Q3 2023 Clearwater Analytics Holdings Inc Earnings Call
Thank you for joining ladies and gentlemen, and thank you we will be starting by.
Speaker 1: Thank you all for joining, ladies and gentlemen, and thank you all for standing by and welcome to the Clearwater Analytics third quarter 2023 financial results conference.
And welcome to the cable chat analytics third quarter 2023 financial results Conference call.
Speaker 1: My name is Breaker and I'll be your event specialist running today.
My name is <unk> and I'll be your event specialist running today's call.
Speaker 1: At this time, all participants are in a listen-only mode.
At this time all participants are in a listen only mode.
Speaker 1: After the speaker's presentation, there will be a question and answer session.
After the speaker's presentation, there will be a question and answer session.
Speaker 1: If you would like to ask a question at this time please press star then one on your touch screen.
If you would like to ask a question at this time. Please press Star then one on your touch van keep at.
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Thank you.
Speaker 1: And I would now like to welcome June Park, Head of Investor Relations, to begin today's call.
I would now like to welcome Jean Paul <unk> head of Investor Relations to begin today's conference.
Thank you and welcome everyone to Clearwater analytics third quarter 2023 financial results Conference call.
Speaker 2: Thank you and welcome everyone to Clearwater Analytics third quarter 2023 financial results.
Joining me on the call today are sandy.
Speaker 2: Joining me on the call today are Sandeep Sahai, Chief Executive Officer, and Jim Cox, Chief Financial Officer. After their remarks, we will open the call
Chief Executive Officer, and Jim Cox, Chief Financial Officer.
After their remarks, we will open the call to a question and answer session.
Speaker 2: I would like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
I'd like to remind all participants that during this conference call any forward looking things that are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Speaker 2: Expressions of future goals and pensions and expectations, including in relation to business outlook, future financial and product performance, and similar items, including without limitation, expressions using the terminology may, will, can, expect and believe.
Expressions of future goals and pensions and expectation.
Including in relation to the business outlook future financial and product performance and similar items, including without limitation expressions using the terminology may will can back them bleed in.
And expressions, which reflect something other than historical facts are intended to identify forward looking statements.
Speaker 2: and expressions which reflect something other than historical facts are intended to identify for looking
Speaker 2: Forms of containment involve a number of risks and uncertainties, including those discussed in the risk factors section of our filings with the SEC.
Forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section of our filings with the SEC.
Speaker 2: Actual results may differ materially from any form of the consumer.
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 the events that may arise. After this conference call.
Speaker 2: The company undertakes no obligation to revise or update any foreign looking statements in order to reflect events that may arise after this conference call. Accept the
Operator: My name is Breaker, and I'll be your event specialist running today's call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question and answer session. If you would like to ask a question at this time, please press a star, then one, or your touch-fingy pet. If you change your mind at any time, and would like to remove your request to speak, then please press a star, then two.
Except as required by law.
Speaker 2: For more information, please refer to the cautionary statement included in our earnings presentation.
For more information please refer to the cautionary statement included in our earnings press release.
Speaker 2: Lastly, all metrics discussed in this call are presented on a non-gas or adjusted basis and include the results of jump technology since acquisition on the November 30th, 2022 unless otherwise.
Lastly, all metrics discussed on this call are presented on a non-GAAP or adjusted basis and include the results of jumped technology.
Since the acquisition on November 30.
2022, unless otherwise noted.
Joon Park: Thank you, and I would now like to welcome Joon Park, Head of Investor Relations to begin today's conference. Thank you and welcome everyone to Clearwater Analytics third quarter, 2023 Financial Results Conference School.
A reconciliation to GAAP results can be found in the earnings press release that we have posted to our Investor Relations website.
Speaker 2: A reconciliation to gap results can be found in the earnings press release that we have posted to our investor relations website.
Speaker 2: With that, I'll turn the call over to our Chief Executive Officer, Van Leep, the High.
With that I will turn the call over to our Chief Executive Officer Sandeep Hi.
Joon Park: Joining me on the call today are Sandy Sahai, Chief Executive Officer, and Jim Cox, Chief Financial Officer. After their remarks, we will open the call to a question and answer session. I would like to remind all participants that during this conference call, any four-look-of-things are made pursuant to the faith-father provisions of the Private Security's Litigation Reform Act of 1995. Expressions of future goals and pensions and expectations, including in relation to business outlook, future financial and product performance, and similar items, including without limitation, expressions using the terminology may, will, can, expect and believe, and expressions which reflect something other than historical facts are intended to identify four-look-of-things.
Thanks, Sue and thank you all for joining us.
Speaker 3: The very strong numbers in Q3 were the result of disciplined execution from our operations and onboarding team.
The very strong numbers in Q3 with a result all day.
Disciplined execution from our operations and Onboarding team.
Joon Park: Four-look-of-things involve a number of risks and uncertainties, including those discussed in the risk-track reflection of a filing for the SEC. As show results, may different material be from any four-look-of-things. The company undertakes no obligation to revise or update any four-look-of-things in order to reflect events that may arise after this conference call, except as required by law.
Strong and sustained product innovation.
Speaker 3: strong and sustained product innovation from our engineering and product teams. And finally, our ability to
Good morning and product team.
And finally.
Our ability to focus on client success with.
With a genuine desire to partner for the long term.
Speaker 3: with a genuine desire to partner for the long term.
Normally I would provide a business summary in this opening section of the corn.
Speaker 3: Normally, I would provide a business summary in this opening section of the corn.
Speaker 3: But given the financial outperformance in Q3.
But given the financial outperformance in Q3.
Speaker 3: I've asked a chief financial officer Jim Cox to discuss the financial scores.
I've asked our Chief Financial Officer, Jim Cox to discuss the financials first.
Speaker 2: Thanks, Sundee, and thank you all for joining us. Sundee is right. We had another strong quarter.
<unk> and.
And thank you all for joining US Sandeep is right we had another strong quarter.
Speaker 2: On the heels of Q2's solid results and our impactful first Investor Day in September , I'm happy to report strong results for Q3.
On the heels of Q2 solid results at our impactful first Investor day in September I'm Happy to report strong results for Q3, where we beat guidance on top and bottom line once again.
Speaker 2: where we beat guidance on top and bottom lines once again.
Joon Park: For 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-gap or adjusted basis and include the results of jump technology since that position on the November 30, 2022 unless otherwise noted. A reconciliation to gap results can be found in the earnings press release that we have posted to our investor relations website.
Speaker 2: Revenue continued to reaccelerate, but the real highlight is our greater than 30% EBITDA margin for Q3. At our investor day, we announced our intent to expand EBITDA margin by 200 basis points in 2024 to approximately 29%.
<unk> continued to reaccelerate, but the real highlight is our greater than 30% EBITDA margin for Q3.
At our Investor Day, we announced our intent to expand EBITDA margin by 200 basis points in 2024 to approximately 29%.
Speaker 2: After our strong Q3 results, our current 2023 guidance implies whole year EBITDA margins increasing to approximately 28.
After our strong Q3 results are.
Our current 2023 guidance implies full year EBITDA margin increasing to approximately 28%.
Sandeep Sahai: With that, I'll turn the call over to our chief executive officer, Bandeep Sahai. Thank you, and thank you all for joining us. The very core numbers in Q3 were a result of disciplined execution from our operations and onboarding teams, strong and sustained product innovation from our engineering and product teams, and finally, our ability to focus on science success with a genuine desire to partner for the long term.
Speaker 2: Today, we intend to expand EBITDA margins by 200 basis points in 2024. So we expect our 2024 EBITDA margins will be approximately 30%.
Today.
We intend to expand EBIT margin by 200 basis points in 2024.
So we expect our 2020 for EBITA margin will be approximately 30%.
Speaker 2: In effect, we believe these higher profitability levels were persists in the business going for
In effect, we believe these higher profitability levels, where persists in the business going forward.
Turning to revenue in the quarter.
Speaker 2: Turning to revenue in the quarter. In 2003, 2023, we delivered 94.7 million in revenue, which translates to 23.7% year-over-year revenue. In 2003, we delivered 94.7 million in revenue, which translates to 23.7% year-over-year revenue.
In Q3, 2023, we delivered $94 $7 million in revenue, which translates to 23, 7% year over year revenue growth driven by marquee client wins, displacing our legacy competitors.
Sandeep Sahai: Normally, I would provide a business summary in this opening section of the phone, but given the financial output performance in Q3, I've asked a chief financial officer, Jim Cox, to discuss the financials first.
Speaker 2: driven by marquee client wins, displacing our legacy competitive.
<unk> expansion at our existing clients.
Speaker 2: continued expansion at our existing clients and continued increase in efficiency of onboarding new clients by our operations team.
And continued increase.
In efficiency of Onboarding, new clients by our operations team.
Jim Cox: Thanks, Sandeep, and thank you all for joining us. Sandeep is right. We had another strong quarter.
In addition, <unk>.
Speaker 2: In addition, clients continue to remain with us with a strong and consistent 98% grocery. In addition, clients continue to remain with us with a strong and consistent 98% grocery.
<unk> continued to remain with us.
Jim Cox: On the heels of Q2's solid results and our impactful first investor day in September, I'm happy to report strong results for Q3, where we beat guidance on top and bottom lines once again. Revenue continued to re-accelerate, but the real highlight is our greater than 30% EBITDA margins for Q3. At our investor day, we announced our intent to expand EBITDA margins by 200 basis points in 2024 to approximately 29%. After our strong Q3 results, our current 2023 guidance implies whole year EBITDA margins increasing to approximately 28%.
With a strong and consistent 98% gross retention.
Speaker 2: We've achieved this 98% gross retention for 18 out of the last 19 prior quarter.
We've achieved 98% gross retention for 18 out of the last 19 prior quarters.
Speaker 2: Our net revenue retention rate continued to remain healthy at 108% as of September 30, 2023, which is higher than the prior year 103. We continue to expire to expand NRR to 115% or beyond.
Our net revenue retention rate continued to remain healthy at 108% as of September 32023, which is higher than the prior year 103, we continue to aspire to expand <unk> to 115% or beyond.
Speaker 2: through upsell of new products and modules that we are now offering our clients, like Clearwater LPX, MLX.
Through upsell of new products and modules that we are now offering our clients like Clearwater LTI.
MLR.
Because the.
And our solution.
Jim Cox: Today, we intend to expand EBITDA margins by 200 basis points in 2024. So we expect our 2024 EBITDA margins will be approximately 30%. In effect, we believe these higher profitability levels were persisted in the business going forward.
And we expect our improved TTM and additional product.
Speaker 2: and we expect our improved GTM and additional product to help us meet our goals.
Help us meet our goals.
As we saw during a rethink Clearwater connect our clients are excited about our new offerings that we continue to develop to meet their dynamic needs in an ever changing investment world.
Speaker 2: As we saw during our recent Clearwater Connect, our clients are excited about our new offering that we continue to develop to meet their dynamic needs in an ever-changing investment world.
Now, let's turn to profitability results were.
Jim Cox: Turning to revenue in the quarter, in Q3 2023, we delivered 94.7 million in revenue, which translates to 23.7% year over year revenue growth. Driven by marquee client wins, displacing our legacy competitors, continued expansion at our existing clients and continued increase in efficiency of onboarding new clients by our operations. In addition, clients continue to remain with us with a strong and consistent 98% growth retention. We've achieved this 98% growth retention for 18 out of the last 19 prior quarters.
Speaker 2: We're pleased to report that both our EBITDA margins and gross margins showed strong improvement in Q.
We're pleased to report that both our EBITA margin and gross margin showed strong improvement in Q3.
Speaker 2: We reported 28.6 million in adjusted EBITDA and 30.2% EBITDA margin in the third quarter, which was 550 basis points higher than the third quarter of last year.
We reported $28 6 million in adjusted EBITDA, and 32% EBITDA margin in the third quarter, which was 550 basis points higher than the third quarter of last year.
Speaker 2: Just like last quarter, the outperformance in our revenue pulled straight through to EBITDA, as we are starting to see real efficiency gains with the operations team using our Gen AI.
Just like last quarter, the outperformance in our revenue put straight through to EBITDA and we are starting to see real efficiency gains with the operations team using our Gen AI technology.
Yet another highlight of the quarter was our free cash flow.
Speaker 2: Yet another highlight of the quarter was our free cash flow at...
$39 million.
Speaker 2: Free cash flow exceeded EBITDA in the quarter, as there were limited changes in working capital and increased interest income contributed to our cash flow.
Free cash flow exceeded EBITDA in the quarter as there were limited changes in working capital and increased interest income contributed to our cash flows.
Jim Cox: Our net revenue retention rate continued to remain healthy at 108% as of September 30, 2023, which is higher than the prior year 103. We continue to aspire to expand NRR to 115% or beyond through upsell of new products and modules that we are now offering our clients like Clearwater LPS, MLAC, prism, and our jump solutions. And we expect our improved GTM and additional products to help us meet our goals. As we saw during our recent Clearwater Connect, our clients are excited about our new offering that we continue to develop to meet their dynamic needs in an ever changing investment world.
Speaker 2: Put this all together, and we ended the quarter with 302.8Million dollars in cash, cash equivalents, and investments. Our highest ever balance. This level of cash on the balance sheet.
Put this all together and we ended the quarter with $302 8 million in cash cash equivalents and investments our highest ever balance.
This level of cash on the balance sheet and the free cash flow generation.
Speaker 2: of this business provides us with significant strategic optionality in a number of areas.
This business provides us with significant strategic Optionality and a number of area.
Speaker 2: Overall, the third quarter was exceptionally strong, continuing our plot.
Overall, the third quarter was exceptionally strong continuing our positive momentum we could not deliver these results without the great work of our over 1700 employees, who work tirelessly focused on delivering for our clients.
Speaker 2: We could not deliver these results without the great work of our over 1,700 employees who are tirelessly focused on delivering for our clients.
And certainly we could not achieve these results without partnering with our terrific clients.
Jim Cox: Now let's turn to profitability results. We're pleased to report that both our EBITDA margins and gross margins showed strong improvement in cutery. We reported 28.6 million in adjusted EBITDA and 30.2% EBITDA margin in the third quarter, which was 550 basis points higher than the third quarter of last year. Just like last quarter, the outperformance in our revenue put straight through to EBITDA, as we are starting to see real efficiency gains with the operations team using our Gen AI technology.
Speaker 2: And certainly, we could not achieve these results without partnering with our terrific clients.
Speaker 2: With that, I'll turn it over to Sondi to share the exceptional client detail that generated the stellar result.
With that I'll turn it over to sandy to share the exceptional client detail that generated the stellar results.
Thank you Jim.
Speaker 3: I wanted to cover the three topics I laid out at the beginning of my remarks, namely disciplined execution, client success, and product innovation.
But I wanted to cover the three topics I laid out at the beginning of my remarks, namely disciplined execution client success and.
Product innovation.
Disciplined execution and a focus on client success.
Speaker 3: Disciplined execution and a focus on client success are very important to our business.
A very important to our business.
That's the highest level.
Jim Cox: Yet another highlight of the quarter was our free cash flow at $30.9 million. Free cash flow exceeded EBITDA in the quarter, as there were limited changes in working capital and increased interest income contributed to our cash flow. Put this all together and we ended the quarter with $302.8 million in cash, cash equivalent and investment, our highest ever balance. This level of cash on the balance sheet and the free cash flow generation of this business provides us with significant strategic optionality in a number of areas.
