Q2 2024 Clearwater Analytics Holdings Inc Earnings Call
[music].
Operator: Ladies and gentlemen, thank you for standing by and welcome to the Clearwater Analytics second quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode.
Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Clearwater Analytics second quarter 2024 financial results conference. At this time, all participants are in a listen only mode.
Ladies and gentlemen, thank you for standing by and welcome to the Clearwater analytics second quarter 'twenty 'twenty four financial results conference call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.
Operator: After the speaker presentation, there will be a question-and-answer session.
Operator: After the speaker's presentation, there will be a question and answer session. And now, I would like to welcome Joon Park, Head of Investor Relations, to begin the conference. Thank you and welcome everyone to Clearwater Analytics' second quarter 2024 financial results. 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 to a question and answer session. I would like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Joon Park: And now, I would like to welcome Joon Park, head of investor relations, to begin the conference. Thank you and welcome everyone to Clearwater Analytics' second quarter 2024 financial results conference call. Joining me on the call today are Sandeep Sahai, Chief Executive Officer, and Jim Cox, Chief Financial Officer.
And now I would like to welcome Joon Park head of Investor Relations to begin the conference.
Speaker Change: Thank you and welcome everyone to Clearwater analytics second quarter, 'twenty 'twenty four financial results conference call.
Speaker Change: Joining me on the call today are sand needs to high Chief Executive Officer, and Jim Cox Chief Financial Officer.
Joon Park: After their remarks, we will open the call to a question-and-answer session. I would like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Expressions of future goals, intentions and expectations, including in relation to business outlook, future financial and product performance, 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 looking statements. Four looking statements involve a number of risks and uncertainties, including those discussed in the risk factor section of our findings with the SEC.
Speaker Change: After their remarks, we will open the call to a question and answer session.
Speaker Change: 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 <unk>.
Operator: Expressions of Future Goals, Intentions, and Expectations, 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 forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties, including those discussed in the risk factor section of our filings with the SEC.
Speaker Change: Expressions of Fisher goals intentions 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.
Speaker Change: And expressions, which reflect something other than historical facts are intended to identify forward looking statements.
Speaker Change: Forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section of our filings with the SEC.
Joon Park: Our show results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement included in our earnings press release. Lastly, all metrics discussed in this call are presented on a non-gap or adjusted basis unless otherwise noted.
Joon Park: As show results may differ materially from any four looking statements. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement included in our earnings press release.
Speaker Change: Our results may differ materially from any forward looking statements. The company undertakes no obligation to revise or update any forward looking statements in order to reflect events that may arise. After this conference call.
Speaker Change: Except as required by law.
Speaker Change: For more information please refer to the cautionary statement included in our earnings press release last week all metrics discussed on this call are presented on a non-GAAP or adjusted basis unless otherwise noted.
Joon Park: Lastly, all metrics discussed in this call are presented on a non-GAAP or adjusted basis unless otherwise noted. A reconciliation to GAAP results can be found in the earnings press release that we have posted to our investor relations website.
Joon Park: A reconciliation of gap results can be found in the earnings press release that we have posted on our investor relations website. With that, I'll turn the call over to our Chief Executive Officer, Sandeep Sahai. Thank you, Joon.
Speaker Change: A reconciliation to GAAP results can be found in the earnings press release that we have posted to our Investor relations website with that I'll turn the call over to our Chief Executive Officer Sandeep So high.
Sandeep Sahai: With that, I'll turn the call over to our Chief Executive Officer, Sandeep Sahai. Thank you, June. I'm pleased to report that Q2-2024 was a very strong portal for the company. Our ability to win in the market, to develop new products for our clients, and our ability to execute consistently on all fronts has never been more evident. Revenue for the quarter was 106.8 million and 19% year-on-year increase. The momentum of a business was evident in ERR growth, which grew 22% year-on-year. Growth was balanced between new logos and current clients, between the North American and international markets, and finally between new products and the core platform.
Sandeep Sahai: I'm pleased to report that Q2 2024 was a very strong quarter for us. Our ability to win in the market, to develop new products for our clients, and our ability to execute consistently on all fronts has never been more evident. Revenue for the quarter was $106.8 million, and 19% year-on-year growth. The momentum of a business was evident in ERR, which grew 22% year earlier. However, growth was balanced between new logos and current lines?
Thank you June I'm pleased to report that Q2, 'twenty 'twenty four was a very strong quarter for the company.
Speaker Change: Our ability to win in the market to develop new products product lines and our ability to execute consistently on all fronts has never been more evident.
Speaker Change: Revenue for the quarter was $106 8 million.
Speaker Change: 19% year on year increase.
Speaker Change: The momentum of our business was evident in our outgrowth.
Speaker Change: Which grew 22%.
Speaker Change: <unk>.
Speaker Change: Growth was balanced between new logos and current clients.
Sandeep Sahai: between the North American and international markets. And finally, between new products and the core platform. New products were an incrementally higher contributor to bookings in the quarter, and that gives us confidence to continue down the path of developing adjacent products in partnership with our partners. All of that combined with an industry-leading 99% gross revenue retention for the second consecutive quarter and Continued Success, with bringing clients live on our platform, gives us confidence to meaningfully revive.
Speaker Change: Between the North American and international markets.
Speaker Change: And finally between new products and the core platform.
Sandeep Sahai: New products were an incrementally high contributor to booking in the quarter, and that gives us confidence to continue down the path of developing adjacent products in partnership with our clients. All of that combined with an industry-leading 99% growth revenue retention for the second consecutive quarter and continued success with bringing clients live on a platform. William gives us confidence to meaningfully revise revenue guidance upward for the year. If not just about revenue growth, our disruptive platform and our outstanding customer focus allows us to grow, earning with very meaningfully, while we continue to grow. Adjusted EBITDA module for the quarter was 31.3%, which is 34.7% higher than last year, and 370 basis points better than last year.
Speaker Change: New products were an incrementally higher contributor to bookings in the quarter.
Speaker Change: And that gives us confidence to continue down the path of developing adjacent products in partnership with our clients all of that combined with an industry, leading 99% gross revenue retention for the second consecutive quarter and.
Speaker Change: And continued success with.
Speaker Change: With bringing clients live on our platform.
Speaker Change: Gives us confidence to meaningfully device.
Sandeep Sahai: Revenue Guidance Upward for the year. It's not just about revenue growth. Our disruptive platform and our outstanding customer focus allows us to grow, earning very meaningful while we continue. Adjusted EBITDA margin for the quarter was 31.3%, which is 34.7% higher than last year and 370 basis points better than last year, meaningfully higher than the margin expansion goal of 200 basis points a year we had laid out at last year's investment. Finally
Speaker Change: Revenue guidance upward for the year.
Speaker Change: It's not just about revenue growth.
Speaker Change: Disruptive platform and an outstanding customer focus allows us to grow earnings very meaningfully.
Speaker Change: While we continue to grow.
Speaker Change: Adjusted EBITDA margin for the quarter was 31, 3%.
