenue growth of the company.
With me to journey II based product offering.
<unk>.
Impacting the bottom line with efficiencies across our operations.
I'm sure you immediately wondering if we can predict.
What this might mean to our financials.
Let me just say that the product is very promising.
And the early results are very good.
But the technology is new.
And it is hard to assess the full impact it can have.
We expect to have more details for you in the coming months.
Given that a robust multi product offering caters to diverse geographies around the world.
We are excited to welcome Sunil Dikshit as our new Chief product Officer.
Who brings proven expertise in innovating and building.
Multi product platform at leading SaaS companies.
When I stop and think about these four areas.
Operational excellence.
Demand based on addressing find screen with a large tam.
And effective commercial model.
And a disruptive platform.
I'm not only proud of our team, but I also recognize that this is what allows us to deliver stable growth with the potential to increase margins consistently.
That is what we set out to Delaware.
And our actions and results in the last two years since we went public.
Bear out the strength of our approach.
We are setting aggressive goals and executing on our plan.
As frankly.
Great time to be actually what analytics.
Now, let me turn it over to Jim to discuss the financial results for the company.
The outlook for the year.
Thanks, Sandeep and thank you all for joining US we're very proud of our Q2 2023 result.
Let me start with the top line and the metrics that drive rabbit.
In Q2 2023.
Delivered $89 $9 million in revenue.
Which translates to 22, 4% year over year revenue growth driven by solid expansion.
At our existing clients.
<unk> strong unfortunate activity.
Our operations team.
Over the last two quarters, we've completed 83 onboarding programs and in Q2, those Onboarding program had an average duration.
Just over six months.
With time to value like that.
Not surprising that so many prospects accusing clearwater.
We reported annualized recurring revenue or <unk> at the end of the second quarter.
$349 $5 million, an increase of 24% year over year.
This is particularly satisfying when we look back one year to.
Q2, 2022, and recall the worry over asset price value and our announced transition from AUM pricing to the base plus model.
I said not many investors would have predicted back then.
Terrible reliable 20, plus percent growth would remain intact, one year into the future.
Today.
We remain even more optimistic about our future for one reason our clients.
Stay with us as evidenced by a return to 98% gross retention as of June 32023.
The 17 out of 18 quarters for which gross retention has been 98%.
More importantly.
Clients grow with us as evidenced by our net revenue retention rate of 109%.
As of June 32023.
We are seeing success within our client base by doing more for our clients and this in.
In fact, it's the true.
Dividend.
We aspire to expand an IRR to 115% or beyond because we believe we can help our clients do more.
We've completed the foundational element with the market acceptance of the base plus model.
And our recent rollout bundled offerings for the North American insurance and corporate market.
With the new bundled offerings, we offer prospects a choice between base professional and enterprise bundle. These.
These market specific bundles allow prospects to select the clearwater offering that matches their sophistication and solve today's burning platform, while providing a path to our expanded capabilities when they expand.
Now that we have Lps.
Prison.
All of the functionality they jumped solutions provide.
Coupled with the expected launch of ml lax.
We have the opportunity to expand our reach within our clients.
We will continue to evolve our go to market takes it to focus on both new client acquisition and add teams focused on expanding our relationship with existing clients across all of our market segment.
The beat in second quarter revenue flows through to our full year revenue guidance as we are raising our full year guidance by $2 million and our guidance range for the full year is $364 million to $366 million for $20 to 21% year over year growth.
Now, let's turn to profitability results.
We reported $24 8 million in adjusted EBITDA.
<unk>.
27, 6% EBIT margin in the second quarter, which is a solid result, and better than our guidance by $2 million. This translates to a 9% beat as our revenue outperformance flowed straight through to EBITDA.
non-GAAP gross profit in the second quarter was $68 1 million and gross margin came in at 75, 8%.
Which was a slight improvement from the 75, 7% in the second quarter of 2022.
The four consecutive quarter, where incremental gross margin exceeded our reported gross margin.
Illustrating that we are making progress on our path toward our long term goal of 80% gross margin.
non-GAAP research and development expenses in the quarter were 20.
$23 $6 million or 26, 2% of revenue.