Speaker 3: We are excited to be executing ahead of the models you presented on Investor Day.
We are excited to be executing ahead of the models you presented on Investor day.
Speaker 3: And these results were delivered before the R&D cost starts to normalise.
And these results with Delaware.
Before the.
The R&D cost starts to normalize.
The entire Clearwater team continues to be relentless.
Speaker 3: The entire clear water team continues to be relentless in the OJC and precision with which it exists.
And the urgency and precision.
Richard execute.
The commercial model adjustment of last year.
The highest ever NPS in the company's history.
Speaker 3: the highest ever NPS in the company's history this past quarter.
This past quarter.
And the sharp improvement in the time taken to onboard clients our.
Speaker 3: And the sharp improvement in the time taken to own both clients are examples of our ability to execute.
Our example.
They need to execute.
Jim Cox: Overall, the third quarter was exceptionally strong, continuing our positive momentum. We could not deliver these results without the great worth of our over 1700 employees who are tirelessly focused on delivering for our clients. And certainly we could not achieve these results without partnering with our terrific clients.
It's easy for us to say that 90% of the Onboarding now happens within five months.
Speaker 3: It's easy for us to say that 90% of the onboarding now happens within 5 months, that is a truly extraordinary achievement. The reality is that
But that is a truly extraordinary achievement.
The reality is that systems like these.
And it takes several years to implement.
And the fact that we get customers on our platform the value within five months.
Speaker 3: And the fact that we get customers on our platform live within five months is a direct consequence of us.
He is a direct consequence of a single instance, multi tenant platform.
Sandeep Sahai: With that, I'll turn it over to Sandeep to share the exceptional client detail that generated the stellar result. Thank you, Jim.
A single security milestone.
Speaker 3: a single security master and the relentless focus of onboarding teams.
And the relentless focus of our Onboarding team.
Sandeep Sahai: I wanted to cover the three topics I need out at the beginning of a remark. Namely, discipline execution, client success and core innovation. Discipline execution and a focus on client success are very important to our business. At the highest level, we are excited to be executing ahead of the models we presented on investor day and these results were delivered before the already cost starts to normalize. The entire clear water team continues to be relentless in the urgency and precision with which it exists.
Which leads me to product innovation.
Speaker 3: beneath all the industries they serve, continue to change and wait continue to change in the future. But it's our ability to adjust.
The need until the industry's DSO.
Continuing to change.
And we continue to change in the future.
But it has the ability to adjust.
Execute and innovate.
That allows us to deliver these results.
The needs of the asset management industry continue to evolve.
Speaker 3: The need for the asset management industry continue to want and they now face relentless.
And then now please relentless.
Cost and growth factors.
Speaker 3: soon left to the eventually
Recognizing this change we started to invest in prism.
Speaker 3: and a current solution linked to the party of a girl.
And our current solution makes us the partner for growth.
Speaker 3: instead of a partner, a vehicle just replace their accounting platform. And when it deals in recent quarters, we are now helping our asset management.
Instead of a partner who could just replace that.
Net accounting platform.
Sandeep Sahai: The commercial model adjustment of last year, the highest ever NPS in the company history, this past quarter and the short improvement in the time taken to onboard clients are examples of our ability to execute. It's easy for us to say that 90 percent of the onboarding now happens within five months. But that is a truly extraordinary achievement. The reality is that systems like these can take several years to implement. And the fact that we get customers on a platform invite within five months is a direct consequence of a single instance multi tenant platform. A single security master and the relentless focus of onboarding team.
And many deals in recent quarters.
Now healthy.
Our asset management fine.
They'll have a better solution to their clients.
Thereby helping them increase in AUM flows.
Speaker 3: thereby helping them increase in UN flow, we have become a part of the world. Likewise, the asset order industry, also...
We have become a partner for growth.
Likewise, the outset order industry.
Also evolved the investing strategy.
And the increase the allocation to alternative assets.
And why are you already processed alternative assets very well.
Speaker 3: And while we already process alternative assets very well.
Studios back you started to invest the goal of becoming best in class.
Speaker 3: Studios back he started to invest the going of becoming best in class
Speaker 3: when it comes to reporting on constituent elements.
When it comes to reporting on Q2.
One element.
Within the MLP.
Speaker 4: spanning data, link, compliance, and reporting requirements. We now have two other LPX.
Finding data arena complying and reporting requirement.
Sandeep Sahai: Which leads me to product in the way. The needs of the industries they serve continue to change and will continue to change in the future. But it's our ability to adjust, execute and innovate that allows us to deliver these results. The needs of the asset management industry continue to evolve and they now face relentless past and growth pressures. Recognizing this change, we started to invest in phism and a current solution makes us a partner for growth instead of a partner who could just replace their accounting platform. And when we deal with some recent quarters, we are now helping our asset management find, deliver a better solution to their clients. Thereby, helping them increase in UN flows, we have become a part of growth.
We now have clear whether LPX.
LPX clarity mmm.
<unk>.
These products play a significant role.
Speaker 3: in our ability to continue to well and different field also.
And our ability to continue to win.
And differentiate us.
We are very proud of our ability to win 80% of the time, we'd like to proposal.
Speaker 3: We are very proud of our ability to win 80% of the time we write a proposal.
Speaker 3: But we maintain that reingrade that continuously nipped me to our clients and prospects.
But we maintain that win rate.
Continuously.
Let's move to our clients and prospects.
We believe that we have a truly disruptive platform.
Speaker 3: But we will continue to innovate to ensure that we broaden our competitive modes.
But we will continue to innovate to ensure.
That will broaden our competitive moat.
How do we do this.
Speaker 3: We evaluate product ideas and categorize them into one or three areas.
We evaluate product ideas.
To drive them into one of three areas.
First back to base.
Speaker 3: products that can help our current clients get better value or help us to solve additional pain points.
Products that can help our current clients get better value.
Or help us.
Solve a default briefly.
Sandeep Sahai: Likewise, the asset older industry also evolved the investing strategy and increased the allocation to alternative assets. And while we all ready process alternative assets very well, studios back, we started to invest the goal of becoming best in class when it comes to reporting on constituent elements within an L.C. Planning data lineage, compliance and reporting requirement. We now have few other L.P.X, L.P.X clarity and MLX. These products play a significant role in our ability to continue to win and differentiate our solution.
Second the Adjacencies.
Speaker 3: products that can help us provide full investment life cycle for investment management instead of just investment.
Products that can help us provide.
Investment lifecycle thoughtful investment management.
Instead of just investment accounting.
Third disruptor.
Speaker 3: never give the power of the single-A-Scule platform. These are products that help us leverage the power of the single security master.
Leveraging the power of the single dose platform deals.
These are products that help us leverage the <unk>.
The single security Master.
And have the potential to disrupt the industry.
Let me then with the investments against the bookings potential.
Speaker 3: We then weigh the investment against booking potential, both over the next 12 months.
Both over the next 12 months and in the long term.
We take a portfolio approach.
Speaker 3: We take a portfolio approach that includes having three infant doubles while also reserving some investment for potential homeless.
That includes hitting singles and doubles.
While also absorbing some investments.
What potential homerun.
Sandeep Sahai: We are very proud of our ability to win 80% of the time we write a proposal. But we maintain that win rate that continuously lifts me to our clients and prospect. We believe that we have a truly disruptive platform, but we will continue to innovate to ensure that we broaden our competitive mode.
One key tenant of our innovation process.
That is common to all of our ideas.
Speaker 3: that is commenting on our ideas is partnering with actual client every step of the way. We solicit client inputs directly through
Is partnering with absolute flying every step of the way.
We solicit find inputs directly.
Through our customer advisory boards.
And through our annual user conference.
Clearwater connect.
Sandeep Sahai: How do we do this? We evaluate product ideas and categorize them into one or three areas. First, back to base. Products that can help our current clients get better value or help us to solve a difficult pre-point. Second, suggestion fees. Products that can help us provide full investment life cycles, if you think for investment management. Instead of just investment accounting. Third, disruptors. Never give the power of the single aid skills platform.
Speaker 3: beating of connect in September , we hosted over 500 clients and flashbacks.
<unk> connect in September.
We hosted over 500 clients and prospects.
But across the globe.
Speaker 3: Discuss Innovation Goldmap, take their feedback and we conduct.
Discuss our innovation roadmap.
Take their feedback.
And we conduct joint design section.
Speaker 3: We held over 160 client meeting.
We held over 160 client meeting.
Speaker 3: we actively sought inputs to our roadmap and we see feedback from them.
We actively sought input to our roadmap.
And received feedback from them.
Oh no upcoming initiatives.
Most importantly, we collaborated with your bank partners.
Speaker 3: most importantly, the collaborators of the design partners to ensure that our products are in need of the beneficial to them.
So there are products in each of the beneficial.
You bet.
Sandeep Sahai: These are products that help us leverage the power of the single security master. And have the potential to disrupt the industry. We then weigh the investment against booking potential. Both of them are the next 12 months and in the long term. We take a portfolio approach that includes sharing savings and double, while also resolving some investment for potential homeless.
Let me try and bring these trends to life.
Speaker 3: with actual seven-figure client when this quarter.
With actual seven figure client wins this quarter.
I'll start with a leading insurance company that we won in Q3.
Speaker 3: I'll start with the leading e-c
Speaker 3: This was a significant win because they had arms sore.
This was a significant win.
Because they had outsourced.
The entire investment accounting function.
Speaker 3: Entire investment accounting function to a competitor.
Got it.
But when they saw an onsite demo of the Clearwater platform.
Speaker 3: But when they saw an on-site demo of the Clearwater platform
Sandeep Sahai: One key tenet of our innovation process that is commenting on our ideas is partnering with actual clients every step of the way. We solicit client inputs directly through our customer advisory board and through our annual user concept. Clearwater Connect. Speaking of Connect, in September, we hosted over 500 clients on Crossback from across the globe to discuss innovation roadmap, take their feedback and conduct joint design questions. We held over 160 client meetings, we actively sought inputs to our roadmap and received feedback from them on our upcoming initiatives. Most importantly, we collaborated with them in majorly beneficial to them.
They realized that it was possible to get a comprehensive daily real of the global portfolio.
Speaker 3: They realize that it was possible to get a comprehensive daily reel of the global portfolio, including public and private assets, which in turn would enable the decision.
Including public and private assets.
Which in turn will enable the decision makers.
To make better.
And more informed decision.
That demo.
Speaker 3: That demo made to an accelerated review of the accounting book of records solution.
Led to an accelerated review of the accounting book of record solution.
And this is silver.
Speaker 3: through this piece of the collector clean water and rugged one.
Conducted clearwater in record time.
Another large win was with a leading life insurance and annuity company.
Speaker 3: Another large win was with a leading life insurance and annuity company that administered nearly 100 billion dollars in assets under management. They selected a competitor over 2 years back.
Understood.
$100 billion in assets under management.
They selected a competitor though.
I look two years back.
And they have yet to go lives.
Meanwhile, the bought out of the pool of assets.
Speaker 3: But given the challenges with parent company was facing,
But given the challenges the company was facing.
This subsidiary to Clearwater.
Clearwater was able to quickly implement the subsidiary assets.
Sandeep Sahai: Let me try and bring these trends to life with actual seven figure client when this quarter. I'll start with the leading insurance company that we won in Q3. This was a significant win because they had an outsource, their entire investment accounting function to competitor. But when they saw a quantified demo of the Clearwater platform, they realized that it was possible to get a comprehensive daily real of the global portfolio, including public and private assets, which in turn would enable the decision maker to make better and more informed decision. That demo led to an accelerated review of the accounting book of record solution, and this is a selective Clearwater in record time.
Speaker 3: Clear what I want to be able to quickly and combine this up to the rear.
Speaker 3: and they will survive on our platform in relatively short order.
And they went live on our platform.
In relatively short order.
Looking at that experience.
Speaker 3: We have joined to report that the parent company came to the conclusion.
He is joined to report that the parent company came to the conclusion that.
Speaker 3: that the price system that's connected was unable to scale and operate under pressure.
Prior system that selected was unable to scale and operate under pressure.
And opted to consolidate all of the assets onto three waters platform.
Speaker 3: and opt to discriminate all the assets onto three-attered flat.
So very clear.
Speaker 3: Today, clear water is their soil investment accounting solution and we want to again prove the power of our planet.
Clearwater is their sole investment accounting solution and.
And we once again proved.
The power of our platform.
Speaker 3: In Q3, we also find an asset balance.
In Q3, we also signed an active manager.
We have previously decided to migrate.
Speaker 3: We have previously decided to migrate to the cloud version of a competitors off.
So the cloud version of our competitors' offerings.
Speaker 3: as we attempt to move from an on-prem to the cloud working with this vendor. The come.
As we attempted to move from an on Prem to the cloud with him Lucas window.
The complaint.
How about the damage.
For me accurate data and segregated Peter classic classes.
Speaker 4: from inactive data and segregated pH acid classes, to reporting limitations, and the overall experience of the provider. The founder.
Sandeep Sahai: Another large win was with a leading life rate for an annuity company that administered nearly $100 billion in assets under management. They selected a competitor over two years back and they have yet to go live. Meanwhile, they bought another clearwater asset, but given the challenges that the parent company was facing, did subsequently chose Clearwater. Clearwater was able to quickly implement the subsidiary assets and they've been live on our platform in relatively forethought.
Boarding liberte food and.
But on the full experience of the provider.
They found themselves conflicted being late.
On monthly close.
Speaker 4: Unable to provide users with a view into the daily holdings across all assets, or while their fees cut.
Unable to provide users with a view into the daily holdings.
Across all assets.
While there please crept up.
No wonder it took a different approach.
We started by collaborating.
We conducted a number of important factors outlining every asset class.
Speaker 4: We conducted a number of important sessions on climbing every aspect of the track.
Industries as the frequency, it's clear water would be able to deliver.
Speaker 4: illustrator the appreciable see is K. I want to would be able to deliver.
Sandeep Sahai: Looking at that experience, we have joy to report that the parent company came to the conclusion that the prior system was connected, was unable to scale and operate under pressure and opted to confirm that all the assets onto Clearwater's platform. Today, Clearwater is their sole investment accounting solution, and we once again proved the power of our platform.
I mean that uses across the spectrum.
Speaker 4: to complete, developing your own lineways, FALSEing in lineways, in FISTY.
Leading to complete.
Linemen and trust.
Finally, they talk to a number of our science and then.
Speaker 4: Finally, they talked to a number of our clients and then.
Speaker 3: Even though they have several years remaining on their contract with the previous window,
Even though they had several years remaining on that contract with the previous window.
The time with us this past quarter.
Although the decline is the North American full service life insurance company.
Speaker 3: Another find in the North American Food Service, life insurance.
The recently went through an acquisition.
Speaker 4: They recently went through an acquisition, essentially doubling the U.S.
Sandeep Sahai: In Q3, we also signed an asset manager, who had previously decided to migrate to the cloud version of a competitive offer. As we attempted to move from an on-prem to the cloud version with this vendor, the company covered the damage. From inaccurate data and segregated data to asset classes to reporting limitations and the overall experience of the provider. They found themselves consistently late and monthly clones, unable to provide users with a view into the daily holding across all assets, all while their fees crept up.