Speaker Change: Which was $34, 7% higher than last year.
Speaker Change: And 370 basis points better than last year.
Sandeep Sahai: Meaningfully higher than the margin expansion goal of 200 basis points a year, we had laid out at last year's Investor Day. Finally, free cash flows from operations during the quarter was 42.4 million, which is 116.9% higher than last year. A truly exceptional number; an interesting observation that we substantially paid for the wheelchair acquisition in Q2 using the cash generator from operations in Q2 alone.
Speaker Change: Meaningfully higher than the margin expansion goal of 200 basis points a year, we had laid out at last year's Investor day.
Speaker Change: Finally.
Sandeep Sahai: Free cash flows from operations during the quarter was $42.4 million, which is 116.9% higher than last year. A truly exceptional, an interesting observation that we significantly increased our cash generator from operations in Q2 alone. Let's discuss a few elements of our business and our plan for continued revenue and earnings growth. Starting with revenue growth. 1. There is little to no change in the competitive lands.
Speaker Change: Free cash flows from operations during the quarter was $42 4 million.
Speaker Change: Which is $116, 9% higher than last year.
Speaker Change: A truly exceptional.
Speaker Change: An interesting observation.
Speaker Change: That would be substantially paid.
Speaker Change: For the Wuxi acquisition in Q2.
Speaker Change: Using the cash generated from operations in Q2 alone.
Sandeep Sahai: Let's discuss a few elements of our business and our plan for continued revenue and earnings growth. Starting with revenue growth, number one, new logos. There was little to no change in the competitive landscape. Competitors have tried to create offerings by taking legacy platforms and making them accessible on the cloud, or by stitching various products together, but that does not change the core legacy offering. Clients come to play water because we have a single instance multi-genuine platform allowing us to ingest data from over 3,000 sources. Reconciled and provide clients with a comprehensive view of the global portfolio.
Speaker Change: Let's discuss a few elements of our business and our plans for continued revenue and earnings growth.
Speaker Change: Starting with revenue growth.
Speaker Change: Number one new logos.
Speaker Change: There is little to no change in.
Speaker Change: In the competitive landscape.
Sandeep Sahai: Competitors have tried to create offerings by taking legacy platforms and making them accessible on the cloud, or by stitching various products together, but that does not change the core legacy of Clearwater. Clients come to Clearwater because we have a single-instance, multi-tenant platform allowing us to ingest data from over 3,000 sources. Reconciled, and provide clients with a comprehensive view of the global portfolio. This has been a core offering of the company and continues to drive the new logo book. Number two. Back to the base group.
Speaker Change: Competitors have tried to create offerings by taking legacy platforms, and making them accessible in the cloud.
Speaker Change: Or by stitching greatest products together, but that does not change.
Speaker Change: Change the core legacy offering.
Speaker Change: Clients come to Clearwater, because we have a single instance, multi tenant platform, allowing us to ingest data from over 3000 sources.
Rico: Rico silent and.
Rico: And provide clients with a comprehensive view of the global portfolio.
Sandeep Sahai: This has been a core offering of the company and continues to drive new logo booking. Number two, back to base growth. As you've said before, we are spending 60% of our indie capacity on building new products in partnership with our clients. In the last call, we had said that approximately 25% of our booking in the quarter was from these new offerings. It is with great enthusiasm that we note that booking was incrementally higher in Q2 from these products. We had expected these new products to be adopted by current clients first, but was pleasantly surprised to see that more than 50% of booking for these new products came from new logos.
Rico: This has been a core offering of the comfortable and continues to drive new logo bookings.
Rico: Number two.
Rico: Back to base growth.
Sandeep Sahai: As we have said before, We are spending 60% of our R&D Capacity on building new products in partnership with our. On the last call, we had said that approximately 25% of our bookings in the quarter were from these new offices. It is with great enthusiasm that we note that bookings were incrementally higher in Q2 from these products. We had expected these new products to be adopted by current clients first. What a pleasant surprise!
Rico: How does he have said before we.
Speaker Change: We are spending 60%.
Speaker Change: Of R&D capacity.
Speaker Change: On building new products in partnership with our clients.
Speaker Change: In the last call, we had said that approximately 25% of our booking in the quarter was from these new offerings.
Speaker Change: It is with great enthusiasm that we note.
Speaker Change: The booking was incrementally higher in Q2 from these products.
Speaker Change: We had expected these new products to be adopted by a 100 clients first.
Speaker Change: But we're pleasantly surprised.
Sandeep Sahai: to see that more than 50% of bookings for these new products came from new logos. Number three. Alternatives remain one of the biggest drivers of growth because the efficient processing of these asset classes continues to be challenging for clients everywhere. The innovation and functionality we're bringing to the market has led to significant client adoption, as evidenced by the roughly 30 deals closed with new or existing clients in Q2 alone. Our substantial investments in this area have been pivotal in attracting new clients and deepening existing client relationships.
Speaker Change: You'll see that more than 50% of bookings for these new products came from new logos.
Sandeep Sahai: Number three, alternative remain one of the biggest drivers of growth because the efficient processing of these asset classes continues to be challenging for clients everywhere. The innovation and functionality we're bringing to the market has led to significant client adoption, as evidenced by the roughly 30 deals. We close with new existing clients in Q2 allow. Our substantial investments in this area have been pivotal in attracting new clients and deepening existing client relationships.
Speaker Change: Number three well.
Speaker Change: <unk> remained one of the biggest drivers of growth because the efficient processing of these asset classes continues.
Speaker Change: Continues to be challenging for clients everywhere.
Speaker Change: The innovation and functionality, we are bringing to the market has led to significant client adoption.
Speaker Change: As evidenced by the roughly 30 deals we closed with new or existing clients in Q2 alone.
Speaker Change: Our substantial investments in this area.
Speaker Change: Have been pivotal in attracting new clients and deepening existing client relationships.
Sandeep Sahai: I'm delighted to share details about a major addition to our platform. A US investment advisor recently selected our LPX solution because they have a broad footprint that encompasses private equity, real estate, credit, and second-rate markets. They were previously mired in manual processes, compiling data from GPs and living in Excel spreadsheets. The combination of Clearwater's LPX, user-friendly interface, seamless data ingestion and validation capabilities, and its robust reporting features dramatically increased the scale of the operations. With Clearwater, clouds receive a single platform that ties accounting and performance book of record all from a single source of data, thereby gaining a level of transparency that they did not have before with other legacy systems. Number four, Clearwater Prism continues to make inroads with a range of use cases emerging across a diverse client base.
Sandeep Sahai: I'm delighted to share details about a major addition to our platform. A U.S. investment advisor recently selected our LPX solution because they have a broad footprint that encompasses private equity, real estate, credit, and secondary. They were previously mired in manual processes, compiling data from GPs in an Excel Spreadsheet.
Speaker Change: I'm delighted to share details about the major addition to our platform.
Speaker Change: Our U S investment adviser recently selected a L. P X solution because they have a broad footprint that encompasses private equity real estate credit and secondary markets.