That is a sequential decrease of 6% of revenue from the R&D spend of 26, 8% in Q1 of 2023.
We expect R&D expense to trend down as a percentage of revenue going forward with the efficiencies we are achieving in R&D.
For example, large programs in Europe are entering more of a steady state.
Sales and marketing expenses in the quarter were $10 $9 million, an increase of $1 1 million or 11, 5% year over year.
That equates to 12, 2% of revenue.
General and administrative expenses in the quarter were $8 $8 million sequentially flat with the first quarter.
And as a percentage of revenue G&A decreased to nine 8% showing better leverage.
On a GAAP basis.
Equity based compensation increased to $28 $7 million, including $5 5 million related to the jump acquisition.
A full quarter of expense from awards granted in Q1 were reflected in Q2.
We expect that this is the high water level for equity based compensation expense.
And that it will decrease as a percentage of revenue going forward.
The significant expense in 2023 results from the granting of three year performance based awards in Q1.
Although the awards at that one third in each 2020 for 2025 and 2026, assuming achievement of the performance criteria.
For GAAP purposes.
61% of the expense is recorded in the first year versus 33% as you might intuitively that's it.
Below the operating income line, we recorded $1 3 million of interest income net from the investment of our excess cash balances and.
And we recorded $6 7 million of year to date tax receivable agreement.
We recorded tax receivable agreement or TRA expense in lieu of income tax expense.
We will be a pair of the TRA because of the capitalization of R&D cost for U S federal tax purposes.
Absent amendment of the tax law, we expect to pay the tax receivable agreement expense in the fourth quarter of 2023.
Let's turn to the balance sheet and cash flow.
We ended the quarter with $277 $8 million in cash cash equivalents and investments and 14.
$49 3 million and total debt that.
That results in net cash holdings of approximately $229 million.
During the quarter, we continued to invest our excess cash and fixed income security for excess yield.
Free cash flow for the second quarter was.
$19 $6 million.
Representing year over year growth of 18, 5% from fee cash flow in the second quarter of 2022.
This includes $1 6 million of capital.
Capital expenditures.
In the second quarter that conversion of EBITDA to free cash flow was at a rate of 79%.
We reported a GAAP.
GAAP EPS loss of <unk> per share.
And.
Fully diluted non-GAAP EPS was <unk> <unk> per share.
For non-GAAP EPS, we utilize our fully diluted share count for which Q2 was 252 2 million shares.
That fully diluted share count.
Essentially flat with last quarter.
And with the end of last year.
<unk>.
Q4 of 2021, reflecting that there has not been shareholder dilution since the company went public.
Now, let's turn to guidance.
So casino in guidance for the third quarter of 2023, we expect revenue to be $92 million and we expect adjusted EBITDA to be $25 $5 million or approximately 27, 7%.
For EBIT to March.
Consistent with Q2.
For the full year 2023.
I said before we've increased our revenue guidance to $364 million to $366 million.
Which is an increase of $2 million.
In the low and high end of the range and represents approximately 20% to 21%.
Year over year growth.
We have also increased our full year EBIT guidance by $2 $5 million at the midpoint to $100 million for the full year 2023.
That guidance represents EBITA margins of 27, 3% to 27, 5% for the full year and.
An expansion of 60 to 70 basis points over 2022.
Sandy noted and our numbers demonstrate.
The second quarter was another quarter of strong execution.
We accelerated revenue growth to 22%.
I'll, let EBITDA and free cash flow.
We look forward to keeping the momentum going with that I'll turn it over to Sandeep to provide some closing thoughts.
Thank you Jim.
As I reflect on the second quarter.
I'm incredibly proud.
Of the exceptional team, we have a tier one.
We remain laser focused on our mission to revolutionize the investment management industry.
By every measure.
Drilling portfolio of product offerings.
Didn't I believe.
Best in class.
I'm, particularly excited about the potential for generators.
And its capabilities to ignite new opportunities that will disrupt and transform the fintech sector.
Our team at Stillwater.
Continuing to innovate boldly.
Consistently meeting our clients' ever changing needs.
At the end of the day.
Seeing our clients satisfied with our platform.