One is really doubling the U S.
At the recent meeting with the Chief investment Officer.
Speaker 3: We know of the plans of diversify into adjacent geographies and markets.
We don't have the plan to diversify.
Two adjacent geographies and markets.
And the challenges that would both from an infrastructure point of view.
Speaker 4: and the challenges that would pose from an infrastructure upon it.
We've demonstrated the clear with our platform and its ability to devote comprehensively and seamlessly.
Speaker 4: We demonstrated the clear word of platform and its ability to devote comprehensively and cleanly of access around the world.
Of access around the world.
Not only that.
But we can also generate financial reports and local GAAP.
Speaker 3: but we could also generate financial reports in local gaps and address local regulatory needs.
Address local regulatory body.
That can lead them to sign a seven figure deal.
Of course, we also signed a number of six figure deals with medium sized businesses.
Speaker 3: Of course we also find a number of 6 figure deals with medium sized speakers.
Let me start with the last of banking from a variety of intuitive to the customer.
Speaker 3: Let me start with a massive banquant firm with a variety of Institute of Culture.
Sandeep Sahai: Clearwater took a different approach, we started by collaborating. We conducted a number of important sessions, hunklining every asset class. Illustrated, the efficiency is clear what a would be able to deliver, and not using the cross spectral, leading to complete functional alignment and trust.
Before Sunday with Clearwater does business had grown tired of continuous <unk>.
Speaker 4: Before signing with Clearwater, this business had grown tired of continuity.
Bandage Felicia.
The turn to pure water for our comprehensive portfolio.
Speaker 3: They turn to pure water for a comprehensive portfolio.
Speaker 3: of sun, middle and back office supporting, relying on the depth and breadth of clean water.
Sung.
Middle and back office reporting.
Relying on the depth and breadth of Clearwater.
Sandeep Sahai: Finally, they talked to a number of our clients and then, even though they had several years remaining on their contract with the previous vendor, they signed with us this past quarter.
Kilowatt a jump.
L T X and tourism.
Using free what a jump.
Speaker 4: Using clear water jump, this client is implementing a new OMS and PMF.
This client is implementing a new Oems and Pms.
Sandeep Sahai: Another client is the North American full-service life insurance company. They recently went to an acquisition, essentially doubling the EUM.
Once Nevada, LPX clarity provides the front office with the transparency needed to understand risk and exposure and limited partnership investments.
Speaker 3: While he would have LPS clarity provides the front office with the founds penalty needed to understand risk and exposure to limited partnership investment when making both for your decisions. Finally, they use clear water prism.
When making portfolio decisions.
Sandeep Sahai: At the recent meeting of the chief investment officer, we learnt of their plans to diversify into adjacent geographies and markets. And the challenges that would pose from an infrastructure upon a view. We demonstrated the clearwater platform and its ability to devote comprehensively and seamlessly to asset around the world. Not only that, but we could also generate a length of reports in local gaps and address local regulatory needs. That means them to sign a seven-figure deal.
Finally, the youth Clearwater Prism.
Which allows users to build and edit.
Important client statements.
Speaker 4: and define custom approval workflows to meet the client's audience, attributing things and areas you're reporting me.
Define custom approval workflows.
Meet the client audits attributable and ESG reporting to me.
The next client is a prominent insurance company in Asia.
Speaker 4: The next client is a prominent insurance company in Asia.
That exactly a growth rate.
Speaker 3: That exists in Pakistan. Busy question of independent Joker theorem. The
With significant screen unveil brief coating systems and processes.
Particularly the investment operations team.
Sandeep Sahai: Of course, we also signed a number of six giga deals with medium-sized brick losses.
They've been introduced to Clearwater.
Speaker 3: They were introduced to clear water, but one of our existing clients in the region.
But one of our existing clients in the region.
Sandeep Sahai: Let me start with a massive bank loan firm with a variety of institute tool customers. Before signing with clearwater, the business had grown tired of creating new and band-aid solutions. The turn to Clearwater for a comprehensive portfolio for front, middle and back-office supporting, relying on the depth and breadth of Clearwater, Clearwater Jump, Lpx Inclusion, using Clearwater Jump, this client is implementing a new OMS and PMF, while Clearwater Lpx Clarity provides the front-office with the transparency needed to understand risk and exposure to the limited partnership investment when making portfolio decisions.
Once again, demonstrating that our happy customers are our best sales channel.
Speaker 4: Once again, demonstrating that our happy customers are our best sales chance.
This reference led to an accelerated review using a series of workshops.
Speaker 4: This reference led to an extraordinary video review using a series of works
Speaker 4: this hands on experience with oscillation, that to meet with success and reinforce the belief, the clear water is the disruptive best in translation.
This hands on experience with our solutions led to mutual success and reinforces the belief that clear what are the disruptive best in class fleet.
You have heard us talk about how we support grief.
And during the third quarter, we added a significant read through our client base.
Speaker 3: and due to the third quote, we added a significant read to our client.
As clients those clearwater to replace the previous redemption.
Speaker 4: spline those clear-waddle to replace the previous limit
Speaker 4: We also find a publicly held wellness brand to resolve the inconsistencies with investment data and more.
We also signed a publicly held wellness brand to resolve the inconsistencies with investment data and more.
And finally, we signed several new clients leveraging our partnership with moving money.
Speaker 4: And finally, we signed seven million clients leveraging our partnership with Morgan Money.
Sandeep Sahai: Finally, the youth Clearwater Prism, which allows youth to build and edit reports and client statements and define custom approval workflows to meet the client's audience, attributing things and ESG reporting needs.
Speaker 4: Strategic partnership we announce with J.P. Morgan in May of this year.
Our strategic partnership we announced with J P. Morgan in May of this year.
The joint solution makes it easier for.
Speaker 4: The joint solution makes it easier for financial professionals to have a global connected view of their investment portfolios and have powered them to make real time investment decisions by working on the clear water and Morgan money platform in Canada.
Financial professionals to have a global connect.
Collective view of the investment portfolio.
And you have powers them to make real time investment decisions by working on the Clearwater and Morgan money platform in Canada.
Sandeep Sahai: The next client is a prominent influence company in Asia. There is exactly a growth rate, but significant strain on the operating systems and processes, particularly the investment operations team. They were introduced to Clearwater by one of our existing clients in the region. Once again, demonstrating that our happy customers are our best sales channel. This reference led to an accelerated review using a series of workshop. This hands on experience with oscillation, led to mutual success, and reinforces the belief that Clearwater is the disruptive best-in-class solution.
Speaker 4: And while all of these clients went very exciting, they equally excited about the recent progress you made on two sides. And it's now, with an energetic calm in your eyes. And it's now, with an energetic calm in your eyes.
And while all of these client wins are very exciting.
Equally excited about the recent progress you've made on two fronts.
Number one Jennie O.
Speaker 4: The response to the demonstrations and brilliantly provided a clinical prospect at Tierwater Connect with variance.
The response to the demonstrations and visually provided our clients and prospects at Tijuana connect.
Very encouraging.
The bond that we have done with our internal operations team continues to build confidence about the impact of this technology.
Speaker 4: The pilot we have done with our internal operational team continues to build fun for them about the impact of this technology.
On the every associate cooperation scheme.
Speaker 3: on the efficiency of the operation scene. And therefore, to go to Smart.
And therefore, the gross margin.
And to the productivity of our engineering team and therefore.
Speaker 3: and to the productivity of our engineering team and therefore to the cost of innovation.
The cost of innovation.
Second.
Sandeep Sahai: You have heard us talk about how we support REAP and during the third quote, we added a significant REAP to our client base. This client shows Clearwater to replace the previous redemption. We also find a publicly held wellness brand to resolve the inconsistencies with investment data and more.
Speaker 3: building products that never the power of a single security mass share to think the least can smug I can.
Building products that leverage the power of a single security posture.
Single instance, multi tenant platform.
Again, the vision of the demo that we showed a small group of clients under NDA.
Speaker 4: Again, the visionally demo that we showed a small group of clients under NDA was very encouraging and has led us to doubling down on that area of investment.
It was very encouraging.
And that has led us to doubling down on that area of investment.
Sandeep Sahai: And finally, we find several new clients leveraging a partnership with more than money. A strategic partnership we announced with JP Morgan in May of this year. The joint solution makes it easier for financial professionals to have a global, connective view of their investment portfolios and have powered them to make real-time investment decisions by working on the Clearwater and Morgan-Money platform in Canada.
As a summary, continuing to delight our customers.
We have an exciting roadmap with trying to find partners guiding approach.
Speaker 4: We have an exciting roadmap with trying to find partners guiding our approach. And we are capitalizing on the latest technology.
And we are capitalizing on the latest technologies.
To improve our internal operations.
Speaker 4: and deliver on proud and real and good opportunities for our clients.
And we deliver unparalleled scale and growth opportunities product lines.
All of this is evident in our strong Q3 results.
Speaker 4: All of their fervident in our strong kill-treaters.
With that I'd like to turn it back to Jim to.
Speaker 2: With that, I'd like to totally add back to Jim to cover our guide. Hey, Sunday, now let's turn the guidance.
Sandeep Sahai: And while all of these clients were very exciting, we are equally excited about the recent progress we made on two fronts.
To cover our guidance.
Thanks Sandeep.
Now, let's turn to guidance.
Focusing on guidance for the fourth quarter of 2023.
Speaker 2: We expect revenue to be 98.5 million.
We expect revenue to be $98 $5 million.
Sandeep Sahai: Number one, Jenny Ai. The response to the demonstrations and brilliantly provided a clinical prospect at Clearwater connect was very encouraging. The pilot we have done with our internal operations team continues to build on to the impact of this technology.
Speaker 2: and we expect adjusted EBITDA to be $28 million or approximately 28% EBITDA marks.
And we expect adjusted EBITDA to be $28 million or approximately 28% EBITA margin.
Speaker 2: For the full year 2023, we have increased our revenue guidance.
For the full year 2023.
We have increased our revenue guidance too.
Speaker 2: 367.6 million dollars.
$367.6 million.
Sandeep Sahai: Energy, on the everythincy of operation scene, and therefore to go to smartly. And to the productivity of our engineering team, and therefore to the cost of innovation.
Speaker 2: which is an increase of $2.6 million from the midpoint of our prior guidance.
Which is an increase of $2 $6 million from the midpoint of our prior guidance range.
Speaker 2: and represents approximately 21% year over year.
Represents.
Proximately, 21% year over year growth.
Sandeep Sahai: Second, building products that leverage the power of a single security mass share to think the least in multi-general platform. Again, the visionally demo that we showed a small group of clients under NDA was very encouraging and has led us to doubling down on that area of investment.
Speaker 2: We've also increased our full year EBITDA guidance by $4 million from the prior quarter to
We've also increased our full year EBIT guidance by $4 million from the prior quarter too.
Speaker 2: $104 million for the full year 2020.
$104 million for the full year 2023.
Speaker 2: That guidance represents EBITDA margins of 28% to the full year at expansion of over 150 basis points over the full year 2022. With that, I'll turn it over to Sandy.
That guidance represents EBITA margins of 28% for the full year.
That expansion of over 150 basis points over the full year 2022.
Sandeep Sahai: As the summary, we continue to divide our customers. We have an exciting roadmap with trying to design partners guiding our approach. And we are capitalizing on the latest technologies to improve our internal operations and deliver unfaddleless skill and group opportunities for our clients.
With that I'll turn it over to Sandy.
To provide some closing thoughts.
Speaker 4: Thanks Jim, you're long said that we want to build a truly exceptional company.
Thanks, Jim He has long said that we wanted to build a truly exceptional company.
Speaker 4: I'm so happy to report that we are executing ahead of the plan. We laid out at our investor.
I'm So happy to report that we are executing ahead of the plan.
We laid out at our Investor day.
You can either been purpose with our clients to become better together.
Sandeep Sahai: All of this is evident in our strong Q3 results.
Speaker 4: Stalin is making an industrial development pursue exactly 300 years ago, and most often done to do something like this but he is now working socio-evernal development in his field, like working in Baja is that one who may employ Chal Being fell dead all and all wants money for me and I am because unity must be active in the people and
And I'm incredibly excited about what lies ahead.
Jim Cox: With that, I'd like to turn it back to Jim to cover our guiding. Thanks, Cindy.
With that I will turn it towards the operator for <unk>.
Speaker 4: But that I was telling it to be operational for my question analysis.
A question and answer session.
Jim Cox: Now let's turn to guidance. Well, we can see non-guidance for the fourth quarter of 2023. We expect revenue to be $98.5 million, and we expect adjusted EBITDA to be $28 million, or approximately 28% EBITDA margins.
Thank you.
Speaker 1: If you would like to ask a question, please press star then one on your telephone keypad. If you change your mind anytime, please.
If you would like to ask a question. Please press Star then one on your telephone keypad.
If you change your mind any time, please press star Okay.
Torture Amendment last week.
Speaker 1: We will pause for a moment, boss. We look at the days. Can we name a star?
Thank goodness Q&A.
Jim Cox: For the full year 2023, we have increased our revenue guidance to $367.6 million, which is an increase of $2.6 million from the midpoint of our prior guidance range, and represents approximately 21% year-over-year growth. We've also increased our full year EBITDA guidance by $4 million from the prior quarter to $104 million for the full year 2023. That guidance represents EBITDA margins of 28% for the full year, and expansion of over 150 basis points over the full year 2022.
The first question we have comes from machine channel Yeah cause RBC you May proceed machine.
Speaker 1: The last question we have comes from Rashid, Shaloria, of RBC, you may proceed Rashid.
Oh wonderful.
Taking my question I wanted to start by asking a little bit about Gen AI.
Speaker 2: taking my question. I wanted to start by asking a little bit about Gen AI. Sundee, when I was at Clearwater Connect, definitely got a chance to see Clearwater GPD demo. Seems really impressive. Maybe if you could talk about early feedback coming out of the conference, and how we should be thinking about the roadmap of future use cases over, let's call it the next year, based on that customer feedback, and maybe monetization alongside them, and then I've got to quit all the other day.
When I was at.
Clearwater connect I.
I forgot to stand a chance to see Clearwater GPT demo. It seems really impressive maybe you can talk about early feedback coming out of the conference and how we should be thinking about the roadmap of future use cases over let's call. It. The next year based on that customer feedback and maybe monetization alongside that when I've got a quick follow up for Jim.
Thank you for the question here.
Speaker 3: Thank you for the question here. Look, also thank you for coming over to clear what a connect. It was very good that you can talk to clients directly. You sort of always just listening to us. So look at what Chad GPT and Genie I in general here. So firstly, we believe it is transformative and disruptive.
Also thank you for coming over to Clearwater connect those very good that you can talk to clients directly instead of always just listening to us silica.
Sandeep Sahai: With that, I'll turn it over to Sandy to provide some closing thoughts. Thanks, Jim. You're long said that we want to build a truly exceptional company. I'm so happy to report that the executing ahead of the plan, we lead out at our investor day. We invited in purpose with our clients to become better together, and I'm incredibly excited about what lies ahead.
<unk> and <unk>.
Jimmy I in general here.
So firstly, we believe it is transforming <unk>.
And disruptive.
Speaker 3: I do think it can have significant and mostly positive impact on our business.