Speaker Change: Previously mired in manual processes, compiling data from GPS and.
Speaker Change: Living in Excel spreadsheets, the combination of clear waters LPX user friendly interface seamless data ingestion and validation capabilities and this robust reporting features dramatically increased the scale of the operations.
Sandeep Sahai: The combination of Clearwater's LPX user-friendly interface, seamless data ingestion and validation capabilities, and its robust reporting features dramatically increases the scale of the operation. With Clearwater, trials receive a single platform that ties accounting and performance books of record, all from a single source of data, thereby gaining a level of transparency that they did not have before with other legacies. Number four, Clearwater Prism continues to make inroads with a range of use cases emerging across a diverse set of plans.
Speaker Change: With Clearwater.
Speaker Change: Trying to receive a single platform.
Speaker Change: That ties accounting and performance book of record all from a single source of data, thereby gaining a level of transparency that they did not have before with other legacy systems.
Speaker Change: Number four Clearwater Prism continues to make inroads with a range of use cases emerging across a diverse client base.
Sandeep Sahai: In Q2, we announced M&G Investments selected Clearwater to automate its investment management and regulatory reporting while supporting the complex needs of the global insurance industry with a white-labeled version of Clearwater's platform. MNG's insurance clients will have access to an MNG web portal and rely on Clearwater Prism for monthly report generation.
Sandeep Sahai: In Q2, we announced M&G Investments selected Clearwater to automate its investment management and regulatory reporting while supporting the complex need of the global insurance clients. With a widely labeled version of Clearwater's platform, M&G's insurance clients will have access to an M&G web portal and relied on Clearwater Prism for monthly report generation. This automated investment reporting system will provide clients with a complete view of the investments and enable them to meet complex multi-basis accounting requirements.
Speaker Change: In Q2, we announced LNG investments selected Clearwater to automate its investment management and regulatory reporting while supporting the complex needs of the global insurance clients.
Speaker Change: With a white labeled version of Clearwater platform.
Speaker Change: <unk> insurance clients will have access to an LNG web portal and rely on clear where the prism for monthly report generation. This automated invest when reporting system will provide clients with a complete view of the investments and enable them to meet complex multi basis accounting.
Sandeep Sahai: This automated investment reporting system will provide clients with a complete view of the investments and enable them to meet complex, multibasis accounting requirements. Number five, let me give you the status of both Jump and the analytics platform. The Clearwater Jump Platform had an exceptional performance. In North America, we secured five deals with managers who have diverse, multi-asset portfolios that not only replaced the accounting but order management as well. In Europe, the Clearwater Jump Platform was chosen by numerous new clients, demonstrating the growing demand for high-value solutions that span the front, middle, and back office operations.
Speaker Change: Climates.
Sandeep Sahai: Number five, let me give you a status of both Jump and the analytics platform over sure. The Clearwater Jump platform had an exceptional quarter. In North America, we secured five deals with managers who had diverse multi-asset portfolios that not only replaced the accounting, but older management as well. In Europe, the Clearwater Jump platform was chosen by numerous new clients, demonstrating the growing demand for a high-value solution that spans the front, middle, and back office operation. Let me illustrate with a few examples here. In Q2, we announced that Brown's base Galilee Asset Management will implement Clearwater Jump to consolidate fund and wealth management activities across its entire investment life cycle.
Speaker Change: Finally, let me give you a status of both John and the analytics platform of this or.
Speaker Change: The Clearwater jumped platform.
Speaker Change: <unk> had an exceptional quarter.
Speaker Change: In North America, we secured five deals with managers, who are diverse multi asset portfolios.
Speaker Change: That not only replace the accounting.
Speaker Change: But order management as well.
Speaker Change: In Europe.
Speaker Change: Clearwater jump platform was chosen by numerous new clients.
Speaker Change: Demonstrating the growing demand for our high value solutions that span the front middle and back office operations.
Sandeep Sahai: Let me illustrate with a few examples. In Q2, we announced that France-based Galilee Asset Management will implement Clearwater Jump to consolidate fund and wealth management activities across its entire investment life. The selection of Clearwater Jump is a vote of confidence, as Galilee Asset Management seeks to support its rapid growth and Consolidated Activities after acquiring several investment management companies. A leading life insurer based in France selected Clearwater Jump to modernize the IT stack. While another French company
Speaker Change: Let me illustrate with a few examples here.
Speaker Change: In Q2, we announced that Brown space Galilee asset management.
Speaker Change: We'll implement Clearwater jumped.
Speaker Change: The consolidated fund and wealth management activities across its entire investment lifecycle their selection of Clearwater jump as a word of confidence as Galilee asset management seeks to support its rapid growth.
Sandeep Sahai: Their selection of Clearwater Jump is a vote of confidence. As Galilee Asset Management seeks to support its rapid growth and consolidate its activities after acquiring several investment management companies. A leading life insurer based in France selected Clearwater Jump to modernize the IT stack. While another French... Facebook-based fund and wealth manager chose Clevvera Jump to increase efficiencies across their entire end-to-end investment management operation. All these wins underscore the value we bring to leading firms; cost efficiency, modernization, scalability, and unparalleled user experience are just a few reasons clients continue to choose Clevvera Jump.
Speaker Change: Consolidated this activities after acquiring several investment management companies.
Speaker Change: Leading life insurer based in France selected Clearwater jump.
Speaker Change: To modernize their it stack.
Speaker Change: While another French based fund in wealth manager chose camra jumped to increase efficiencies across the entire end to end investment management operation.
Sandeep Sahai: Fund and Wealth Managers chose Clearwater to increase efficiency across the entire end-to-end investment management. All these wills underscore the value we bring to leading. Cost efficiency, modernization, scalability, and unparalleled user experience are just a few reasons clients continue to choose Clearwater JAL. Number six.
Speaker Change: All of these wins underscore the value, we bring to leading firms cost efficiency modernization scalability and unparalleled user experience are just a few reasons.
Speaker Change: Clients continue to choose Clearwater John.
Sandeep Sahai: Number six, for knowing our acquisition of the risk performance and analytics platforms of Vulture Advisors, the integrated Clearwater Vulture platform can offer an integrated solution for transactions and positions. Our clients can now leverage a unified reporting platform for portfolio construction, quantitative performance attribution, risk analysis, stress testing, and portfolio analytics, all using the same underlying data from the CoreJ Water platform. This has already started to pay dividends as seen with the expanded relationship with a leading portfolio manager who's now leveraging Clearwater Vulture analytics for daily performance attribution and factor-based x-anti-risk analysis. The expansion highlights the success of Clearwater strategy to offer an integrated platform encompassing accounting performance attribution and rest and strategic positions as to strengthen existing client relationships that help to drive future growth.
Speaker Change: Our mistakes.