And growing the assets under management matters, the most to us.
When they achieve their goals.
<unk>.
Thank you.
Yeah.
Okay.
Sure.
If you would like to ask a question. Please press star followed by one on your telephone keypad.
If for any reason you would like to remove that question. Please press star followed by two again to ask a question. It is star one.
Our first question is from Peter Heckmann with D. A Davidson your line is now open.
Yes.
Hey, good afternoon. Thanks for taking the question can you comment a little bit.
Uh huh.
In terms of the on boarding you said 83 in the first half.
And you are speeding the go lives I guess is that how do you think about it in terms of average size.
The clients are they getting larger staying about the same.
Sure.
Yeah.
Thanks, Pete This is Jim can you hear me okay.
Yep.
Okay.
Okay, Great I, just wanted to make sure I was off mute sorry about that.
So yes. So those are 83 program so.
So some of those could be onboarding of additional assets at some of our larger existing client.
Onboarding additional products and solutions as well as on boarding.
Sandeep spoke about Aviva.
Kind of.
Top 20 insurance companies across the globe right.
So there is there is a broad variety across those I think what it comes down to it's less about the number although that's very impressive.
More about shrinking the Si.
And shrinking the period of time it takes for clients to get to value and that really comes down to a few hours.
Number one it's the network effect right as we're adding more clients in different geographies and and building out that network keen opportunity youre seeing that.
Number two.
The Onboarding team has done a really.
Has put a lot of effort in over the last couple of years to really.
[noise] formalized and structure.
<unk> onboarding process with our clients.
And holding mutual accountability between.
All of the participants in that process the data providers.
<unk> the clients.
The upstream and downstream streams as well as ourselves principally and most importantly ourselves.
And so this what we're seeing here, which we saw in the first quarter and continued to see in the second quarter.
It's really.
The amalgamation of all of those elements.
Coming together and I think we feel.
Proud.
The accomplishments of that team.
Yes, Pete this is from the the only thing I would add is just talking about seems like six months to go live.
I'm sure you've covered ERP systems in the past you talked about yours is talking about certainly is for programs to go fully live and the fact that we talked about six months and how to improve it. We're just trying to provide a contrast to what the network effect allows us to do so I do think it's super impressive just having been in the industry for that.
Tom.
Okay. That's helpful. And then just in terms of Morgan money in their global trading platform.
It sounds as if you have a strategic partnership in place.
It's going to allow users to use clearwater, but in terms of the contribution I guess, how do you think about that ramping and could you could you maybe size a little bit about how you how big that client could be if you're successful in cross selling with the existing JP Morgan customers.
So one is that JP Morgan is already one of the largest clients we have.
So that's 0.1 0.2 is that it allows people.
Hughes functionality on both platforms very easily.
And that usually allows.
Lyons to bring on more and more AUM on our platform. So that's the play for US to play is the ability to trade on that platform and look at the data on our platform. If we can do that easily could you attracts more and more clients to our platform and we have done that with other partnerships and we saw a sustained.
Growth from those clients and we also had new clients join our platform because of the ease with which they could go between these two platforms. So we think it's quite strategic we think it continues to cement.
Our relationship with J P. Morgan and continues to grow them in the years to come.
Okay.
Alright, Thank you I'll get back in the queue.
Our next question is from Rishi Galeria with RBC. Your line is now open.
Oh wonderful <unk>, Jim. Thanks, so much for taking my questions nice to see continued strength in the business.
Wanted to start by by going a little bit deeper into Clearwater GPT no doubt the press release sounds.
I think pretty impressive, but can you talk a little bit about some of the use cases that you anticipate seeing from Clearwater, GPT and and maybe more importantly, how does that tie into your broader generative AI strategy because it feels like there's a really big opportunity for you to be.
Our vertical weiser of some of these lines and really help customers and given the data and the relationships you have in ways that they can't do themselves. So would love to drill a little bit into into both of those and I've got a quick follow up.
Yes, Thank you Rishi so.
We believe Jimmy I is transformative and disruptive.
You can also understand that for our China business. We think it can have very significant and mostly positive impact on our business but.