I do think it can have significant and mostly positive impact on our business.
As you know we launched <unk> and then at connect we showed a number of demos.
Speaker 3: As you know, we launched PlayWard a GPT and then at Connect, we showed a number of demo.
Speaker 3: And if you get to the next level, what you've done is we have done, we have launched and funded five programs.
And if you can get to the next level. What we have done is we have done we have launched and funded five programs.
Operator: With that, I'll turn it over to the operator for my question and answer session. Thank you.
Speaker 3: Two of these programs are revenue generated. They are more about how do we increase revenue? One of those insights which you demonstrated, and the other one was how can customers talk to the data and really interact with the data themselves without sort of coming to us to understand what's going on? We think both of these are potentially revenue generating.
Two of these programs are revenue generated that theyre more about how do we increase revenue one of them is insights, which have demonstrated and the other one was high.
Operator: If you would like to ask a question, please press star, the one on your telephone keypad. If you change your mind at any time, please press star and two. We will pause for a moment, but we look at today's Q&A list.
How can cash towards talks to the data and really interact with the data themselves without sort of coming to us to understand what's going on.
Rishi Jaluria: The last question we have comes from Rishi, Shaloria. Of RBC, you may proceed, Rishi. Oh, wonderful. Taking my question.
We think both of these are potentially revenue generating.
Two of those programs the efficiency of it later.
So the first one is about improving reconciliation and data.
Speaker 3: So the first one is about improving reconciliation and data.
Sandeep Sahai: I wanted to start by asking a little bit about Gen AI. Cindy, when I was at Clearwater Connect, I definitely got a chance to see Clearwater GPT demo. Seems really impressive.
Speaker 3: And the second one is how do you improve onboarding and client service?
And the second one is how do you improve onboarding.
Lyons servicing.
Speaker 3: And frankly, the fifth one is one, you know, we talk about an NDA because it's something we aren't ready to discuss quite yet.
And frankly, the first one is one.
We talked about an NDA, because it's something we own ready to discuss quite yet.
Jim Cox: Maybe you can talk about early feedback coming out of the conference, and how we should be thinking about the roadmap of future use cases over, let's call it the next year, based on that customer feedback and maybe monetization alongside them, and then I've got a quick follow up for Jim. Rishi, thank you for the question here. Look, and also thank you for coming over to Clearwater Connect. It was really good that you can talk to Brian directly, you sort of always just listening to us.
Speaker 3: And the point ratio that this is nothing which is gonna take us six months in a year, you're gonna, you have already started to see some impact of that, frankly enough, financials, and owner of Brady and Kippable.
The point ratio that this is nothing which is going to take us six months in a year, you're going to you've already started to see some impact of that.
Thank you and our financials and on our operating capability.
Speaker 3: So I would say that do we expect to continue to improve meaningfully in 2024? Yes, we do. We think it'll have an impact. How much impact? I think that's something we will have a better position to tell you when we provide guidance for next year. Jim, would you add anything back? All right, thank you.
I would say that do we expect to continue to improve meaningfully in 2024, yes. We do we think it will have an impact how much impact I think thats something we will have a better position to tell you when we provide guidance for next year.
Jim Cox: So look here, about Chad GPT and Gen AI in general here. So firstly, we believe it is transformative and disruptive. I do think it can have significant and mostly positive impact on our business. As you know, we launched Clearwater GPT and then at Connect, we showed a number of demos. And if you get to the next level, what you've done is we have launched and funded five programs. Two of these programs are revenue generated.
Jim would you add anything.
Got it.
But as your base.
Speaker 2: Okay, no thanks, thanks. And maybe the quick follow up on that for Jim related. And you know, you're giving this preliminary outlook on Ividal margins for next year. Really happy to see that and nice to see you continue to expand margins.
Okay. Thanks.
And then maybe the quick follow up for that are.
So Jim related.
You are giving this preliminary outlook on EBITDA margins for next year really happy to see that in our nice to see you're continuing to expand margins as you're investing or beside that though I'd have to imagine there is some impact on your P&L from the investments you are making a generative AI the costs as long as I'm sure there's going to be more focused on <unk>.
Speaker 5: as you're investing. All inside that though, I'd have to imagine there is some impact.
Jim Cox: They are more about how do we increase revenue? One of the insights which you demonstrated and the other one was how can customers talk to the data and really interact with the data themselves without sort of coming to us to understand what's going on? We think both of these are potentially revenue generating. Two of those programs are efficiency related. So the first one is about improving reconciliation and data. And the second one is how do you improve on boarding and client servicing? And frankly, the fifth one is one, you know, we talk about an NDA because it's something we aren't ready to discuss quite yet.
Speaker 5: on your P&L from the investments you're making in generative AI, the cost, as well as I'm sure there's going to be more focus on driving adoption in the near term, before really focusing on monetization in a big way. Maybe keep walking through.
Living adoption in the near term before really focusing on monetization in a big way maybe can you walk us through what what are you thinking about the impact of generative AI on margins for next year and how much I guess room are you, leaving yourself to invest in what is really a big market opportunity and not wanting to OLED.
Speaker 5: What are you thinking about the impact of gender to the eye on margins for next year? And, you know, how much I guess room are you leaving yourself to invest in what is really a big market opportunity and not wanting to over-deliver on margins? Thanks.
The liver on margins. Thanks.
Speaker 2: That's a great question and the way you articulated it is exactly how a fundee and all of us are thinking about it. We have already started it.
Appreciate thats a great question and the way you articulated is exactly how sandeep and all of us.
Our thinking about it so we have already started to see the benefits.
Sandeep Sahai: And the point ratio is that this is nothing which is going to take us six months in a year. You're going to, you have already started to see some impact of that frankly enough, financials and on our operating capability. So I would say that do we expect to continue to improve meaningfully in 2024? Yes, we do. We think it'll have an impact. How much impact? I think that's something we will have a better position to tell you when we provide guidance for next year. Jim, would you add anything to that? Excellent. Go ahead. Good. Thank you, please. Okay. No, thanks.
Speaker 2: to a small degree of the Gen AI tools that our teams are using internally. And I think you can just see the expression of it partially in the Gross Margin expansion that's two-side Q3. That is not the entire reason for the Gross Margin expansion in Q3. It is only a very small subset of the client servicing team that is using those tools, but the results we're seeing from those.
To a small degree.
As the journey II.
Jim Cox: Maybe the quick follow up on that for Jim related.
Tools that our teams are using it internally and I think you can just see the expression of it.
Partially in the gross margin expansion that you saw in Q3 that is not the entire reason for the gross margin expansion in Q3. It is only a very small subset.
The client servicing team that is using those tools, but the results we're seeing from those are meaningful.
Speaker 6: And so I think that just gives us more confidence.
And so I think that just gives us more confidence.
Speaker 6: that 80% gross margin target that we think about in the longer term is extremely attainable. However, we want to bounce.
Bet that 80% gross margin target that we think about in the longer term is extremely attainable. However, we want to balance that gross margin.
Jim Cox: And you know, you're giving this preliminary outlook on EBITDA margins for next year. Really happy to see that and I'm nice to see you continue to expand margins as you're investing. I want to invest into making in generative AI the cost as well as I'm sure there's going to be more focus on driving adoption in the near term, you know, before really focusing on monetization in a big way.
Speaker 6: That gross margin, kind of targeting with kind of that incredible client service and focus on clients that we have. And so we don't want to lean too quickly into that. We want to make sure that we're delivering for that.
Kind of targeting with kind of that incredible client service and focus on clients that we have and so we don't want to lean too quickly into that we wanted to make sure that we're delivering for them and.
And so what I would say is as we think about the 200 basis point expansion next year, which we talked about at Investor day, and we're reiterating here even at our higher EBIT.
Speaker 6: And so what I would say is as we think about the 200 basis point expansion next year, which we talked about it investor day and we're reiterating here, even at our higher EBITDA numbers for 2023.
Jim Cox: Maybe you walk us through what what are you thinking about the impact of generative AI on margins for next year? And you know, how much I guess room are you leaving yourself to invest in what is really a big market opportunity and not wanting to over-deliver on margins. Thanks. Rishi, that's a great question, and the way you articulated it is exactly how Sunil and all of us are thinking about it. So we have already started to see the benefits to a small degree of the Gen AI tools that our teams are using internally, and I think you can just see the expression of it partially in the gross margin expansion.
Numbers for 2023.
Speaker 6: There is very limited impact of Gen AI within those margin numbers.
There is very limited impact.
Jen AI within those margin.
Numbers.
Speaker 6: And I think that what we want to do is exactly what you said. We want to maintain the optionality. We see a very clear path to delivering 200 pages points of margin expansion next year while allowing us flexibility.
And I think that what we want to do is exactly what you said, we want to maintain the optionality, we see a very clear path to delivering 200 basis points of margin expansion next year.
While allowing us flexibility.
Speaker 6: to attack the opportunities that we see ahead of.
To attack the opportunities that we see ahead of us.
Speaker 3: Yes, I think we just add to that, this will be very, very clear. Just be very, very clear. We are not optimizing for profitability. I think when we presented at Investor Day, the gross margin should grow simply because of Europe and Asia normalized.
Yes, if I can just add to that.
This will be very very cheap.
But just to be very very clear, we are not optimizing for profitability.
When we presented at Investor day, the gross margin should grow simply because of Europe and Asia normalizing.
Jim Cox: That is not the entire reason for the gross margin expansion in Q3. It is only a very small subset of the client servicing team that is using those tools, but the results we're seeing from those are meaningful. And so I think that just gives us more confidence that that 80% gross margin target that we think about in the longer term is extremely attainable. However, we want to balance that gross margin kind of targeting with kind of that incredible client service and focus on clients that we have.
Speaker 3: And also if you remember R&D should come down, not because we wanted to come down, but because at one time conversion up to the cloud and the investment for Europe have been completed.
And also if you remember R&D should come down not because we wanted to come down, but because at one time conversion to the cloud and the investment for Europe had been completed.
Speaker 4: So really, we don't think that we are optimizing for profitability. It's just a consequence of the business we have.
So really we don't think that we have.
Optimizing for profitability is just a consequence of the business we have.
Speaker 3: And if I can just stop, you know, since you asked this great question, put it out, you know, just to be a little bit more declarative, I do think we are investing in Genie I, we have a significant dedicated team, which does just that.
If I can just suggest that's a great question.
Just to be a little bit more that your ratio I do think we are investing in Germany, we have a significant dedicated team, which does just that.
But we already get in return for that how.
Speaker 3: But we're already getting returns on it. Are we going to invest more? Yes. Are we going to be able to get results quicker? Yes. And that is the power of Jenny. It can deliver results in months.
Jim Cox: And so we don't want to lean too quickly into that. We want to make sure that we're delivering for them. And so what I would say is as we think about the 200 basis point expansion next year, which we talked about it investor day and were reiterating here, even at our higher EBIT numbers for 2023. There is very limited impact of Gen AI within those margin numbers. And I think that what we want to do is exactly what you said we want to maintain the optionality we see a very clear path to delivering 200 basis points of margin expansion next year while allowing us flexibility to attack the opportunities that we see ahead of us. Yes, I think we just add to that.
How are we going to invest more yes, how are you going to be able to get results quickly. Yes that is the power of Jennie O. It can deliver results in months.
Speaker 4: and not in two years and three years. So yes, we're going to invest more in GenieI and we are investing more in GenieI, but the efficiency they're getting is frankly there to see. So yeah, that's how we think about it.
And not in two years and three years. So yes, we will invest more in journey and we are investing in Jennie O.
But the efficiency, we're getting is frankly there to see.
That's how we think about.
Alright wonderful. Thank you so much guys I appreciate it.
We now have.
Speaker 1: We now have a slice full JP Morgan to line it up.
Slash from J P Morgan benign as they can.
Hi, This is Alex Smith on for Alexia <unk> from JP Morgan. Thank you for taking my question. So my first question I noticed that NR that ever so slightly sequentially from 190 <unk> went away I was hoping you could speak to what happened there.
Speaker 7: Hi, this is Ella Smith on for Alexa Google Live from Jake Morton. Thank you for taking my question. So for my first question, I noticed that NRR dipped ever so slightly sequentially from 109 to 108. Let's hope you could speak to what happened there.
Jim Cox: Just to be very, very clear, just to be very, very clear, we are not optimizing for profitability. I think when we presented at investor day, the gross margin should grow simply because of Europe and Asia normalizing. And also if you remember, R&D should come down, not because we wanted to come down, but because at one time conversion up to the cloud and the investment for Europe have been completed. So really we don't think that we are optimizing for profitability. It's just a consequence of the business we have.
Sure Alex this is.
Jim happy to take that.
Speaker 6: If you all recall, back in Q1, when we wrote 106.
If you all recall back in Q1, when we were at 106.
Speaker 6: I kind of said, hey, this is about where we're going to live in the high single digit.
I've said, Hey, this is about where we're going to live in the high single digits and I think that if you have heard me say in when we got to Q2 and we were at 109 I said, maybe I only said this.
Speaker 6: And I think that if you heard me say in when we got to Q2 and we were at 109, I said,
Speaker 6: Maybe I only said this to, you know, boy, it just rounded up to 109, all things being equal. And so I think we're just in the margin there. We're living in that space and kind of where we thought we would live.
Boy, It's just rounded up to 109, all things being equal and so I think we're just in the margin there we're living in that space.
Sandeep Sahai: And if I can just start, you know, since you asked the question, you know, just to be a little bit more declarative, I do think we are investing in Gen AI. We have a significant dedicated team which does just that. But we already getting returns on it. Are we going to invest more? Yes. Are we going to be able to get results quicker? Yes. And that is the power of Gen AI.
And.
Where we thought we would list.
Speaker 6: While we work to continue to build out the GTM function and the additional products and solutions and executing that to drive us towards that 115.
While we work to continue to build out the GCM function.
And the additional.
Products and solutions and executing that to drive us towards that 115.
So we are continuing to work really hard.
Speaker 6: So we are continuing to work really hard to drive towards that aspirational 115 level.
Sandeep Sahai: It can deliver results in months and not in two years and three years. So yes, we will invest more in Gen AI and we are investing more in Gen AI. But the efficiency they're getting is frankly there to see. So yeah, that's all we think about.
Unknown Attendee: Wonderful. Thank you so much, guys. I appreciate it.
To drive towards that aspirational 115 level.
But this is not an easy task it is a herculean effort.
Speaker 6: But this is not an easy task. It is a herculean effort. And I don't think that, you know, I think we will work through all of 2024 to continue to push on that, but I don't think we will get there in 2024. But if I'm still talking about moving to NRR 115 in 2026, I think...
And I don't think that I think we will work through all of 2024 to continue to push on that but I don't think we will get there in 2024, but if I'm still talking about moving to NR $1 15 in 2026.
Ellis Smith: We now have Ellis Smith from J.P. Morgan, Willine Zaykin.
Think I will.
I will consider that.
Speaker 6: I will consider that, you know, a failure, frankly, on my part. So we're going to push hard. It's a multi-year effort. We're very committed to it. And we want to drive to it. This, these kind of quarter to quarter changes in the margin, I'm very comfortable with. All the initiatives are still pointing in that direction.