Sandeep Sahai: Following our acquisition of the RISC performance and analytics platforms of Wilshire Advisors, The Integrated Clearwater Wilshire platform can offer an integrated solution for transactions, and our clients can now leverage a unified reporting platform for portfolio construction. Quantitative Performance Attribution, Risk Analysis, Stress Testing, and Portfolio Analytics, all using the same underlying data from the Core Clearwater platform. This has already started to pay dividends, as seen with the expanded relationship with a leading portfolio manager who's now using Clearwater Wilshire Analytics for daily performance attribution, and Factor-Based Ex-Anti-Risk Analysis
Speaker Change: Following our acquisition of the risk performance and analytics platforms of <unk> advisors.
Speaker Change: The integrated.
Speaker Change: Clearwater looser platform can offer an integrated solution for transactions in particular.
Speaker Change: Our clients can now leverage our unified reporting platform for portfolio construction.
Speaker Change: Quantitative performance attribution.
Speaker Change: Risk analysis stress testing and portfolio analytics, all using the same underlying data from the core Clearwater platform. This has already started to pay dividends as seen with our expanded relationship with a leading portfolio manager who is now leveraging.
Speaker Change: Clearwater Boucher analytics for daily performance attribution.
Speaker Change: And factor base ex ante risk analyses.
Sandeep Sahai: The expansion highlights the success of Clearwater's strategy to offer an integrated platform encompassing accounting, performance, attribution, and strategic positions us to strengthen existing relationships that helped to drive FutureGround. Number seven, and finally, let's discuss our continuing expansion across Europe and APEC. As our platform continues to make a significant impact across the world, we're delivering best-in-class localized accounting and investment analytics that provide our clients with a comprehensive view of the asset and gives them confidence that they're making the most informed decisions about their needs. Let me highlight a few of the impressive DLT clubs.
Speaker Change: The expansion highlights the success of Clearwater strategy.
Speaker Change: To offer an integrated platform.
Speaker Change: Income passing accounting performance attribution and dress.
Speaker Change: And strategically positions us to strengthen existing client relationships.
Speaker Change: That helped to drive future growth.
Sandeep Sahai: Number seven, and finally, let's discuss our continuing expansion across Europe and A-Back this quarter. As our platform continues to make a significant impact across the world, we're delivering best-in-class localized accounting and investment analytics that provide our clients with a comprehensive view of the assets and gives them confidence that they're making the most informed decisions about their investments. Let me highlight a few of the impressive deals we closed. In the UK, we announce an exciting new win with Poolery, Britain's government-backed re-insurer. Poolery will leverage Clearwater's single-incense multi-dimensional platform to streamline and modernize their finance and investment processes and support highly efficient monthly closed processes.
Speaker Change: Number seven and finally, let's discuss our continuing expansion across Europe and APAC this quarter.
Speaker Change: As our platform continues to make a significant impact across the world.
Speaker Change: We are delivering best in class localized accounting and investment analytics that provide our clients with a comprehensive view of the assets and.
Speaker Change: And gives them confidence that they are making the most informed decisions.
Speaker Change: About the investments let me highlight a few of the impressive deals we closed in the U K, we announced an exciting new win with poorly Britain's government backed reinsurer poorer even leverage clear waters single instance, multi tenant platform.
Sandeep Sahai: In the UK, we announced an exciting new win with Pool Re, Britain's government-backed reinsurer. Pool Re will leverage Clearwater's single-instance multi-tenant platform to streamline and Modernize the Finance and Investment Process and support highly efficient monthly closed. The scalability and flexibility of the Clearwater platform will also enable Pooray to rapidly adapt to evolving market dynamics and the Treasury Reporting Obligation. In APAC, we signed on a new asset manager in Singapore that is now able to redesign.
Speaker Change: Streamline and modernize their finance and investment processes and.
Speaker Change: In support highly efficient monthly close processes.
Sandeep Sahai: The scalability and flexibility of the Clearwater platform will also enable Poolery to rapidly adapt to evolving market dynamics and their treasury reporting obligation. In A-Back, we signed on a new asset manager, Singapore, that is now able to redesign a cross-company asset strategy and build the technology infrastructure for significant asset growth. Another client in that region can now significantly decrease operating risks and free up the investment team to play offense versus defense.
Speaker Change: Scalability and flexibility of the Clearwater platform will also enable poorly to rapidly adapt to evolving market dynamics and their treasury reporting obligations in APAC, we signed on a new asset manager in Singapore.
Speaker Change: That is now able to redesign occur.
Sandeep Sahai: Cross-Company Asset Strategy and build the technology infrastructure for significant asset growth. Another client in that region can now significantly decrease their operating risks and free up the investment team to play offense versus defense. Now I'd like to switch to unit economics and overall profit. The foundation of our continued growth and profitability is industry-leading retention and NPS and our ability to onboard clients in a relatively short period of time. How do we do that?
Speaker Change: Across company asset strategy.
Speaker Change: And build the technology infrastructure for significant asset growth.
Speaker Change: Another client in that region can now significantly decreased operating risks and free up the investment team to play offense versus defense now I'd like to switch to.
Sandeep Sahai: Now, I'd like to switch to unity economics and overall profitability. The foundation of our continued growth and profitability is industry-leading retention and NPS and our ability to on-board clients in a relatively short time. How do we do that? A platform allows us to reuse public data we are already ingesting, reuse custody connections we have already built, and reuse the thousands of other connections we have already built. Accounting is very nuanced, and over the years we have created an incredible array of configuration options, which is needed as the onboard increasingly sophisticated clients and portfolios. The benefits of this approach are due forward.
Speaker Change: To unit economics, and overall profitability.
Speaker Change: The foundation of our continued growth and profitability is industrial.
Speaker Change: <unk>, leading retention and NPS and our ability to onboard clients in a relatively short time, how do we do that our platform allows us to reuse.
Sandeep Sahai: A platform allows us to reuse public data we are already using, reuse custody connections we have already built, and reuse the thousands of other connections we have already made. Counting is very nuanced. And over the years, we have created an incredible array of configurations, which is needed as we onboard increasingly sophisticated clients and portfolios. The benefits of this approach are twofold. Number one, it is incrementally easier to onboard the next flight because you already have many of the data sources and security modeled on a.
Speaker Change: Public data, we are already ingesting reused custody connections we have already built.
Speaker Change: And reuse the thousands of other connections we have already built at <unk>.
Speaker Change: Counting is very nuanced and over the years, we have created an incredible array of configuration options.
Speaker Change: Which is needed.
Speaker Change: As we onboard increasingly sophisticated clients and portfolios the benefits of this approach are due for.
Sandeep Sahai: Number one, it is incrementally easier to onboard the next client because we already have many of the data sources and securities modeled on our platform. Number two, on a day-to-day basis, we reconcile data once and use it for every client on the platform who invests in that security. Both of these practices incrementally improve gross margin. Add to that the progress we are making with Generative AI, and you will understand why we have outperformed our margin goals and have strong confidence in continuing to improve unit economics. Our client's onboarding experience continues to be incredibly positive, including notable goal lives with leading global firms, such as France Active in Europe.
Speaker Change: Number one it is incrementally easier too.
Speaker Change: To onboard the next client.
Speaker Change: Because you already have many of the data sources and securities modeled on our platform.