Obviously launched okay. What are the GPT. So, let's just talk about some examples and I think you can.
Basically put them into two different buckets one is.
Switch.
Enhances revenue.
So things that can help grow our revenue and the second one is the one which can improve efficiency of our operations.
So let's talk about operation does first.
Obviously efficiency is important because that drives gross margin.
So whenever we have talked to yourselves. We have said look there is 75% and there is about two <unk>.
My question is is there much more room, there and we think Chad <unk> allows us to think about.
Meaningfully better better operating results.
What exactly are we talking about.
As you know we get many many data feeds every morning, some 2800 data feeds and they have to be reconciled to be aggregated and normalized.
Now could.
But a significant portion we've done using something like <unk>, we think so.
We think that could have a meaningful impact in what we have to do ourselves.
So what the machine can do so we think that can be majorly disruptive. The second one is we spend a lot of energy on client servicing.
And on boarding.
And again both of those could change very meaningfully.
If Chad GPT can be successfully deployed.
So both of those ideas, we have sort of teams of dedicated people with dedicated leadership looking on dose and we expect to have some.
And be able to report some progress in the coming months.
The other side of it obviously is revenue oriented what can help us drive revenue and there are two big areas. One is just customer interactions.
Natural language interaction completely changes.
The value you can derive from our platform.
That's one area, but the second one and the most exciting one is the insights you can draw.
Because <unk> allows us to look at a very large volume of data and frankly, historically going back to 10 years of what we have been doing what insights can we draw which clients can use.
Either improve yields.
Or improve the other functions I think is super interesting and exciting.
So again those are two areas, where we have invested.
Dedicated teams and dedicated leadership to get after it.
We already so I just wanted to caution one thing Rishi, we're obviously using machine learning already this is just very different order of magnitude.
What impact this could have so it will be really excited about it we have dedicated R&D teams and product teams working on it and have been looking for a period of time and so it's just that we're not yet ready if you will to qualify and say look this has a chance to make 80 something else. We want wanted us to go on for another three or four.
And then we'll be in a better position I think to come back to all of you and say look here's where we think we can go with Jennie O.
Alright wonderful thanks, Andy that's a very thorough answer and it really helpful. Maybe just continuing on Gen. AI and then thinking about other potential use cases, how do you think about the ability to use gen AI to make it easier for asset.
<unk> is out there to migrate from from their legacy solutions onto Clearwater right, because that's a long process, obviously theres a lot of data complexity involved in that but given what we've seen a lot of.
Companies in this space using generative added make migrations from legacy the nextgen faster it feels like that's a big opportunity for you as well. So how are you thinking about that thanks.
Yes, Thank you issue, but yes, absolutely I do think it can completely change how we think about onboarding.
And as you know on boarding is is the hard part and once you have done the transformation that of course.
<unk> sort of gives you the full functionality you could want and the agility and analytics.
So we feel like Jenny I could could transform how we onboard to take an example.
Let's say, we move a client to onboard them from a competitive legacy platform while.
While we probably have done 30 40 of those transformational onboard unloading exercises from that same legacy platform.
Jimmy I to that.
And the next Onboarding youre doing and can do it meaningfully faster because.
Because it has learned from all of those 30.
Onboarding exercises you have done so we do think that transformation, we do think it changes the risk profile of the nonvoting exercise and really time to value meaningfully. So look we think it is actually perhaps the biggest use case when it comes to on the efficiency side of it none of the revenue side, but just on the <unk>.
Efficiency side.
Wonderful. Thank you so much.
Thanks Tricia. Our next question is from James Faucette with Morgan Stanley . Your line is now open.
Hi, guys, it's Michael in Fontana for James Thanks for taking our question.
And I just wanted to circle back on an IRR, obviously really impressive to see.
The sequential and year over year improvement there I think migrating to this level, we anticipated to take a little bit longer so great to see that.
Jim is it possible to decompose that improvement between last.
Last year's pricing initiatives first incremental attach of new products and and does the recent improvement sort of accelerate your confidence in getting to that <unk> level of $1 15 over time.
Does that does that pull that forward.
Yeah. Thanks, Michael Thanks.
So the revenue acceleration from 19% to 22.