Jim Cox: Hi, this is Ellis Smith on for Alexei Gogolev from Jake Morgan. Thank you for taking my question. So, for my first question, I noticed that NRR dipped ever so slightly sequentially from 109 to 108. Let's hope you could speak to what happened there.
The failure frankly on my part so we're going to push hard it's a multi year effort, we're very committed to it.
And we want to drive to it this these kind of quarter to quarter changes in the margin.
Im very comfortable with all.
All the initiatives are still pointing in that direction.
Jim Cox: Sure, Ella, this is Jim. I'm happy to take that. If you all recall, back in Q1, when we were at 106, I kind of said, hey, this is about where we're going to live in the high and single digits. And I think that if you heard me say in when we got to Q2, and we were at 109, I said, maybe I only said this to, you know, boy, it just rounded up to 109, all things being equal.
That's very helpful. Thank you so much John and for a follow up so listening to the Investor day, which happened not too long ago in this call.
Speaker 7: That's very helpful. Thank you so much, Jim. And for follow-ups, they're looking to the investor day which happened not too long ago in this call. A huge emphasis is obviously on your product development and new product launches. And they seem to think that you would expect a strong majority of your future growth to come from
Huge emphasis is obviously on your product development and new product launches. It makes me think that you would expect a strong majority of your future growth should come from.
<unk> expansion per client as opposed to the number of clients expanding would you agree with that or not necessarily.
Speaker 7: ARR expansion per client has opposed to the number of clients expanding. Would you agree with that or not necessarily?
Jim Cox: And so, I think we're just in the margin there. We're living in that space and kind of where we thought we would live, while we work to continue to build out the GTM function and the additional products and solutions and executing that to drive us towards that 115. So, we are continuing to work really hard to drive towards that aspirational 115 level, but this is not an easy task. It is a Herculean effort.
Speaker 6: So I think let's pray. Oh, sorry, go ahead, son.
So, yes, I think what's great Oh, sorry go ahead Tony.
Speaker 6: I'll start and then you go start. I would say that we had so.
I'm not sure I'll start and then and then you guys sorry.
I would say that we had so.
Speaker 6: That is one path. So what is so great about adding?
That is one path right. So what is so great about adding.
Speaker 6: NRR 115 to this level and all of the product development is that that is yet another path of going back to the base to get that. But the truth is we have many, many different paths to drive 20 plus percent growth. We have geographic expansion.
And our $1 15 to this level and all of the product development is it that is yet another path of going back to the base to get that but the truth is we have many many different paths to drive 20% growth we have geographic expansion.
Jim Cox: And I don't think that, you know, I think we will work through all of 2024 to continue to push on that, but I don't think we will get there in 2024. But if I'm still talking about moving to NRR 115 in 2026, I think I will, I will consider that, you know, a failure, frankly, on my part. So we're going to push hard. It's a multi-year effort. We're very committed to it. And we want to drive to it. This, these kind of quarter to quarter changes in the margin. I'm very comfortable with all the initiatives are still pointing in that direction.
Speaker 6: We have these new products, but they are also opening up at J-SENCES and additional market opportunities for new clients, as well as our existing clients. And yes.
We have these new products, but they are also opening our adjacencies and additional market opportunities for new clients as well as our existing clients and yes.
Unknown Attendee: That's very helpful. Thank you so much, Jim.
We talk a lot about going back to base, because it's a relatively new muscle for us, but it's just yet another one of those options. So if we have five or six different options to drive that growth. It just makes it a more durable resilience.
Speaker 6: We talk a lot about going back to base because it's a relatively new muscle for us, but it's just yet another one of those options. So if we have five or six different options to drive that growth, it just makes it a more durable, resilient, and strong business.
And <unk>.
Strong business Sandeep, what would you add.
So I think thats exactly right.
Speaker 3: I think that's exactly right, Ella, that I don't think you can sort of take these pieces and say, ah, so if this is going to get to 14 or 15, then new logos are going to go down. That's not the way we think about it. What we do think about it is how do we put many ions in the fire and some will work and some won't work. And as it and some will be good in one quarter, and another will be good in another quarter. But we want to provide resiliency in our growth. And so like, generate out their fighting, their geography.
I don't think you can sort of take these pieces and say Oh. This is going to get to 14 or 15, new logos, we're going to go down that's not the way we think about it what we do think about is how do we put many irons in the fire.
Sandeep Sahai: And for follow up, so looking to the investor day, which happened not too long ago in this call, a huge emphasis is obviously on your product developments and new product launches. It makes me think that you would expect a strong majority of your future growth to come from NRR expansion per client, as opposed to the number of clients expanding. Would you agree with that or not necessarily? Yeah, this is what's great.
Tom will walk through some won't work and as the and some will be good in one quarters in Orlando will be good in another quarter, but we want to provide resiliency in our growth and so like Jim laid out five teams is geography.
Speaker 4: The second one is markets and market adjacencies. The third one is these products and new products we're developing. Fourth one is the commercial model. We'll be changes to and that will help. And finally, at some point there's gonna be an AUM tailwind.
The second one is markets and market Adjacencies. The third one is these products are new products. We are developing <unk>. One is the commercial model, we have made changes to our natural health and finally.
Sandeep Sahai: Oh, sorry, go ahead, study. I'll start and then you go start. I would say that we had, so that is one path. Right. So what is so great about adding NRR 115 to this level and all of the product development is that that is yet another path of going back to the base to get that, but the truth is we have many, many different paths to drive 20 plus percent growth. We have geographic expansion.
At some point, there's going to be.
AUM tailwind.
Speaker 3: Not how do you, you know, tailwind this year. And last year, obviously hurt us, but at some point, the value of assets looks like to grow. Is it going to be two, three percent? Yes. And that's what we would expect, but we obviously can't forecast that and we don't expect that. We don't visit into our business model, except to note that, yes, that would be another level of growth we might expect in the outer years. See, it's not about one versus the other. You want to work on all of these set of simultaneously.
If it's not <unk>.
AUM tailwind this year.
Last year, obviously hurt us, but at some point the value of assets will start to grow is it going to be two 3% yes.
And Thats, what we would expect but we obviously can't forecast that and we don't expect that we don't build it into our business model, except to note that yes that would be another level of growth we might expect in the outer years.
Sandeep Sahai: Right. We have these new products, but they are also opening up at Jason C's and additional market opportunities for new clients, as well as our existing clients. And yes. Yes, we talk a lot about going back to base because it's a relatively new muscle for us, but it's just yet another one of those options. So if we have five or six different options to drive that growth, it just makes it a more durable, resilient and strong business.
Not about one versus the other we want to work on all of these.
Simultaneously.
Great. Thank you so much Jim and Sandeep.
Thank you.
Your next question comes from the line of James Faucette Morgan Stanley.
Speaker 1: The next question comes from the line of James Holteth of Morgan Stanley .
You May proceed with your question.
Speaker 8: Hi, it's Michael and Fontaine for James, nice result here. I just wanted to ask on ARR growth first revenue growth. It looks like ARR is growing 19.4% in the quarter, probably a touch lower on an organic basis, but you're seeing revenue growth that's close to 24%. I know you've spoken about the delta between ARR growth and revenue growth, ultimately compressing in 24, but can you sort of unpack what's driving that delta right now?
Hi, it's Michael in Fontana for James Nice results here.
I just wanted to ask on IRR growth versus revenue growth.
Sandeep Sahai: Sandeep, what would you add? So I think that's exactly right, Ella, that I don't think you can sort of take these pieces and say, ah, so if this is going to get to 14 or 15, then new logos are going to go down. That's not the way we think about it. What we do think about is, how do you put many ions in the fire and some will work and some won't work.
Looks like <unk> is growing at 19, 4% in a quarter or probably a touch lower on an organic basis, but you're seeing revenue growth that's close to 24%.
You've spoken about the delta between <unk> growth and revenue growth ultimately compressing in 'twenty four but can you sort of unpack, what's driving that delta right now.
Sandeep Sahai: And as it and some will be good in one quarter, and another will be good in another quarter, but we want to provide resilience in our growth. And so like Jim Raidout, they have five things. There's geography. The second one is markets and market adjacencies. The third one is these products and new products we developing. Fourth one is the commercial model. We will be changes to and that will help. And finally, at some point, there's going to be an AUM tailwind.
Sure sure I think that that's a so I think that as you're onboarding clients.
Speaker 6: Sure, I think that that's, so I think that as you're onboarding clients, you can get it, some catch up in revenue there that then plays through. So maybe just let me back up for a second, say we are very rigorous and conservative in our approach for the revenue that we describe as recurring revenue. We have lots of new products and we have lots of things.
You can get.
Some catch up in in in revenue there.
Then place through so maybe just let me back up for a second.
We are very rigorous and conservative in our approach for the revenue that we describe as recurring revenue and so we have lots of new products and we have lots of lots of things within our clients.
Sandeep Sahai: You know, we've not had a AUM tailwind this year. And last year, obviously hurt us. But at some point, the value of assets will start to grow. Is it going to be two, three percent? Yes. And that's what we would expect. But we obviously can't forecast that and we don't expect that. We don't visit into our business model, except to note that, yes, that would be another level of growth. We might expect in the outer years. Yeah, it's not about one versus the other. We want to work on all of these sort of simultaneously.
Speaker 6: which we believe will be recurring in nature, but we do not put them into ARR at that bucket. Michael, and so that's a little bit of the delta there. ARR continues to, I agree with you, but in the long term, those two will trend together. But let's say that we choose to commercialize something in a non-recurring way. We would have, at some point in the future, we would have a delta in...
Which we are.
Which we believe will be recurring in nature, but we do not.
Put them into <unk> at that bucket, Michael and so that's a little bit of.
The Delta there.
<unk> continues to I agree with you that in the long term those two will trend together.
But let's say that we choose to commercialize something in a nonrecurring way we would have at some point in the future. We would have a delta in that going forward. So I think they are very close to each other and so I think that that's.
Sandeep Sahai: Great. Thank you so much, Jim and can do. Thank you.
Michael Infante: The next question comes from the line of James or that of Morgan Stanley. May proceed to your question. Hi, it's Michael and Fontan for James. Nice result here.
Speaker 6: So, I think they're very close to each other, and so I think that that's, you know, when you start looking at last 12 months and those sorts of information, they're trending pretty consistently.
When you start looking at last 12 months and those sorts of information that trendy.
Pretty consistent.
Jim Cox: I just wanted to ask on ARR growth first revenue growth. It looks like ARR is growing 19.4% in the quarter, probably a touch lower on an organic basis, but you're seeing revenue growth. That's close to 24%. I know you've spoken about the delta between ARR growth and revenue growth, ultimately compressing in 24. But can you sort of unpack what's driving that delta right now? Sure, I think that that. So I think that as you're onboarding clients, you can get some catch up in revenue there, that then place through.
Makes sense and I wanted to follow up just on some of the strategic commentary you made obviously a record cash balance and pretty impressive free cash flow generation in the quarter. It seems like M&A is very much on the table I guess, how are you thinking about the types of assets or geographies you would be targeting.
Speaker 8: And I wanted to follow up just on some of the strategic commentary you made. Obviously, record cash balance and pretty impressive free cash flow generation in the quarter seems like M&A is very much on the table. I guess, how are you thinking about the types of assets or geographies you would be targeting? I guess the reason I ask is...
I guess the reason I ask is it seems like driving towards that 115% IRR is sort of the guidepost in M&A may not necessarily sort of aid in that goal, but I'm curious, how you're how you're thinking about both of those sectors.
Speaker 8: It seems like driving towards that 115% NRR is sort of the guidepost and M&A may not necessarily sort of aid in that goal, but I'm curious how you're thinking about both of those vectors.
I think just answered it.
No.
Jim Cox: So maybe just let me back up for a second, say, we are very rigorous and conservative in our approach for the revenue that we describe as recurring revenue. And so we have lots of new products and we have lots of lots of things within our clients, which we are, which we believe will be recurring in nature. But we do not put them into ARR at that bucket. Michael, and so that's a little bit of the delta there.
So Jamie Goldman Sachs.
Speaker 3: you could become satisfied within. Less?? Dimition.
Or did the issue.
Okay.
Yeah.
Okay. It looks like both of US are going to ship. So look I think that there are two things here. One is we obviously have $302 million of cash in that <unk>.
Speaker 3: Okay, looks like both of us are going to set. So look, I think that there are two things here. One is we obviously have $302 million of cash and that's significant because you never had that much cash on a balance sheet. But what's also useful is that we were, if we continue to generate cash on a quarterly basis.
Significant because you've never had that much cash on our balance sheet, but what's also useful is that we were as we continue to generate cash on a quarterly basis.
So the first step we took it it was.
Speaker 4: Now the first step we took at it was buying jump last year. And frankly, we wanted to...
Buying jump last year.
Frankly, we wanted to play out a little bit.
Jim Cox: ARR continues to, I agree with you that in the long term, those two will trend together. But let's say that we choose to commercialize something in a non-recurring way. We would have, at some point in the future, we would have a delta in that going forward. So I think they're, they're very close to each other. And so I think that that's, you know, when you start looking at last 12 months and those sorts of information, they're trending pretty. Makes sense.
Speaker 3: When you acquire something as you know, it takes a little while for the company, the first acquisition in this history to sort of play out.
When you acquire something as you know it takes a little while for the company. The first acquisition in this history to sort of play out.
And I think we are very happy with the result, and therefore, we will be aggressive on M&A, but it is not being done for our purposes no real purpose. Its not like we have to hit a certain gross margin target a certain EBITDA target or a certain revenue target what we do care about as we've said before is can it help us.
Speaker 3: And I think we are very happy with the result. And therefore, we will be aggressive on M&A, but it's not being done for a purpose. There's no real purpose. It's not like we have to hit a certain gross margin target or certain EBITDA target or a certain revenue target. What we do care about, as you said before, is can it help us expand functionality?
Expand functionality.
Speaker 4: Can it help us bring in products we can take to our current clients and go south to them? Or can we explain?
Jim Cox: And I wanted to follow up just on some of the strategic commentary you made, obviously record cash balance and pretty impressive free cash flow generation in the quarter. Seems like M&A is very much on the table. I guess, how are you thinking about the types of assets or geographies you would be targeting?
Can you just help us bring in products, we can take to our current clients and goes out to them.
Or can we expand geographically so I think it is going to be in service of one of those three things and obviously, we want a bar to be high and these are really nice financials. The balance sheet is quite pristine.
Speaker 3: So I think it has got to be in service of one of those three things. And obviously, we want to bar to be high. These are really nice financial balance sheet is quite pristine. And so therefore, we want to be cautious, but we don't want to be defensive.
Jim Cox: I guess the reason I ask is it seems like driving towards that 115% NRR is sort of the guidepost and M&A may not necessarily sort of aid in that goal, but I'm curious how you're thinking about both of those sectors. I think you're obviously have $302 million of cash in that that's significant because you never had that much cash on a balance sheet. What's also useful is that we were if we continue to generate cash on a quarterly basis.
And so therefore, we want to be cautious, but we don't want to be defensive.
Speaker 9: And so if you haven't seen anything to now, it was because we did jump last year. We want to make sure we have the right muscle and the right systems to have them integrated in the right way. And then we will continue to act on this. So we are excited about it. We are excited about what that potential opportunity that opens for us.
So if you haven't seen anything to know it was because we did jump last year, we wanted to make sure we have the right muscle and the right systems too.