Sandeep Sahai: Number two, on a day to day basis, we reconcile data once and use it for every client on the platform who invests in that security. Both of these practices incrementally improve gross margin. Add to that the progress we are making with generative AI, and you will understand why we have outperformed our margin goals and have strong confidence in continuing to improve the United States economy. Our client's onboarding experience continues to be incredibly positive, including notable go-lives with leading global firms, such as France Active in Europe. In less than five months,
Speaker Change: Number two on a day to day basis.
Speaker Change: Reconcile data once and use it for every client on the platform who invest in that security.
Speaker Change: Both of these practices incrementally improve gross margin.
Speaker Change: Add to that the progress we are making with generative AI and you will understand why we have outperformed our margin goals.
Speaker Change: And have strong confidence in continuing to improve unit economics.
Speaker Change: Clients Onboarding experience continues to be incredibly positive, including notable go lives with leading global firms such as France active in Europe.
Sandeep Sahai: In less than five months, they are realizing significant business benefits, including timely book offer, record accounting, efficient period and operational tasks, and increased productivity, because the Clear Water platform helps automate data injection, reconciliation, and reporting.
Speaker Change: Less than five months.
Sandeep Sahai: Realizing Significant Business Benefits, including Timely Book of Record Accounting, Efficient Period and Operational Tasks, and increased production because the Clearwater platform helps automate data ingestion, reconciliation, and reporting. On a regulatory front, Clearwater experts continue to provide valuable guidance, ensuring our clients remain ahead of the curve with the most significant NAIC update since 1991. Global regulatory reporting is built into the Clearwater platform, so our reports always stay current to meet the latest regulatory guidelines. A team of regulatory product experts monitor guidance closely and work with our engineering team to incorporate those changes into Clearwater because Clearwater is a web-based SaaS solution. Those updates deploy seamlessly to your machine.
Speaker Change: We are realizing significant business benefits, including timely book of record accounting efficient period end operational tasks and increased productivity.
Speaker Change: Because the Clearwater platform helps automate data ingestion reconciliation and reporting.
Sandeep Sahai: On a regulatory front, clear water experts continue to provide valuable guidance, ensuring our clients remain ahead of the curve with the most significant NIC update since 1991. Global regulatory reporting is built into the Clear Water platform, so reports always take current to meet the latest regulatory guidance. A team of regulatory product experts monitor guidance closely and work with our engineering team to incorporate those changes into Clear Water's platform. Because clear water is a web-based sad solution, those updates deploy seamlessly to users.
Speaker Change: On a regulatory front.
Speaker Change: Clearwater exports continue to provide valuable guidance.
Speaker Change: Ensuring our clients remain ahead of the curve.
Speaker Change: The most significant NTIC update since 1991 global regulatory reporting is built into the Clearwater platform.
Speaker Change: So reports always stay current.
Speaker Change: The latest regulatory guidance.
Speaker Change: Our team of regulatory product experts.
Speaker Change: Monitor guidance closely.
Speaker Change: And work with our engineering team to incorporate those changes into Clearwater platform.
Speaker Change: Because clearwater is a web based SaaS solution.
Speaker Change: Those updates deploy seamlessly to users.
Sandeep Sahai: Switching gears, I want to talk about a continuing investment in a core platform. We live in an ever-changing world where new securities are created every day, entire asset classes emerge, regulations change, and accounting standards evolve. It is critical for our technology to be a beacon of reliability, scalability, and operational rigour. Attributes critical to a world where change is constant. Last year, we completed our movement to the cloud, completely changing our ability to scale. That change has helped us continue to process data daily, meet deadlines, and lower costs, even as data volume grew substantially over the year.
Sandeep Sahai: Switching gears, I want to talk about our continuing investment in our core plan. We live in an ever-changing world where new securities are created every day. Titled Assets, Transfers, and Mergers.
Speaker Change: Switching gears I want to talk about our continuing investment in our core platform.
Speaker Change: We live in an ever changing world.
Speaker Change: When new Securities are created every day.
Speaker Change: And tired asset transfers emerge.
Sandeep Sahai: Regulations change, and Accounting Standards evolve. It is critical for our technology to be a beacon of reliability, scalability, and operational rigor. Attributes.
Speaker Change: Regulations change.
Speaker Change: And the accounting standards evolve it is.
Speaker Change: For our technology.
Speaker Change: To be a beacon of reliability scalability and operational rigor.
Speaker Change: Attributes.
Sandeep Sahai: Critical to a World With Changes. Last year, we completed our movement to the cloud, completely changing. Our Ability to Scale. That change has helped us continue to process data daily, meet deadlines, and lower costs; even the data volume grew substantially over the At the bump end, our data intake increases by a factor of roughly two and a half. But we successfully handled the surge using the cloud, where it is easier to add and then reduce. Compute Power On Demand.
Speaker Change: Critical to a world where it changes constantly.
Speaker Change: Last year, we completed our movement to the cloud.
Speaker Change: Completely changing our ability to scale.
Speaker Change: That change has helped us continue to process data daily.
Speaker Change: Deadlines and lower costs, even as data volume.
Speaker Change: Grew substantially over the year.
Sandeep Sahai: At bump end, our data intake increases by a factor of roughly two and a half times, but we successfully handle the surge using little out, where it is easier to add and then reduce compute power on the band. Earlier, we would have had to provision for the peak load, and that would have sat idle during much of the quarter. In another significant change, our investment in non-differentiated heavy lifting has gone down meaningfully, allowing us to deploy our engineering resources to growth, and finally, having a single instance platform obviates the need to maintain and manage multiple versions of the software.
Speaker Change: At bump and our data intake increases.
Speaker Change: By a factor of roughly two and a half times, but we successfully handled is sold using the cloud.
Speaker Change: Easier to add and then reduce.
Speaker Change: Compute power on demand.
Sandeep Sahai: Earlier, we would have had to provision for the peak load, and that would have sat idle during much of the quarter. In another significant change, our investment in non-differentiated heavy lifting has gone down meaningfully, allowing us to deploy our engineering resources. And finally, having a single instance platform eliminates the need to maintain and manage multiple versions of the.
Speaker Change: Earlier, we would have had to provision for the peak load.
Speaker Change: And that would have sat idle during much of the quarter.
Speaker Change: In another significant change our investment in non differentiated heavy lifting has gone down meaningfully.
Speaker Change: Allowing us to deploy our engineering resources to growth.
Speaker Change: And finally <unk>.
Speaker Change: Having a single instance platform, albeit the need to maintain and manage.
Speaker Change: Multiple versions of the software.
Sandeep Sahai: Our fall of the Sun model is not just a good to have operating more. It is essential when you want to effectively address the needs of the clients around the world in a reliable fashion. Even in the face of a global IT outage like the one on July 19th that caused technological havoc. Clearwater responded with urgency and agility. Because we have a single-instance platform that all our clients use, we had one version of the software to focus on and rectify. Not multiple versions, some on prem and some on the cloud. Have the events unfolded? Our team in India swiftly diagnosed and worked on rectifying the problem.