Can almost be correlated to.
NRI moving from 106 to 109 and and we do believe that is sustainable as we look into the near future.
So.
Youre right Michael why is it growing it has been.
Obviously.
Primary strategic initiatives of the company over the last 12 months to really building the commercial model building.
Building the base plus pricing have the default price increases flowing through adding these incremental modules.
<unk> MLS prism.
And and.
And that sophistication just kind of continues.
We were happy to see that the improvements and NR where across all of the.
Market verticals that we focus into <unk>.
And.
And that improvement really comes into those existing customers and really see the 12 months of effort across all of those pieces bridge.
Bridging bridging the gap from.
From the 106 to the 109.
Yes, Michael I would just add that this is pretty deliberate it's not something we said hey, let's do something if we got something no. We think that these four things you can run that Jim walked you through and if you continue to improve in each of these you can sort of get better.
Sequentially and so do we think the 109 number is it.
Is now a new normal for US we think so.
Does that improve the paths to $101 15, absolutely compared to when we had the first discussion Michael we had 103.
First better at one six.
We just had to do with sustainable and we were up at 109, which we think is sustainable and so we think it is it makes the 115.
More insights it doesn't mean, we're going to get the next quarter or in the next two quarters, but how we get there and the elements, we're going to use to get the defined.
And it's just said and many of those youre still in the second or third inning of a game and the multi product strategy. For example, we talk about LP actually talk about the MLR actually top talked about prism. Those are still second third innings and you just have to let it mature and as they mature to should continue to push that number up so we feel really good about.
The box where anja.
It makes a ton of sense I appreciate that.
Maybe just pivoting to jumps specifically I saw the commentary in the release surrounding the pairing of jump in the front office with Clearwater and the back office, how powerful is that cross sell motion and is there a particular client type or client size that that pairing would be most applicable for.
Yes. Thank you I look at we all.
I'll get quite excited about.
Just a partnership with them in Paris is just exceptional so so let's just talk about specifics one is.
His jumps ability to compete in the French market.
Against larger players much much better clearly clearly the winning more deals in the French market because they are a part of this larger organization.
Second.
The ability to sell front to back in North America for small asset managers and mid size asset managers, absolutely and this is something Michael which clear where it would not have been able to do but now we have the Oems and the pms on the portfolio management system and the accounting and all of that so just end to end market, which we could not compete in audio.
Works and therefore increase was down very meaningfully.
Third one which is the one you pointed to.
Is perhaps.
The most exciting which is can I take the jump front office modules and paired it with the Clearwater platform.
Either for new prospects, which is the one we were talking about or two.
To go back to all of our asset owner clients, who already have the clear what our platform and then provide the front office.
More deals to them. So again, we have had success there that's exciting and finally jumped brings capabilities in a unit linked fund.
In Europe , and we've been successful with that also in all of this in the first half. So look we think it is.
Really good progress.
I think unfortunately that is still in the some of the early early innings of this until the second and third innings of.
What we could do with Trump, yes, I think it is.
Yes.
Thank you both.
Thank you. Thanks, Mike. Our next question is from Jackson Ader with Moffett Nathanson. Your line is now open.
Oh, great. Thanks for taking our questions guys.
So the first one actually why don't we stick with the kind of the AI line of questioning I think.
It's pretty clear that.
The architecture and infrastructure being cloud based versus maybe some other competitors are not.
Lent itself already to the use of AI and machine learning within your own products that kind of created an advantage, but is there any reason why.
Sandeep you said it yourself. This generative AI is a different thing and it's kind of.
Customer facing and and is there any reason why you think that you might have a similar advantage over over your competitors when it becomes.
More about customer facing and maybe layering in.
The GPT on top of something that you already have.
Yes. So Jackson. Thank you for the question look I think it's Super valid question, because it certainly opens up opportunities frankly, which I did not think inks.
Was that about a year back so look the core of all of these.
AI technologies is the quality of data you have and the accessibility to that data.
If you don't have the data in one nice structured way it makes it much harder right so should that.
Meaningfully improve our ability to do.
A reconciliation ability to do.