Have them integrated in the right way and then we will continue to have active there. So we are we are excited about it we're excited about.
What.
Tension opportunities that opens for us.
That's great. Thank you both.
Thank you.
And I'll have Mike Lucarelli from Wells Fargo.
Speaker 10: Great, thanks very much. Hey, David, under for Michael's parents, and I just want to make. So this is a refreshing call and software land today, for sure. I know we've kind of touched upon this, but can you guys talk more broadly in the man environment for the industry? You're just talking about the, you know, proving out the ROI and the more constrained budget environment? And guys, maybe going back to that, that beautiful slide you had in the investor night, for BIP.
Great. Thanks, very much David.
David Unger.
For microphones and I just want to make.
Jim Cox: Now the first step we took at it was buying jump last year. Infantly, we wanted it to play out a little bit when he acquired something as you know it takes a little while for the company, the first acquisition in this history to sort of play out. And I think we're very happy with the result. And therefore, we will be aggressive on M&A, but it's not being done for a purpose. There's no real purpose.
The second call in software land today for sure.
No we've kind of touched upon this but can you guys talk more broadly on the demand environment for the industry just talking about the.
Proving out the ROI in a more constrained budget environment and guys, maybe going back to that that beautiful slides you had on the investor data workbench.
Speaker 10: Tech investment management spent and reference versus just pointing to one bit today.
<unk> investment management spend Pam referenced.
As planned in the one that okay. Thanks.
Jim Cox: It's not like we have to hit a certain gross margin target or certain EBITDA target or a certain revenue target. What we do care about, as you said before, is can it help us expand functionality? Can it help us bring in products we can take to our current clients and go sell to them? Or can we expand geographically? So I think it has got to be in service of one of those three things.
So, yes, I could just talk about that.
Speaker 4: So yes, I just talk about that, you know, that's specifically if you think about
That specifically if you think about.
How do we go from the 1 billion to the three bps to the focus for me and you think about what is incorporated in that and so we think of that as risk as.
Speaker 3: how we go from the one bed to the three beds or to the four beds for me. And you think about what is incorporated in that. And so we think of that as rest.
Speaker 3: as performance and middle office, and really components that complete the investment life cycle instead of just investment accounting.
His performance and Middle office, and really components that complete the investment lifecycle.
Jim Cox: And obviously, we want to bar to be high. These are really nice financial, the balance sheet is quite pristine. And so therefore, we want to be cautious, but we don't see anything to now. It was because we did jump last year. We want to make sure we have the right muscle and the right systems to have them integrated in the right way. And then we will continue after this. So we are excited about it. We are excited about what that potential opportunity that opens for us.
Jim Cox: That's great. Thank you both.
Instead of just investment accounting.
And so we can Jim was talking about investing in new products and ideas. It is about that.
Speaker 3: And so when Jim was talking about investing in new products and ideas, it is about that. It's in service of expanding that one bit into the four bit. Now.
In service of expanding that one Babe.
The format.
Now.
B J.
Speaker 3: We already do risk, we already do performance, we already do these things, but what we are building is displacement quality software.
Make sure you understand we already do risk we already do performance. They already do these things, but what we are building is displacement quality software.
Speaker 4: where a standalone client may be able to buy risk from us directly just for that capability. That's the difference. We have focused always on what's needed for investment accounting.
We're a standalone clients may be able to buy risk from us directly just for that capability. So that's the difference we are focused always on what's needed for investment accounting.
David Unger: Thank you. You now have Michael Karen from Wells Fargo. Great. Thanks so much.
Speaker 4: And our aspiration, as we said at Investor Day, is to move towards the investment management process, the whole life cycle.
And our aspiration as we said at Investor day is to move towards the investment management process the whole lifecycle.
Sandeep Sahai: David, I'm here for Michael's parents and I just want to make so this is a striking call in software land today for sure. I know we've kind of touched upon this, but can you guys talk more broadly in the man environment for the industry? You're just talking about the, you know, proving out the ROI and the more constrained budget environment and guys maybe going back to that, that beautiful slide you had in the investor day, four bits of tech investment management spent and reference versus just pointing to one bit today.
Speaker 4: So that's what we think about it, and a gym with a, you don't think that, that or not. We obviously have the whole section around back to base, which is about products you can take to a current line base. And that is obviously,
So that's how we think about it.
Jim would you add anything.
We obviously have the whole section around back to base, which is about products you can take to our current client base and that is obviously <unk>.
Speaker 3: more important if you will because that helps us grow faster and finally disruptors. So nothing has changed in the last seven weeks. We still believe that, hey, it's back to base. It's a J-SOOCY which is the one to four-bip and finally it is the disruptor products we can come up with.
More important if you will because that that.
That helps us grow faster.
And finally, a disruptor. So nothing has changed in the last seven weeks, we still believe that hey, it's back to base. Its adjacencies, which is the one to four and finally it is disruptive products, we can come up with.
Sandeep Sahai: Thanks. So yes, I can just talk about that, you know, that's specifically if you think about How we go from the one bit to the three bits or to the focus for me. And you think about what is incorporated in that. And so we think of that as risk, as performance and middle office and really components that complete the investment life cycle instead of just investment accounting. And so when Jim was talking about investing in new products and ideas, it is about that it's in service of expanding that one bit into the four bits.
Yeah.
Speaker 6: Yeah, Sandeep, that's right on that. The only thing I'd add, I think you were also asking, hey, what's the overall demand environment like, vis-a-vis what you're hearing from perhaps other software companies. And I would say, we are in a replacement market. And what you heard from Sandeep in his prepared remarks was example after example after example of where we are.
And if thats right now the only thing I'd add I think you were also asking hey, what's the overall demand environment like vis vis what you hear from perhaps other software companies and I would say we are we are in a replacement market and what you heard from Sandeep in his prepared remarks.
<unk> was example after example after example.
Of where we are.
Speaker 2: meaningfully, better and different. And there is pain out there. And it is a known market. And so I think that's why we see such resiliency in the demand that we see. That pain is not getting any less. And...
Meaningfully better and different.
And and there is pain out there and it is a known market and so I think thats why we see such resiliency in the demand that.
Sandeep Sahai: Now, I just want to make sure you understand that we already do risk, we already do performance, we already do these things, but what we are building is displacement quality software, where a standalone client may be able to buy risk from us directly just for that capability. So that's the difference. We have focused always on what's needed for investment accounting. And our aspiration, as we said it in yesterday, is to move towards the investment management process, the whole life cycle.
That we see is that pain is not getting any less and.
The more examples we have.
Speaker 6: The more examples we have of solving that pain, the more likely it is that more clients will recommend us to their friends who will become our prospects and we move forward.
Solving that pay the more likely it is that more clients will recommend us to their friends, who will become our prospects and we move forward.
Okay.
We now have Peter Heckmann with D. A davidson.
Speaker 11: We now have Peter Heckman, the DA Davidson. You're on his cell phone. Peter. Hey, good afternoon.
Sandeep Sahai: So that's how we think about it. We obviously have the whole section around back to base, which is about products, you can take to a current line base, and that is obviously more important, if you will, because that helps us grow faster and finally disruptors.
Your line is now a T K.
Hey, good afternoon, thanks for taking the question.
I wanted to see if you could talk about some of the competitive response, you might be seeing in the marketplace I really appreciated some of the examples you gave a long implementation cycles.
Speaker 12: I wanted to see if you could talk about some of the competitive response. You might be seeing the marketplace. I really appreciate it's in the examples you gave of long implementation cycles, you know, some failed into out migrations. But in terms of, you know, do you see some of those legacy competitors mounting competitive response? If so, what is it? And do you think that that can be successful at all in helping them retain some of that business?
Sandeep Sahai: So nothing has changed in the last seven weeks. We still believe that, hey, it's back to base, it's a Jason sees, which is the one to four bit, and finally it is the disruptive products who can come up with. Yeah, and indeed that's right on that. The only thing I'd add, I think you were also asking, hey, what's the overall demand environment like vis-a-vis what you're hearing from perhaps another software company.
Simpson sailed into out migrations.
But in terms of.
Do you see some of those legacy competitors a competitive response, if so what is it and do you think that that can be successful at all in.
And helping them retain some of that business.
Peter Thank you. Thank you for the question. This is Alicia had.
Speaker 3: Peter, thank you. Thank you for the question. This is, I wish I had prompted you with this question. But look, Q3 was very exciting. I think when we spoke about a year back, a year and a half back, there was a lot of conversation about competitors launching cloud versions of their product. And I think if you go back and listen to what we said, we said yes.
Pump to deal with this question.
Sandeep Sahai: And I would say we are, we're in a replacement market. And what you heard from Sunday, it is prepared remarks with example after example after example of where we are meaningfully better and different. And there is pain out there, and it is a known market. And so I think that's why we see such resiliency in the demand that we see is that pain is not getting any less. And the more examples we have of solving that pain, the more likely it is that more clients will recommend us to their friends who will become our prospects and we move forward from that. Thank you.
Q3 was very exciting I think when we spoke about a year back a year and a half back there was a lot of conversation about competitors launching cloud versions of the product and I think if you go back and listen.
Listen what we said we said yes.
But that doesn't change the underlying technology or the inability of the various pieces and components of working together like our software does right and in Q3, we really got many several million dollar deals.
Speaker 3: But that doesn't change the underlying technology or the inability of the various pieces and components of working together like our software does, right? And in Q3, we really got many several million dollar deals.
To actually prove that point.
Speaker 4: to actually prove that point. And so the first one, what we talked about was, cloud version of a product in two years, been implementing it, having the head success, they talked to the client and they were saying, can we have to talk to five different groups? Yeah, because there are five different products behind.
And so the first one we talked about was cloud version of our products being two years have been implementing it haven't had success can you talk to the client and they are saying hey, we have to talk to five different groups. Yeah. Because there are five different products behind it and show it as one integrated products here on that and we won another one where there was a problem.
Speaker 3: and say what is one integrated product. So you know, on that, we want another one where there was a promise of a product two years back. So look, we feel really good about it. We feel a little bit validated in what we have been saying. And obviously, all of you understand technology well. It's not quite that easy.
Peter Heckmann: We now have Peter Heckler, the DA Davidson. You're on its own way to Peter. Hey, good afternoon. Thanks for taking the question.
Most of our product two years back so look we feel really good about it we feel a little bit validated and what we have been saying.
Obviously, all of you understand technology, while the third quite that easy.
Sandeep Sahai: I wanted to see if you could talk about some of the competitive response. You might be seeing in the marketplace. I really appreciate it's in the examples you gave of long implementation cycles, you know, some failed into out migrations. But in terms of, you see some of those legacy competitors mounting a competitive response. If so, what is it? And do you think that that can be successful at all in helping them retain some of that?
Speaker 4: You're going to just take pieces of a technology and re-architect all of them and make them all work with you.
If you can just take pieces of our technology and re architect all of them and make them work with each other.
On the other hand, our platform was built ground up.
Speaker 3: Cliff got her on the other hand, a platform was built ground up.
Speaker 3: to work end to end seamlessly. So look, we feel like our competitor position, if anything, is a little bit stronger. And I do think as we get more proof points, it becomes easier for us to go to our prospects and say,
To work end to end seamlessly. So look we feel like our competitive position if anything has delivered stronger and I do think as we get more proof points it becomes easier for us to go to our prospects, let's say.
Speaker 3: Don't talk to us. Why don't you go talk to these five clients and see what they have to say. So look, we feel really good about where we are right now. But as I'm sure you heard from us right now, we are not resting. It's not like we are saying, we're gonna stop innovating, we're gonna stop investing in our indie, none of that. We expect to continue to innovate and continue to deepen our competitive mode.
Talk to US once you go talk to these five clients and see what they have to say so it's we feel really good about about where we are right now, but but as I'm sure you heard from US right. Now we are not addressing essentially we're saying we're going to stop innovating, we're going to stop investing in R&D. None of that we expect to continue to innovate and continue to do.
Sandeep Sahai: Peter, thank you. Thanks for the question. This is, I wish I had, you know, prompted you with this question. But look, Q3 was very exciting. I think when we spoke about a year back or year and a half back, there was a lot of conversation about competitors launching cloud versions of their product. And I think if you go back and think listen to what we said, we said yes. But that doesn't change the underlying technology or the inability of the various pieces and components of working together like our software does.
Sandeep Sahai: Right. And in Q3, we really got many several million dollar deals to actually prove that point. And for the first one, what we talked about was, you know, cloud version of a product in two years, been implementing it, haven't had success. They talk to the client and they are saying, hey, we have to talk to five different groups. Yeah, because they're five different products behind it. And say what is one integrated products you on that.
Our competitive moat.
Jim would you add.
Okay.
That's great to hear thanks, that's very helpful and just an engine in terms of jump just following up on their I guess versus your expectations. When you announced the deal I guess, how and I know you've announced several deals in several different countries, but generally how would you characterize the response from either current customers or core.
Speaker 12: That's great to hear. That's very helpful. Just an engine in terms of the jump, just falling up over there, I guess, versus your expectations when you announce the deal. I guess how, and I know you've announced that several deals in several different countries, but generally, how would you characterize the response from either current customers or non-jump, non-clear water customers and other markets in terms of the feature functionality of the software? I guess.
Non jumped clearwater customers in other markets in terms of the feature functionality of the software I guess today or are you thinking you need a little bit more investment or or or.
Speaker 12: Are you thinking you need a little bit more investment or perhaps there's a little bit more feature functionality in your thoughts?
Perhaps.
There is a little bit more feature functionality than you thought.
Sandeep Sahai: And we want another one was there was a promise of a product two years back. So look, we feel really good about it. We feel a little bit validated in what we have been saying. And obviously all of you understand technology. Well, it's not quite that easy. You can just take pieces of a technology and re architect all of them and make them all work with each other. Clear order on the other hand, our platform was built ground out to work into and seamlessly.
Yeah.
Yes, sure. So I can literally give you the report card on the jump integration.
Speaker 3: Yeah, sure. So I can literally give you the report card on the jump integration. So look, the first was jumps ability to compete in the French market against largest.
The first was jumps ability to compete in the French market against largest players. So there are a lot of large players who would not buy from jump because of the world.
Speaker 3: So there were a lot of large players who would not buy from a jump because they were, you know, much, much smaller company. So that clear net positive, that there's no confusion there. We are saying more momentum in the French market. The second one was ability to...
Much smaller company, so with that clear net positive that there is no confusion there we are seeing more momentum in the French market.
The second one was the ability to sell front to back in North America.
Sandeep Sahai: So look, we feel like our competitive position, if anything is a little bit stronger. And I do think as we get more proof points, it becomes easier for us to go to our prospects and say, don't talk to us. Why don't you go talk to these five clients and see what they have to say. So look, we feel really good about about where we are right now. But but as I'm sure you heard from us right now, we are not resting.
Speaker 3: It seems several early wins, but I do think we need to invest more in the GTM in the coming year.
It seems several early wins, but I do think we need to invest more in the GPM in the coming year.
Speaker 4: to take those proof points and then take it across the market. So is that all proven out? Does that all know? Are the early wins exactly the kind of wins we wanted to get? Yes. And so I feel good about it, but I would say we have to invest dollars by on the GTM next year to take it to a much broader market here in North America and take it aggressive.