Sandeep Sahai: I'll follow the sun model. It is not just a good to have operating. It is essential when you want to effectively address the needs of clients around the world in a reliable way. Even in the face of a global IT outage like the one on July 19th. Cos-Tech-A-Logical
Speaker Change: I'll follow the Sun model.
Speaker Change: It is not just a good to have operating more.
Speaker Change: It is essential when you want to effectively address the needs of the clients around the world in a reliable fashion.
Speaker Change: Even in the face of a global idea outage like the one on July 19th that caused technological havoc.
Sandeep Sahai: Clearwater responded with urgency and agility. Because we have a single instance platform that all our clients use, we had one version of the software to focus on and rectify. Not multiple versions, some on-premises and some in the cloud.
Speaker Change: Clearwater responded with urgency and agility.
Speaker Change: Because you have a single instance platform that all our clients use <unk>.
Speaker Change: We had one version of the software to focus on and rectify.
Speaker Change: Not multiple versus some on prem and some on the cloud.
Sandeep Sahai: As the events unfolded, our team in India swiftly diagnosed and worked on rectifying the problem. Ensuring that by the time Europe and the U.S. started their day. The disruption was already well understood and largely mitigated. Such instances reaffirm the stability and scalability of operational capability and highlight the technological superiority of the single instance multi-tenant model that is now the de facto standard across and The success of generative AI is largely dependent upon access to data on an ongoing basis.
Speaker Change: Has the events unfolded.
Speaker Change: Team in India slippery diagnosed.
Speaker Change: And worked on rectifying the problem.
Sandeep Sahai: Ensuring that by the time Europe and the US started the day, the disruption was already well understood and largely mitigated. Such instances reaffirmed the stability and scalability of operational capabilities and highlights the technological superiority of the single instance multi-general model that is now the de facto standard across industries.
Speaker Change: Ensuring that by the time Europe and the U S started the date.
Speaker Change: The disruption was already well understood and largely mitigated.
Speaker Change: Such instances reaffirm the stability and scalability of our operational capabilities.
Speaker Change: And highlights the technological superiority of the single instance, multi channel model that is now the <unk> standard.
Speaker Change: Across industries.
Sandeep Sahai: The success of generative AI is largely dependent upon access to data on an ongoing basis. This is where Clearwater's single security master shines because all our data resides in one logical database. Using generative AI, we harness this technology's potential to a natural advantage and eventually to benefit all our clientele. We have already seen benefits from this technology and expected to deploy more applications across our platform.
Speaker Change: The success of generate Abi is largely dependent.
Speaker Change: Upon access to data on an ongoing basis.
Sandeep Sahai: This is Clearwater's single security master because all our data resides in one logical database. Using generative AI, we harness this technology's potential to our natural advantage and eventually to benefit all our clients. We have already seen benefits from this technology and expect to deploy more applications across our platform. Last month, I had the pleasure of connecting with a European user base and prospective clients at Clearwater Connect in London. The interactions I had were enjoyable and insightful, and I'm really excited about the momentum we are seeing across the board.
Speaker Change: This is where Clearwater single security Masters shines.
Speaker Change: Because all our data resides in one logical database.
Speaker Change: Using generative AI, we harnessed this technology's potential to a natural advantage.
Speaker Change: And eventually to benefit all our clientele.
Speaker Change: We have already seen benefits from this technology and expect to deploy more applications across our platform.
Sandeep Sahai: Last month, I had the pleasure of connecting with our European user base and prospective clients at Clearwater Connect in London. The interactions I had were enjoyable and insightful, and I'm really excited about the momentum you see across the board. We have a strong team in London, Paris, and Germany, a local operating center in Edundra, and deep domain expertise across the market. We continue to grow our presence in the UK market, and we are energized by the growing momentum in the French and German markets.
Speaker Change: Last month, I had the pleasure of connecting with our European user base and prospective clients at Clearwater connect inland the interactions I had with enjoyable and insightful.
Speaker Change: And I'm really excited about the momentum we are seeing across the board.
Sandeep Sahai: We have a strong team in London, Paris, and Germany, a local operating center in Edinburgh, and deep domain expertise across the market. We continue to grow our pretzels in the UK market, and we are energized by the growing momentum in the French and German markets. We are even more excited about our next user, Clearwater Connect in Boise set for September 17th and 18th, where we expect institutional investors will come together to learn about new technologies and solutions that can help them grow.
Speaker Change: We have a strong team in London, Paris, and Germany, our local operating center in Edinburgh, and deep domain expertise across the market. We continue to grow our presence in the UK market.
Speaker Change: And we are energized by the growing momentum in the French and German markets.
Joon Park: We are even more excited about our next user conference. Clearwater Connect and Boise set for September 17th and 18th. Very expect institutional investors will come together to learn about new technologies and solutions that can help them grow their business, and with that, let me hand the call over to Jim to review our financial results in more detail.
Speaker Change: We are even more excited about our next user conference.
Speaker Change: We want to connect and Boise set for September 17th and 18th.
Speaker Change: Where we expect distributional investors will come together to learn about new technologies and solutions that can help them grow their business.
James S. Cox: And with that, I will hand the call over to Jim to review our financial results in more detail. Thanks, Sandeep. And thank you all for joining us. I'm happy to report our second quarter results, which continued to build upon the strong momentum from the first quarter. The second quarter was strong across all metrics, but I would like to highlight two metrics that I believe should be particularly compelling to investors. First,
Speaker Change: And with that let me hand, the call over to Jim to review, our financial results in more detail.
Jim Cox: Thanks, Sandeep, and thank you all for joining us. I'm happy to report our second quarter results that continue to build upon the strong momentum from the first quarter. The second quarter was strong across all metrics, but I would like to highlight two metrics that I believe should be particularly compelling to investors. First, ARR increased by 22.2% year over year to $427.2 million, up from the prior year's $349.5 million. This is a very strong result and represents faster growth than our Q2 revenue. We have included the ARR of acquired Wilshire Technology clients in our ARR, and that helped our growth; but even after excluding that impact, the year-over-year growth in organic ARR was still in excess of 20%.
James S. Cox: Thanks, Cindy and thank you all for joining us and happy to report our second quarter results that continued to build upon the strong momentum from the first quarter. The second quarter was strong across all metrics, but.
James S. Cox: But I would like to highlight two metrics that I believe should be particularly compelling to investors first.
James S. Cox: ARR increased by 22.2% year over year, to $427.2 million, up from the prior year's $349.5 million. This is a very strong result and represents faster growth than our Q2 revenue. We have included the ARR of acquired Wilshire technology clients in our ARR, and that helped our growth. But even after excluding that impact, the year-over-year growth in organic ARR was still in excess of 20%.
James S. Cox: Our our increased by 22, 2% year over year.
James S. Cox: Two $427 $2 million up from the prior year's three.
Jim Cox: $349 $5 million.
Jim Cox: This is a very strong result, and.
Speaker Change: Its faster growth.