Onboarding clients. So yes, I think those are those are obviously there, but what you are asking about is can you think about new client facing applications.
And I would just say that.
The answer is a very resounding, yes, because it is specific to our clients' data.
So let me just trying to define that a little bit more.
Can be genetically talk about returns.
Interesting to a certain degree, but what we can do is you can talk about returns.
Specific to our clients portfolio.
So we can generate insights.
With specific reference to what our clients portfolio looks like and what they did yesterday and what they did last week and what they did last month and based on that client specific portfolio, we can come up with ideas and recommendations about what they should do ensure too.
This is a line of thinking we were we did not have about a year back but this does allow that.
And that's why I think it is exciting on two different levels and Thats why I tried to distinguish between look revenue revenue growing value, adding to the front office is a different game versus efficiency oriented which is a different game.
I'm not saying one is more exciting than the other both are very significant for us and our commitment and dedicated leadership.
Behind <unk>.
Both of these initiatives is already there.
Okay, that's great.
All right switching gears to maybe we're getting past the first kind of a major waves of the base plus.
Yeah.
Anniversaries here and I'm, just curious just general feedback like how our customers feeling about pricing increases maybe versus what they would have realized with.
AUM dressed.
And then similarly, similarly, how you guys view.
Just basically how this first year renewals or anniversaries are going relative to last year.
So I think Jim can comment on the on the numbers here, but.
It's a non event now.
Almost all our.
New contracts turn.
Turn depending what the size of the industry data on the new new commercial model.
Frankly, I don't think I've heard resistance to that over the last 90 120 days I don't think I've heard of one and so it's now just the way we do business I haven't heard of pushback from clients haven't had backups.
Anything to the country.
Absolutely I think.
Remember Jack when we went through this process right.
Wanted to stimulate the experience that our clients were always getting right through this through this kind of normal growth rate, we werent we werent.
We're trying to make this a win win.
So I think that that as we anniversary D and continue through this process. This is this isn't it's obviously a much more automated process. This year than it was when we were kind of going through that last year and kind of making this evolutionary change.
But.
I think we.
[laughter] Sandeep always says to me Jim why don't you do this sooner you idiot.
I'm, just I'm, giving them.
Yes, I think what we've learned is it has worked the way we had hoped it would work and I think the outcomes have been okay.
Okay, Alright, that's great. Thank you.
Thanks, Jason.
Our next question is from Dylan Becker with William Blair. Your line is now open.
Hey, gentlemen, appreciate the questions and I apologize if I'm repeating anything jumped on late here, but.
I guess, starting with with Jim maybe Sandeep as well I guess, but nice net dollar retention number there cross sell it seems like jumps kind of starting to gain traction in number of the I guess, how much of that too is a function of some of the recent kind of sales segmentation that shutdowns, our farmers and really some of that domain expertise that's prioritizing again.
That particular customer needs in each of those particular industry verticals.
Look I would just say thanks for the question here about the impact of jump on our revenue.
As a muted right because you obviously go sell these deals that take a while to onboard and then they come out in and they start to get <unk> right. So I think the risk results on the revenue beat is muted.
And would that improve over the next few quarters, yes, absolutely, but I don't think you should look at the Q2 results and ascribe much of that to the cross sell showing showing up in the revenue line or the profitability line I think all of the commentary about jump about the deals we have won and.
But doesn't necessarily convert to revenue that quickly sorry, Jim Gleeson to insulin.
So I think that we add so sandeep as mentioned.
In the early innings with respect to <unk>.
<unk>.
Prism in these areas and I think we're also in the early innings as we think about evolving that go to market.
Engine that we have I think we're obviously these results reflect something we should continue to do and so we will continue to lean in to being more.
I'm thinking about.
These sales.
Opportunities are sales channels discreetly and thing and further segmenting. The thing we've learned time and again is as we focus and segment.
The results become better.
Got it Okay. That's super helpful.
And then maybe to just quickly touching on kind of the competitive landscape. You did have a competitor internationally that was acquired I wonder if you've seen any opportunity situations arise.
Off of that any displacement kind of commentary as you are kind of looking to kind of build out your own kind of global footprints here. Thanks.
Yes.