To take those proof points and then take it across the market.
So is that all proven out does that all known.
The early wins.
Actually the kind of winter, we wanted to that yes.
So I feel good about it but I would say we have to invest dollars day on the GPM next year to take it to a much broader market here in North America and ticketed recipe.
Sandeep Sahai: It's not like we are saying, we're going to stop innovating. We're going to stop investing in R&D. None of that. We expect to continue to innovate and continue to deepen our competitive mode. That's great to hear. That's very helpful.
Speaker 3: The third thing was, abilities of cell jump front office, along with clear water platform, along with the clear water platform. And so.
Third thing was the ability to sell jumped front office.
Along with Clearwater platform, along with the clear water platform.
Sandeep Sahai: And just an engine in terms of jump just falling up over there. I guess versus your expectations when you announced the deal. I guess how and I know you've announced several deals in several different countries, but generally, how would you characterize the response from either current customers or non-jump, non-clear water customers and other markets in terms of the feature functionality of the software.
So that is very promising.
Speaker 4: I think we announced a deal in the last quarter and a number of customers want that optionality from us is that you do what accounting already once you do the front office and the middle office. So if you feel good about it, is there more work there? Yes, there is. As you get to the US and you sort of are trying to integrate them, I think there is some work there. And the final thing the last one was and then you that?
As we announced the deal in the last quarter and a number of customers want that optionality from US is that you do on accounting already wants you to the front office and Middle office. So we feel good about it is.
Is there more work day, yes. It is.
Youll get get to the U S and you sort of are trying to integrate them. I think there is there is some work there and finally the last one was our ability to sell units influx.
Sandeep Sahai: I guess today are you thinking you need a little bit more investment or perhaps there's a little bit more feature functionality in your thought. Yeah, sure. So I can literally give you the report card on the jump integration. So look, the first was jumps ability to compete in the French market against largest players. So there were a lot of large players who would not buy from the jump because they were, you know, much, much smaller company.
Speaker 3: really impressive, really impressive. The technology and the reception and the market in Europe has been really high.
Really impressive is really impressive.
Sandeep Sahai: So that clear net positive that there's no confusion there. We are saying more momentum in the French market. The second one was ability to sell front to back in North America. It seemed several early wins, but I do think we need to invest more in the GTM in the coming year, to take those proof points and then take it across the market. So is that all proven out? Is that all? No.
They're just the technology and the reception in the market in Europe has been really high quality.
So I would say at this point.
Speaker 4: So I would say at this point, I'm happy with the progress we are making. Have you seen the benefits we want from this? Not quite yet. Is there more investment to go in in the medical market? Yes, North America, that is true. Is there much more in Europe ? Not really. So that's how I would sum it. I think we're happy with the progress, but there is work to do. Okay, that's how.
Happy with the progress we are making.
Have you seen the benefits we want from this not quite yet.
Is there more investment to go in the American market, Yes, North America that is true is that much more in Europe not really so so that's how I would summit I think we are happy with the progress.
But there is work to do.
Okay. Okay. That's helpful. I appreciate it I'll get back in the queue.
Thank you so much.
Thank you well now has got playing out.
Speaker 1: Thank you and we now have Myelos Glacias, for colon dizendo.
Goldman Sachs.
Sandeep Sahai: Are the early wins exactly the kind of wins we wanted to get? Yes. And so I feel good about it, but I would say we have to invest dollars there on the GTM next year to take it to a much broader market here in North America and take it aggressively. But the third thing was abilities of sell jump front office along with Clearwater platform along with the Clearwater platform. That's sort of that is very promising.
Good afternoon. Thank you Jim I wanted to follow up on the earlier question on that to modify them and recognizing that it's too early for 2024, our guidance in the past you've given some helpful color on how bookings and bookings momentum.
Speaker 1: Good afternoon, thank you. Today, I wanted to follow up on the earlier question on the Taman environment, recognizing that it's too early for 2024 guidance. In the past, you've given some helpful color on how booking for momentum today can help you predict revenue T plus one, T plus two quarters out. So with that context.
He can help you predict revenue T plus one to plus two quarters out so with that context.
Speaker 13: Are you seeing anything interesting in the bookings environment that would lead you to think that you can accelerate revenue organically into 2024? How does the environment compare to, let's say, this time last year as you think about the puts and takes to budget planning and revenue guidance for 2024?
Are you seeing anything interesting in the bookings environment that would lead you to think that you can accelerate revenue organically into 2020 far how does the environment compare to lets say this time last year as you think about the puts and takes to budget planning and revenue guidance for 2024. Thank you.
Sandeep Sahai: So we, I think we announced a deal in the last quarter and a number of customers want that optionality from us is that you do what are counting already once you do the front office and the middle office. So we feel good about it. Is there more work there? Yes, there is. As you get get to the US and you sort of are trying to integrate them. I think there is there is some work there and the finally the last one was our ability to sell unit link funds.
Thanks, Kevin So I think we feel.
Speaker 6: Gabriela. So I think we feel feel very strong. And if you look at the last couple quarters in the momentum that we've seen there, I think I think that would align. And just you heard the commentary that Sunday provided. We feel really optimistic about the opportunity in 2024 now.
Feel very strong and if you look at the last couple of quarters and the momentum that we've seen there.
I think I think that would align and just you heard that.
Sandeep Sahai: Really impressive. It's really impressive. The technology and the reception and the market and Europe has been really high quality. So I would say at this point, I'm happy with the progress we are making. Have you seen the benefits we want from this? Not quite yet. Is there more investment to go in the American market? Yes, North America, that is true. Is there much more in Europe? Not really.
Common Terry that Sandeep provided we feel really optimistic about the opportunities in 2024 now.
Q4 is a very good quarter, and we want to deliver on that and we're really excited about the pace and the opportunities that are there, but as sandeep always I say, we have a lot of work to do.
Speaker 6: Q4 is a very big quarter and we want to deliver on that and we're really excited about the pike and the opportunities that are there. But as Sunday's always like to say, we have a lot of work to do. And I think we feel very confident about kind of the durability and the reliability of this growth across all of these markets and feel a lot of momentum. Good stuff. So think.
And I think we feel.
We feel very confident about.
Kind of the durability and the reliability of this growth across all of these markets and.
Sandeep Sahai: So that's how I would summit. I think that we are happy with the progress, but there is work to do.
See a lot of momentum.
Unknown Attendee: Okay, that's helpful. I appreciate it. I'll get back in the queue. Thank you so much.
Good stuff.
2022.
Speaker 4: If you look at 2022, clearly it's much better than that. The demand environment right now, if we just compare it to 2022, clearly it is much better than that. Does it mean that we're all super satisfied about it? No. Was the booking in Quarter 3 sort of what we expected? Absolutely. Was it a little bit better? A little bit.
Yeah. If you look at 2022, clearly, it's much better than that the demand environment right now and we just compare it to 2022 clearly it is much better than that doesn't mean that we all super satisfied about it known what the bookings in quarter three sort of what we expected absolutely was it a little bit better.
Gabriela Borges: Thank you. We now have Gabriella, apologies of cold and sex.
Sandeep Sahai: Good afternoon. Thank you. Tim, I wanted to follow up on the earlier question on the demand environment, recognizing that it's too early for 2024 guidance. In the past, you've given some helpful color on how bookings, bookings are meant today can help you predict revenue T plus one T plus two quarters out. So with that context, are you seeing anything interesting in the bookings environment? That would lead you to think that you can accelerate revenue organically into 2024.
But was it meaningfully better in order to docs. So I think it is what we expected and in Q.
Speaker 3: So I think it is what we expected. And you know, Q4 is another quarter, we continue to monitor it. We obviously listen to other underscores and we also listen to what our competitors are saying. So we look, we look pretty aggressively at, you know, how people are doing. But I do think if we just talk about our pipeline and you look at our pipeline growth, it is the highest.
Q4 was another quarter, we continue to monitor it we obviously listen to other analyst calls and the ultra listen to what our competitors are saying so we we looked we look pretty aggressively.
You know how people are doing but I do think if we just talk about our pipeline and you look at our pipeline growth. It is it is the highest its ever been.
Sandeep Sahai: How does the environment compare to, let's say this time last year, as you think about the puts and takes to budget planning and revenue guidance for 2024? Thank you. Thanks, Gabriella. So I think we feel very strong. And if you look at the last couple quarters in the momentum that we've seen there, I think that would align. And just you heard the commentary that Sunday provided. We feel really optimistic about the opportunities in 2024 now.
Speaker 3: So, I don't, I don't feel worried about a pipeline. Obviously, our job is to sort of convert them with the right frequency and urgency.
I don't I don't feel worried about our pipeline, obviously, our job is to sort of convert them.
Alright frequency and urgency.
Thank you for the color my follow up is on the replacement cycle dynamic in your market as you think about the factors that drive replacement cycles. Some of them are within our control and some of them are not so maybe just remind us what are the one or two or three biggest factors within your control that allow you to catalyze a replacement.
Speaker 13: Thank you for the color. My follow-up is on the replacements like a dynamic in your market. As you think about the factors that drive replacements like some of them are within your control and some of them are not. So maybe just for minus, what are the one or two or three biggest factors within your control that allow you to catalyze a replacement when you have a sales executive engaging with the customer? Thank you.
Sandeep Sahai: Q4 is a very big quarter and we want to deliver on that and we're really excited about the pipe and the opportunities that are there. But as Sunday, always like to say, we have a lot of work to do. And I think we feel feel very confident about kind of the durability and the reliability of this growth across all of these markets and feel a lot of momentum. So I think that would come back in 2020.
You have a sales executive of engaging with the customer. Thank you.
Yes, I think that if you think about it a little bit naturally like replacement often accounting engine I think it will get the wrong answer.
Speaker 4: Yeah, I think that if you think about it a little bit matterly like replacement of an accounting engine, I think you'll get the wrong answer.
Speaker 4: So I think if you think about the asset management industry, for example, if you think about clear what someone goes and then replaces an accounting engine and therefore the replacement cycle, then I think it's a very different answer. But we don't do that.
I think if you think about the asset management industry. For example, if you think about payroll, there's someone who goes in and replaces an accounting engine and therefore the replacement cycle. Then I think it's a very different answer, but we don't do that.
Sandeep Sahai: Yeah, if you look at 2022, clearly it's much better than that. The demanded moment right now, if we just compare it to 2022, clearly it is much better than that. Does it mean that we all super satisfied about it? No, was the booking in quarter three sort of what we expected? Absolutely. Was it a little bit better? Little bit? But was it meaningfully better? No, it is not. So I think it is what we expected and and you know, Q4 is another quarter.
Speaker 4: Most of a win in a grow to the last year and a half has been on helping our asset managers grow fast.
Most of our wind and our growth over the last year and a half has been on helping our asset managers grow faster.
So there's a big difference is that the replacement no. It is not what we are doing is we are helping clients get better client reporting get better analytics and therefore.
Speaker 3: So there's a big difference. Is that in replacement? No, it is not. What we're doing is we're helping clients get better client reporting, get better analytics, and therefore driving more in new and to.
Driving a new end to them.
Speaker 3: helping them win mandates. That drives all AUM to them. How will be helping them win mandates? Much better reporting, a comprehensive view versus the old Excel.
Helping them win mandates that drives both to them how will be helping them win mandate much better reporting a comprehensive view versus the old XL deal.
Sandeep Sahai: We can continue to monitor it. We obviously listen to other underscores and we also listen to what are what are competitors are saying. So we we look we look pretty aggressively at, you know, how people are doing, but I do think if we just talk about our pipeline and you look at our pipeline growth. It is, it is the highest ever been side, I don't, I don't feel worried about our pipeline. Obviously our job is just sort of convert them with the right frequency and urgency. Thank you for the color.
Speaker 4: So I feel like replacement cycle of course, we concern ourselves with replacing the opportunity arises, but I don't think we wait for that. I do think if you went to the Asamanic and Industry and said, what's your problem? Two things. I need to find ways to grow my AUM. Number one, and number two, I need to manage cost and become more efficient.
So I feel like replacement cycle of course the.
Concern ourselves with replacing when the opportunity arises, but I don't see we'll wait for that I do think if you went to the asset management industry and said, what's your problem two things I need to find ways to grow my AUM number one and number two I need to manage cost and become more efficient.
Speaker 3: We solve both of those, not necessarily only by replacing their accounting engine. Right? So that's one. I think the same thing on the acid or
So both of those not necessarily only by by replacing their accounting engine right. So that's one I think the same thing on the asset owner side. If you look at the asset owner side. There is a cycle of replacement, which we are.
Sandeep Sahai: My fault is on the replacement cycle dynamic in your market. As you think about the factors that drive replacement cycles, some of them are within your control and some of them are not. So maybe just remind us, what does it want to two or three biggest factors within your control that allow you to catalyze a replacement when you have a sales executive engaging with the customer? Thank you. Yeah, I think that if you think about it a little bit matterly like replacement of an accounting engine, I think you'll get the wrong answer.
Speaker 3: If you look at the asset owner side, there is a cycle of replacement, which we are, you know, if they get to that stage, we win a very large portion of the time. We would win 80% of the time we write this proposal here, but we don't wait for it. So, what is the pain point? Well, the pain point is alternative assets.
They get to that stage, we win a very large portion of the time.
We would when 80% of the time, Greg This proposal here, but we don't wait for it. So what is the pinpoint pinpointed alternative assets.
Sandeep Sahai: So I think if you think about the asset management industry, for example, if you think about clear what has someone goes and then replaces an accounting engine and therefore the replacement cycle, then I think it's a very different answer, but we don't do that. Most of our win and a growth over the last year and a half has been on helping our asset managers grow faster. So there's a big difference. Is that in replacement?
And therefore, you've seen our stock nonstop about our investments in Lps and then we back to that with the LPX clarity than we went into MLS. So I don't I don't think we look at the market and say, okay. What is the replacement cycle, what's the jump balls and therefore, what can I guess, but thats something which we.
Speaker 4: And therefore, you've seen us talk nonstop about our investments in LPX. And then we backed it up with the LPX Clarity. Then we went into MLX. So I don't I don't think we look at the market and say, OK, what is the replacement cycle? What's the jump balls? And therefore, what can I get? But that's something which.
We can capitalize a little bit, but we can control, but can be control identifying the right green points, our clients have and going out and addressing that aggressively yes, and thats what leads to grow it's not like.
Speaker 3: We can catalyze a little bit, but we can't control. But can we control identifying the right pain points our clients have and going out and addressing that aggressively? Yes. And that's what leads to growth. It's not like...
Sandeep Sahai: No, it's not. What we're doing is we're helping clients get better client reporting, get better analytics and therefore driving more a new end to them. Helping them win mandates that drives more a you and them how will be helping them when mandate much better reporting a comprehensive view versus the old Excel view. So I feel like replacement cycle of course we have to concern ourselves with replacing them and the opportunity arises, but I don't think you wait for that.
Speaker 3: The replacement cycle has become better and therefore we have grown. We just don't think about that.
The replacement cycle has become better and therefore, we are growing.
We just don't think about that.
That makes sense. Thank you.
Thank you.
Yeah.
Speaker 1: You know have to limitation.
You now have Dylan Becker as Williams.
Your line of thinking.