Speaker Change: Then our Q2 revenue we have included the E. R. R of acquired will share technology clients in our <unk> and that helped our growth, but even after excluding that impact the year over year growth in organic <unk> was still in excess of <unk>.
Speaker Change: 20%.
Jim Cox: Second, the team delivered remarkable cash flows in Q2 with operating cash flows of $43.9 million. That represents a 108% increase year over year, record high, free cash flow of $42.4 million. Again, representing an impressive year-over-year improvement of 117%. Put this all together, and it results in record high free cash flow to EBITDA conversion of 127% in Q2. This success in cash flows in Q2 resulted from stronger gap income and positive working capital changes, including improved collections. Strong cash flow generation is the bedrock upon which strategic optionality is built. For example, we can combine our development efforts with purchase solutions, as we did in the second quarter with the Wilshire Solutions acquisition, and whether we choose to evaluate other inorganic opportunities or return capital to shareholders at some point in time.
James S. Cox: The team delivered remarkable cash flows in Q2, with operating cash flows of $43.9 million. That represents a 108% increase year over year and a record high free cash flow of $42.4 million. Again, representing an impressive year-over-year improvement of 117%. Put this all together, and it results in a record high free cash flow to EBITDA conversion of 127 percent in Qt. This success in cash flows in Q2 resulted from stronger gap income and positive working capital changes, including Improved Collection. Strong cash flow generation is the bedrock upon which strategic optionality is built. For example,
Speaker Change: The team delivered remarkable cash flows in Q2 with operating cash flows of $43 $9 million.
Speaker Change: That represents a 108% increase year over year.
Speaker Change: Our record high free cash flow of $42 $4 million.
Speaker Change: Again, representing an impressive year over year improvement.
Speaker Change: 117%.
Speaker Change: But this all together.
Speaker Change: And it results in record high free cash flow to EBITDA conversion.
Speaker Change: Of a 127%.
Speaker Change: In Q2.
Speaker Change: This success in cash flows in Q2 resulted from stronger.
Speaker Change: GAAP income and positive working capital changes, including improved collections.
Speaker Change: Strong cash flow generation is the bedrock.
Speaker Change: Upon which strategic Optionality is built.
Speaker Change: For example.
James S. Cox: We can combine our development efforts with purchase solutions, as we did in the second quarter with the Wilshire Solutions acquisition, and Whether We Choose to evaluate other inorganic, or return capital to shareholders at some point in time. The company. Our clients, and our investors, all benefit from the optionality provided by such a healthy Financial Profile in Q2. We also beat both our revenue and EBITDA guidance for the quarter. While the outperformance in both revenue and EBITDA may sound routine for Clearwater, it is not an easy accomplishment for most companies, and we are very proud of them for delivering again, as they continue to. Since we became public,
Speaker Change: We can combine our development efforts with purchase solutions as we did in the second quarter with a wheelchair solutions acquisition.
Speaker Change: And whether we choose to.
Speaker Change: To evaluate other inorganic opportunities or return capital to shareholders at some point in time.
Jim Cox: The company, our clients, and our investors all benefit from the optionality provided by such a healthy financial profile. In Q2, we also beat both our revenue and evita guidance for the quarter. While the outperformance in both revenue and evita may sound routine for Clearwater, it is not an easy accomplishment.
Speaker Change: The company.
Speaker Change: Our clients and our investors all benefit from the Optionality provided by such a healthy.
Speaker Change: Financial profile.
Speaker Change: In Q2.
Speaker Change: We also beat both our revenue and EBIT guidance for the quarter.
Speaker Change: While the outperformance in both revenue and EBITDA may sound routine for Clearwater.
Speaker Change: It is not an easy accomplishment for most company and we are very proud of the team.
Jim Cox: For most companies, and we are very proud of the team for delivering again, as they continue to since we became public. Our growth dynamic continues to be boosted by two underlying vectors: growth from both existing clients and new logo clients in Q2. We continued the stellar momentum in upselling to existing clients in Q2, which was reflected in our net revenue retention rate of 110%. In addition, we continued to win new logo clients at a healthy pace. We understand the importance of adding new customers, and we are proud to note that we now have 93 clients with over 1 million in ARR, a 21% increase year over year.
Speaker Change: For delivering again.
Speaker Change: As they continue to sit.
Speaker Change: Since we became public.
James S. Cox: Our growth dynamic continues to be boosted by two underlying vectors, growth from both existing clients and new logo clients in Q2. We continued the stellar momentum in upselling to existing clients in Q2, which was reflected in our net revenue retention rate of 110 percent. In addition,
Speaker Change: Our growth dynamic continues to be boosted by two underlying vectors growth from both existing clients.
Speaker Change: And new logo clients in Q2.
Speaker Change: We continued the stellar momentum in up selling to existing clients in Q2.
Speaker Change: Which was reflected in our net revenue retention rate of 110%.
Speaker Change: In addition.
James S. Cox: We continue to win new logo clients at a healthy pace. We understand the importance of adding new customers, and we are proud to note that we now have 93 clients with over 1 million in ARR, a 21% increase, year over year.
Speaker Change: We continue to win new logo clients at a healthy pace.
Speaker Change: We understand the importance of adding new customers.
Speaker Change: And we're proud to note that we now have 93 clients with over $1 million, an IRR, a 21% increase year.
Speaker Change: For over a year now.
Jim Cox: Now let's turn to profitability results. We have a clear guide path towards our long-term goals of both 80% gross margins and adjusted EBITDA margin of 40%. In Q2, we achieved the gross profit of $82.7 million, which translates to 77.5% gross margin, an increase of 170 basis points over Q2 of 2023. In addition, we reported $33.4 million in adjusted evita and 31.3% adjusted evita margin in the second quarter which beat our evita margin guidance of 29 to 30% and improved over the prior year's evita margin by 370 basis points. What is most impressive is that we are achieving these evita margin improvements while investing significantly in new product innovation and international go-to-market headcount.
James S. Cox: Now let's turn to profitability. We have a clear guide path towards our long-term goals of both 80% gross margins and an adjusted EBITDA margin of 40%. In Q2, we achieved a gross profit of $82.7 million, which translates to 77.5% of gross market.
Speaker Change: Now, let's turn to profitability results.
Speaker Change: We have a clear guide path towards our long term goals of both 80% gross margins and adjusted EBIT margin of 40% in Q2, we achieved a gross profit of $82 $7 million, which translates to 77, 5% gross margin.
Speaker Change: <unk>, an increase of 170 basis points over Q2 of 2023.
James S. Cox: An increase of 170 basis points over Q2 of 2020. In addition, we reported $33.4 million in adjusted EBITDA and 31.3% adjusted EBITDA margin in the second quarter, which beat our EBITDA margin guidance of 29 to 30% and improved over the prior year's EBITDA margin by 370 basis points. What is most impressive is that we are achieving these EBITDA margin improvements while investing significantly in new product innovation and international go-to-market activities. Non-GAAP R&D expense is up more than $2 million over Q2 of last year, and non-GAAP sales and marketing investment is up over $1 million in Q2. Equity-based compensation was $25.2 million.