These are tricky things to comment on but I would just say that on the margin we feel the competitive environment in Europe has improved very meaningfully for us.
And.
So I would just say that and that reflects a little bit in the pipeline build we have season H one N.
And so we are really happy with.
The transaction that was announced.
Fair enough okay. Thank you guys.
Yes overall.
Continue to see we think we have a really strong competitive position.
And there's things that we have between the multi tenancy the single security Master.
That allows everyone to be the most up to date the network effect no. One else has and we think that leaning into those helps.
Yeah.
Yeah.
Thank you.
Okay.
Our next question is from Gabriela Borges with Goldman Sachs. Your line is now open.
Hi, This is Kelly on for Gabriela Congrats on the quarter on a really strong number.
First one from me Sandeep really enjoyed thus far.
The impact Youre expecting from Pat can you talk a bit on that about that data.
Goodbye.
What youre seeing in <unk>.
Sure.
Yes.
Thank you for the question about debt, we obviously deal with.
Investment accounting and we can just be like 95% of the time.
We have to be right almost all the time and as you know our chief.
Chief accounting Chief client officer.
<unk> is a really large background in quality and she approaches all of these things with trying to be like the first time and so for a while though I believe that the journey I applications, we talk about will be with the human in the loop.
So we don't expect quite yet.
Net.
Jamie I respond to customer clients or.
Actually perform a transaction, but but recall that when you think about what the individual does it takes a lot of time to research something came up with alternatives and come up with a potential solution and we expect Jimmy I can just produce alternatives and alternative too.
And at that time, the human the loop could go and pick.
101, and that helped screen.
The model of course, so we think it is still human in the loop because of the data actually is concerned I think there could come a time, where Florida certain class of problems and class of questions you could have.
The module respond directly.
But we do think right now not thinking it isn't about.
100% improvement in efficiency.
Can get 70 vacation 15th that'd be great right and so we think more about about that kind of approach rather than.
We're just going to eliminate.
All functions.
Human interaction.
Okay.
Yes, Nathan Thank you and then.
For me it's at Pollo.
And in the first half relative to 2022, you talked a lot about the visibility you got in the business of bookings can be very forward looking great.
Great any insight, perhaps six months.
Staying in North America.
Sure.
Yes.
We don't see any change in the overall competitive environment.
I think Sandeep just mentioned on the margin the competitive environment in Europe .
<unk> has improved.
And so and I think that helps.
Pipeline and has grown aggressively over the last six months and we're really excited by the number of deals in the pipeline.
Especially those.
Deals are what we would call our additional product deals offering there.
I think we're seeing dividends from announcing the Aviva go live and we are seeing a benefit in Europe .
Potentially there.
And really in the first half when we look back on it.
Now I think we feel the same way we've always thought.
It was nicely balanced between back to base and new logos.
And you know last year, we closed two Meg insurers this year we.
I think we expect to do similar or even better in that environment. So.
So I think we feel we feel really good about.
Our opportunities there.
And that range reflects that obviously there is.
I think it reflects the fact that we think we are in a good position.
But I did want to just point out that our pipeline has surprised us is the growth of the pipeline and.
I do think that people have a lot of work to do with legacy systems and that movement I'm, hoping continues to accelerate towards <unk>.
Companies, which can provide leading edge technology, and we think ours does.
Great. Thank you and congrats again.
Thank you so much.
I think thats.
Yeah.
Oh.
Yeah.
Are there more questions.
Our next question is from Michael <unk> with Wells Fargo. Your line is now open.
Hey, it's David on <unk> filling in for Michael <unk>.
Thanks for squeezing me in just one for me guys I know the jump acquisition wasn't too long it wasn't too long ago, but.
Just curious your appetite to add additional products or go deeper in a particular geo you've made some comments tonight.
On Europe .
So the appetite to do an acquisition, that's perhaps harder to build organically. Thanks.
Yes. Thank you for the question look I think absolutely there is appetite to do more.
If I can quickly just.
Certainly how we think about it we think of jumbos, having provided a good proof point. There is lots of work to be left left to be done and there is a number of tools you have to do but it does provide a really good proof points that.
There is a value to our net promoter score.