Speaker 14: Hey guys, nice job here. And maybe send deep kind of just digging into the customer conference here right. I know we've kind of highlighted the intent integration now having kind of the front and back office solutions. But maybe a big takeaway we kind of came away from the conference was around that insights opportunity. And obviously, yeah, an automation have been at the forefront here. But what are you hearing and seeing from customers? What were your big takeaways around the ability to drive kind of that level of intelligence through that connected platform?
Hey, guys nice job here and maybe Sandeep just digging into the customer conference.
And Youre right I know, we've kind of highlighted the end to end integration now having kind of the front and back office solutions, but maybe a big takeaway, we kind of came away from the conference was around that insights opportunity and obviously and automation have been at the forefront here, but what.
Sandeep Sahai: I do think if you went to the asset management industry and said, what's your problem? Two things. I need to find ways to grow my AUM number one and number two, I need to manage cost and become more efficient. We solve both of those, not necessarily only by by replacing their accounting engine, right. So that's one. I think the same thing on the asset owner side. If you look at the asset owner side, there is a cycle of replacement, which we are, you know, if they get to that stage, we win a very large portion of the time.
What are you hearing and seeing from customers, where a year big takeaways around the ability to drive kind of that level of intelligence through that connected platform. It seems like obviously, a big driver of kind of what the IRR opportunity ends up looking like but would love to hear kind of what the what you heard from me ma'am.
Speaker 14: It seems like a big driver of what the NRR opportunity ends up looking like, but we'd love to hear what you've heard from you.
Speaker 3: Yeah, absolutely. So first is it's really exciting, but doesn't show up in our revenue quite yet. So so that is something which.
Yes, absolutely.
Sandeep Sahai: We would win 80% of the time we write this proposal here, but we don't wait for it. So what is the pain point? Well, the pain point is alternative assets. And therefore you've seen our stock nonstop about our investments in LPX and then we back to that with the LPX clarity, then you went into MLX. So I don't, I don't think we look at the market and say, okay, what is the replacement cycle?
It's really exciting, but it doesn't show up in our revenue quite yet.
So that is something which.
Speaker 3: You'll hear me internally go on about it saying, this is every customer we talk to is really interesting. It feels like...
You'll hear me internally go on about it saying this is every customer we talk to is really interesting it feels like.
Speaker 3: They've been waiting for the product like this and haven't had it. And I think this technology allows them to get insights in a competitive peer bench marking and therefore where they should invest.
They've been waiting for a product like this and haven't had it and I think this technology allows them to get insights.
Sandeep Sahai: What's the jump balls and therefore what can I get? So that's something which... We can catalyze a little bit, but we can't control. But can we control identifying the right pain points our clients have and going out and addressing that aggressively? Yes, and that's what leads to growth. It's not like the replacement cycle has become better and therefore we are growing. We just don't think of that. That makes sense.
<unk> peer benchmarking and therefore, where they should invest.
Unknown Attendee: Thank you.
Speaker 4: But since what I could say is we do think it will start to produce revenue in 24 and we do think it becomes a real engine of growth after that. But today it doesn't. If you ask me about level of excitement from our client base.
But.
So what I could say is we do think it will start to produce revenue in 'twenty four and we do think it becomes a real engine of growth after that but today it doesn't if you.
I asked me about level of excitement from our client base.
Speaker 15: It is very high. We were able to demo.
It is very high we were able to demo.
Speaker 3: things to our current clients and prospects and it was high, but we also demolished some things under NDA to more limited clients, if you will. And it is quite spectacular what feedback you've got. It just needs to convert to revenue, I'm hoping quicker than whatever you want to tell to me.
Things to our current clients and prospects under those highs, but we also damaged some things under NDA to more limited clients, if you will and.
Dylan Becker: You now have Dylan Becker of William Blair. Hey guys, nice job here. And maybe Sandeep kind of just digging into the customer conference here. I know we've kind of highlighted the intent integration now having kind of the front and back office solutions, but maybe a big takeaway. We kind of came away from the conference was around that insights opportunity and obviously an automation have been at the forefront here, but what are you hearing and seeing from customers?
It is it is quite substantial.
What feedback did that it just need to convert to revenue Im hoping quicker.
Everyone tells me.
[laughter] totally fair.
Speaker 14: And I know another kind of sub-segment, too, obviously, you guys have had historical strength in is in that insurance vertical. I wonder to what extent are you guys seeing and hearing from customers, too, how that hardening environment, the ability for these guys to start taking rates to the levels that we're seeing there, it's unlocking not only capacity but also kind of incremental willingness to spend. I know international is a component of that as well, but how that's maybe freed up some of the budgetary allocation on that side as well.
And I know in other kind of sub segment to obviously you guys have had historical strength anything that insurance.
That insurance vertical I wonder to what extent are you guys seeing and hearing from customers see how that hardening environment. The ability for these guys to start taking rates at the levels that we're seeing there.
Dylan Becker: What were your big takeaways around the ability to drive kind of that level of intelligence through that connected platform. Seems like obviously a big driver of kind of what the NRR opportunity ends up looking like, but we'd love to hear kind of what what you heard from the event. Yeah, absolutely.
It's unlocking not only capacity, but also kind of incremental willingness.
To spend I know international is a component of that as well, but but how thats may be freed up some of the budgetary allocation on that side as well. Thanks.
Sandeep Sahai: The first is it's really exciting, but doesn't show up in a revenue quite yet. So so that is something which you'll hear me internally go on about is saying, this is every customer we talk to is really interesting. It feels like they've been waiting for a product like this and haven't had it. And I think this technology allows them to get insights in a competitive peer benchmarking and therefore where they should invest.
Speaker 15: Yeah, I think that I think from the acid, almost, so good, Jim. Yeah, definitely, you want to cover it. Sorry, sorry.
Yes, I think that I can look from asset owners, so glad Jim pathogen nuance.
Oh, sorry, sorry, sorry Sandy.
Yeah.
So I think that.
Speaker 6: So I think that I think you're right.
I think youre right.
That that that could be another contributor all we do know is that our pipeline.
Speaker 6: that that that that could be another contributor. All we do know is that our pipeline.
Speaker 16: are large and larger and getting larger. And so I assume that as a contributing factor to it, we don't know the specific details behind that, but obviously the healthier a client base is the more interested they are in investing, expanding, growing their business and thinking about that. And so I think that's a rational point of view, but the truth is we just see it through pipelines.
Our large and larger right and getting larger and so that I assume that is a contributing factor to it we don't know the specific details behind that but but obviously the healthier our client base is the more interested they are in.
Sandeep Sahai: But what I could say is we do think it will start to produce revenue in 24 and we do think it becomes a real engine of growth after that, but today doesn't. If you ask me about level of excitement from our client base, it is very high, you know, we were able to demo things to our current clients and prospects and it was high, but we also demoed some things under NDA to more limited clients, if you will. And it is quite spectacular what feedback you've got. It just needs to come up to revenue from hoping quicker than what everyone tells me. Totally fair.
<unk> seen expanding growing their business and thinking about that and so I think that's a rational.
Point of view, but the truth is.
We just see it through pipelines.
Sure. Okay. Thanks, guys.
Thank you.
Yeah.
Speaker 1: We have our final question on the line from Brian Shaw. Third, please.
We have a final question on the line from Brian Schwartz.
Okay.
Speaker 17: Hi, thanks for taking my questions today. Cindy, just wanted to ask if you could shed a little light on the business activity that you're seeing geographic between North America and the MiA. It sounds like you had a really good quarter in the APAC, but just hoping you can shed light is how those two geographies are doing then I have a follow-up.
Hi, Thanks for taking my questions today Sandeep just wanted to ask if you could shed a little light on the business activity that you're seeing geographic between North America and EMEA. It sounds like you had a really good quarter in the APAC, but just hoping you can shed light just how those two geos geographies are doing that.
Jim Cox: And I know another kind of sub segment to obviously you guys have had historical strength and is in that insurance that insurance vertical, I wonder to what extent are you guys seeing and hearing from customers to how that hardening environment, the ability for these guys to start taking rates. The levels that we're seeing there is unlocking not only capacity, but also kind of incremental willingness to spend, I know international component of that as well, but, but how that's maybe freed up some of the budgetary allocation on that side as well.
A follow up for Jim.
I would say is just factual basis, we've been in North America much more predictably.
Speaker 3: I would say it's just on an actual basis. We've been in North America much more predictably and I would still say that Europe is still a little bit lumpy. Our coverage around Europe is not as good as North America, especially when you think about continental Europe . So other deals more lumpy, yes. North America just much more
And I would still say that Europe is still a little bit lumpy.
Our coverage around Europe is not as good as North American, especially when you think about continental Europe. So other deals more lumpy, yes, North America just much more.
Jim Cox: Thanks. Yeah, I think that I can look from the asset overs. So go ahead, Jim. Yeah. Sorry, sorry, sorry, Sunday. So I think that I think you're right, that that that could be another contributor. All we do know is that our pipeline are large and larger and getting larger. And so that I assume that as a contributing factor to it. We don't know the specific details behind that, but, but obviously the healthier client base is the more interested they are in investing, expanding, growing their business and thinking about that. And so I think that's that's a rational point of view, but the truth is we just see it through pipe.
Victor and what's going to happen you can look at the whole time and you can focus so many will come to market and disorderly conclude win so I think we are much more predictable.
Speaker 3: predictable on what's going to happen. You can look at the whole dam and you can say, okay, so many will come to market and this is what we think will win. So I think we have much more.
Predictable here Asia is the same way and that's why we announced the issue because we don't expect it.
You've got this three we like Wow. This is this was really impressive that it got done in such a short time in Asia. So I would just say much more predictable in North America is somewhat lumpy in Asia, but in Europe and.
Pretty sporadic in Asia and now we are investing in sales teams in each of these locations. As you know we have we stood up shelves from pre sales teams in each of these markets at the beginning of this year, but it takes time and.
Speaker 15: We have, we stood up sales and pre-sales teams in each of these markets at the beginning of this year, but it takes time and that's how I think about the booking right now.
Unknown Attendee: Sure, okay, totally sorry, thank you guys.
Operator: Thank you.
That's how I think about the booking right now.
Brian Schwartz: We have our final question on the line from Brian Schwartz. Thank you. Hi, thanks for taking my questions today. Sandeep, just wanted to ask if you could shed a little light on the business activity that you're seeing geographically between North America and Amia. It sounds like you had a really good quarter in the APAC. But just hoping you can shed light to how those two geographies are doing, then I have a follow-up for Jim.
Thank you and then Jim the question I have for you was just on the sales and marketing expense and <unk>. It went down sequentially and that's a that's a change from the seasonal trend that we've seen from the business and so I was wondering if you could provide some color on that and did you spend all that you wanted.
Speaker 17: Thank you. And then Jim, the question I have for you was just on the sales and marketing expense in 3Q. It went down sequentially and that's a change from the seasonal trend that we've seen from the business. And so I was wondering if you could provide some color mad and did you spend all that you wanted to spend on sales and marketing.
To spend on sales and marketing in the quarter. Thanks.
Speaker 6: Well, boy, if our chief marketing officer, Susan, heard that, she would say, oh, let's double down, let's double down. We did have, if you recall in Q2, we had our European client.
Oh boy.
Brian Schwartz: I would say it's just on a factual basis. We've been in North America much more predictably, and I would still say that Europe is still a little bit lumpy. Our coverage around Europe is not as good as North America, especially when you think about continental Europe. So are the deals more lumpy? Yes, North America is just much more predictable on what's going to happen. We've got this TV like, wow, this is really impressive that it got done in such a short time in Asia.
If our chief marketing officer, Susan her that she would say Oh, let's double down let's double down we did.
If you recall in Q2, we had our European client.
Which is smaller than that.
Speaker 6: which is smaller than, than they.
And then.
Okay.
Speaker 6: US client conference, which was in Q3. And I think last year we had more of those European events in Q3 as a marketing kind of relative marketing spend. But I think it's your right that typically we would pick up with the client conference in Q3. I think we'll see that trend continue.
<unk> U S client.
Conference, which was in Q3.
And I think last year, we had more of those European events in Q3 as a marketing.
Relative marketing spend but I think youre right that typically we would pick up with that with the client conference in Q3, I think we'll see that.
That trend.
Continue sorry.
Sorry, the sales and marketing expense I think youll see that trend in Q4, <unk> and Q3.
Speaker 17: The sales and marketing expense, I think you'll see that trend up in Q4, piece of E2-3. Thank you for taking my question.
Brian Schwartz: So yeah, I would just say much more predictable in North America, somewhat lumpy in Asia, but in Europe and, you know, pretty sporadic in Asia. Now we are investing in sales teams in each of these locations, as you know, we have listed up sales and pre-sales teams in each of these markets at the beginning of this year. But it takes time, and that's how I think about the booking right now. Thank you.
Thank you for taking my questions.
Thanks, so much thank you.
Speaker 1: Thank you. I'd like to hand it back to our CEO , Sandi, Franny Final Rumor.
Thank you I'd like to hand that Trc eye candy for any final remarks.
Yes, I just wanted to thank all of you and I wanted to thank you for coming out on Investor day, and listening to us talk about our company.
Speaker 3: Yeah, I just wanted to thank all of you. I want to thank you for coming out on Investor Day and listening to us talk about our company. I want to thank you for all of you being on this call here today. Look, we are very committed to trying to build a really special company and earn your trust so that when we say something, we execute on it and we deliver to what you expect. So thank you all, and we really appreciate it.
I want to thank you for all of you being on this call here today look we are very committed to trying to build.
Jim Cox: And then Jim, the question I have for you was just on the sales and marketing expense in 3Q. It went down sequentially, and that's a change from the seasonal trend that we've seen from the business. And so I was wondering if you could provide some color mad and did you spend all that you wanted to spend on sales and marketing in the quarter. Thanks. Well, boy, if it's our chief marketing officer Susan heard that she would say, oh, let's double down, let's double down.
A really special company and owning their trust so that when we see something we execute on it and be delivered to what you expect so thank you all and we really appreciate your time.
Goodbye.
Speaker 1: Goodbye. Thank you. Thank you for joining today's call. I can confirm it has now concluded. Please have a lovely rest of your day and you may now disconnect your heart.
Thank you all for joining today's call I can confirm that's now concluded piece that's left to your day and you may now disconnect.
[music].
Speaker 9: So.
Jim Cox: We did have, if you recall, in Q2, we had our European client, which is smaller than the US client conference, which was in Q3. And I think last year we had more of those European events in Q3 as a marketing kind of relative marketing spend. But I think it's your right that typically we would pick up with the client conference in Q3. I think we'll see that that trend continue. Sorry, the sales and marketing expense, I think you'll see that trend up in Q4, V2, 3. Thank you for taking my questions. Thanks so much.
Sandeep Sahai: Thank you.
Sandeep Sahai: I'd like to hand it back to our CEO, Sandy, funny, final woman. Yeah, I just want to thank all of you. I want to thank you for coming out on an investor day and listening to us talk about a company. I want to thank you for a few being on this call here today. Look, we are very committed to trying to build a really special company and own your trust so that when we see something we execute on it and we deliver to what to expect. So thank you all and we really appreciate your time.
Operator: Good bye. Thank you all for joining today's call. I can confirm it has now concluded.
Operator: Please have a lovely rest of your day and you may now disconnect your hand.