And it is quite simple the value is that clients want to do more with you.
So there is something we have to develop it shouldn't take too long.
Pivoting and doing an acquisition to bring that capability sounds like a good way to go. So I'll just make one more point showed that what has not changed.
It has not changed is we have a pretty high bar for doing an acquisition.
It must expand help us expand geographically.
It must help us expand functionality.
And then what has changed so after jump what has changed is three things one is <unk>.
We have a much sharper focus on.
On understanding the current customer pinpoints beyond investment accounting.
What sort of adjacent to investment accounting so that's one thing.
Second thing is our ability to cross sell the products from a potential acquisition is a massive and cleared embedded in that that also helps as you can imagine the IRR right and the third one as well.
We really feel we are ready to lead globally.
And so acquisitions that can help us lead in the market.
By us being able to provide end to end functionality using our platform.
Think of very interesting now would have been less interest in three years back when we might have been somewhat more tentative about trying to lead an entire industry in a certain function. So yes. Those are the is very similar to before but it does reflect a little change in attitude about what we can do.
Always appreciate the detail sandeep. Thank you.
Okay.
Thank you so much.
Our next question is from Brian Schwartz with Oppenheimer. Your line is now open.
Hi, Sandeep and Jim. Thank you for taking my question just one question here a very high level.
Just.
How youre thinking about the.
The macro environment heading in second half of the year it looks like the business did.
Did well in Q1 looks like the business did even better year Q2, you gave us insights into all of these exciting initiatives and what's going on internally on sales efficiency in the pipeline.
But how about just what youre seeing in terms of cycle and just buying patterns.
From the end Mark out.
Is your view about.
The macro environment in the second half.
Has that changed at all since last time, we spoke two months ago. Thank you.
Thank you so much for that question look I think our thinking is that if you talk to us in January as some time now that we have are worried about it.
Environment, becoming worse at this point our sensors.
It's not going to become much worse. We also don't expect much improvement right now so in our planning we are assuming just sort of status go there, maybe a little bit of movement up and down but it is different from how we felt three months back when we felt we were reasonably worried about how the economy.
Play out so we feel a lot more confident about that at all.
It's true that we have the new commercial models have helps us mitigate some of the risks. So that also increases the level of confidence we have.
In our planning and so that's how we think we just don't see much improvement the only other point I would make is that when you think about AUM.
Just across the board, we feel like the markets have been quite stable and so we feel look I'm. Just wondering you feel pretty good about where the market is what our forecast and our guidance on all of that doesn't include any improvement in the economic conditions, we just don't see that yet.
Yeah.
Thank you.
Thank you so much thank you.
Yeah.
Our next question is from you and Kim with loop capital.
Your line is now alright, great.
Congrats on another solid quarter. One question one question for me as well.
Can you just talk about how the mix of asset types, it's changing between I guess fixed income.
Equities alternative investments and how has that mix changed providing any pricing uplift.
Yeah.
Okay.
Yes, so broadly the mix is staying consistent.
But let me give you one little Nuggets, we talked about MLR and how we're teasing on that so thats kind of test to help with mortgages just for context, as we were sizing that opportunity and looking at the assets on the platform. We have north of 500 billion in mortgage related assets on our platform.
Today, So that's just kind of like one little sliver as you see more and more of these on these types of alternative assets mortgages.
Derivatives and those sorts of things, we can and structured products.
Broadly, we continue to see kind of that trend with fixed income and structured products to flow through and that's why we're doing Lps and ml lax and moving down that path to provide additional alternative asset coverage for clients beyond.
And the investment accounting for those assets.
Okay.
Yes, and I would just say that if you just look at the overall platform.
Thank you.
Okay.
I think we're at time.
For a little over.
Yes.
Are there any of the claret no more questions.
Yeah.
No there are no more questions. So I'll pass the call back over to the man.
<unk>.
So look I just wanted to thank you all for your interest in our company and the continued interest frankly in our ultra like to do a plug for the Investor day, which is coming up on September six September seven pardon me and I hope to see many of you there. Thank you again.
Goodbye.
That concludes the conference call. Thank you for your participation you may now disconnect your lines.