Speaker Change: In addition, we reported $33 4 million in adjusted EBITDA.
Speaker Change: And 31, 3% adjusted EBIT margin in the second quarter.
Speaker Change: Which beat our EBITDA margin guidance of 29% to 30% and improved over the prior year's EBITA margin by 370 basis points.
Speaker Change: What is most impressive is that we are achieving these EBITA margin improvements, while investing significantly in new product innovation and international go to market headcount non.
Jim Cox: Non-GAP R&D expense is up more than 2 million over Q2 of last year, and non-GAP sales and marketing investment is up over 1 million. In Q2, equity-based compensation was $25.2 million, a decrease of $3.5 million from Q2 of 2023. This shows good progress on our path to reduce equity-based compensation as a percentage of revenues. With respect to the tax receivable agreement expense, this amount was $6.2 million in the first half of 2024. We expect this amount to be a total of approximately $17 million dollars for the full year of 2024, an increase from the $14.4 million reported for the full year of 2023.
Speaker Change: non-GAAP R&D expense is up more than 2 million over Q2 of last year, and non-GAAP sales and marketing investment is up over $1 million.
Speaker Change: In Q2.
Speaker Change: Equity based compensation was $25 $2 million, a decrease of $3 5 million from Q2 of 2023.
James S. Cox: A decrease of $3.5 million from Q2 of 2023. This shows good progress on our path to reduce equity-based compensation as a percentage of revenue with respect to the tax receivable agreement expense. This amount was $6.2 million in the first half of 2024, and absent significant change.
Speaker Change: This shows good progress on our path to reduce equity based compensation as a percentage of revenues.
Speaker Change: With respect to the tax receivable agreement expense there.
Speaker Change: This amount was $6 $2 million in the first half of 2024.
Speaker Change: And absent significant changes we expect this amount to be a total of approximately $17 million for the full year 2024.
James S. Cox: We expect this amount to be a total of approximately $17 million for the full year 2024. An increase from the $14.4 million reported for the full year 2020. Let's turn to the balance. We ended Q2 with $297.6 million in cash, cash equivalents, and investments, even after we paid for the Wilshire Analytics acquisition in April 2020. Total debt was $47.9 million, thereby resulting in net cash holdings of approximately $250 million.
Speaker Change: An increase from the $14 4 million reported for the full year 2023.
Jim Cox: Let's turn to the balance sheet. We ended Q2 with $297.6 million in cash, cash equivalents, and investments. Even after we paid for the Wilshire Analytics acquisition in April 2024, total debt was $47.9 million, thereby resulting in net cash folding of approximately $250 million. Thus, we continued to have dry powder and the ability to generate cash from operations to enable another acquisition in the future. Should we choose to do that?
Speaker Change: Let's turn to the balance sheet.
Speaker Change: We ended Q2 with $297 $6 million in cash cash equivalents and investments.
Speaker Change: Even after we pay for the Wilshire analytics acquisition.
Speaker Change: In April 2024 total debt.
Speaker Change: Was $47 $9 million, thereby resulting in net cash holdings of approximately $250 million. Thus, we continue to have dry powder and the ability to generate cash from operations to enable another acquisition in the future should we choose to do that.
James S. Cox: Thus, we continue to have dry powder and the ability to generate cash from operations to enable another acquisition in the future, should we choose to do that. Now, let's turn to guidance for the full year 2024. We have again raised our revenue guidance to a range of $442 million to $444 million.
Jim Cox: Now let's turn to guidance. For the full year of 2024, we have again raised our revenue guidance to a range of $442 million to $444 million. This represents an improved year-over-year growth rate of approximately 20 to 21%. The low end of our current guidance for the year now equals the high end of our guidance provided last quarter. This full year guidance has incorporated both the outperformance in revenue in the second quarter and are continuing incrementally positive view on the second half of 2024. For the third quarter of 2024, we expect revenue to be in the range of $113 million to $114 million dollars, representing a year-over-year growth rate of approximately 19 to 20%.
Speaker Change: Now, let's turn to guidance.
Speaker Change: For the full year 2024.
Speaker Change: We have again raised our revenue guidance to a range of 442 million to $444 million.
James S. Cox: represents an improved year-over-year growth rate of approximately 20 to 21%. The low end of our current guidance for the year now equals the high end of our guidance provided last quarter. This full-year guidance has incorporated both the outperformance in revenue in the second quarter and our continuing increasingly positive view on the second half of 2024. For the third quarter of 2024, we expect revenue to be in the range of $113 million to $114 million, representing a year-over-year growth rate of approximately 19 to 20%. For the full year, we have increased our guidance for depreciation and amortization expense to $12 million, reflecting the incremental amortization from the acquisition of the analytics software business.
Speaker Change: This represents an.
Speaker Change: An improved year over year growth rate of approximately 20% to 21% the low end of our current guidance for the year now equals the high end of our guidance provided last quarter. This full year guidance has incorporated both the outperformance in revenue in the second quarter.
Speaker Change: <unk> and our continuing incrementally positive view on the second half of 2024 for the third quarter of 2024, we expect revenue to be in the range of $113 million to a $114 million representing a year over year growth.
Speaker Change: Eight of approximately 19% to 20% for the full year, we have increased our guidance for depreciation and amortization expense to $12 million.
Jim Cox: For the full year, we have increased our guidance for depreciation and amortization expense to $12 million, reflecting the incremental amortization from the acquisition of the analytics software business from Wilshire. For the full year 2024, we have also raised the adjusted EVIT to guidance to an even $140 million dollars, an increase of $3 million on the low end and $1 million on the high end of our prior guidance. This provides an adjusted EVIT to margin of approximately 31.6% for the full year 2024 and is higher than the previously stated full year 2024 target of 31%. Outperforming our stated plan to improve EVIT by 200 basis points over the full year 2023.
Speaker Change: Afflicting, the incremental amortization from the acquisition of the analytics software business from Russia for the full year 2024, we have also raised the adjusted EBIT guidance to an even $140 million an increase of $3 million on the low end and.
James S. Cox: For the full year 2024, we have also raised the adjusted EBITDA guidance to an even $140 million, an increase of $3 million on the low end and $1 million on the high end of our prior guidance. This provides an adjusted EBITDA margin of approximately 31.6% for the full year 2024 and is higher than the previously stated full year 2024 target of 31%, outperforming our stated plan to improve EBITDA by 200 basis points over the full year 2020.
Speaker Change: $1 million on the high end of our prior guidance. This provides an adjusted EBITA margin of approximately 31, 6% for the full year 2024 and is higher than the previously stated full year 2024 target of 31%.
Speaker Change: Performing our stated plan to improve EBITA by 200 basis points over the full year 2023, this EBIT guidance.
Jim Cox: This evit to guidance implies only slightly better evit to margins in the second half of 2024 when compared to Q2 2024. Although we have the capability to expand evit to margins more quickly, we are thoughtfully investing where we are seeing returns, and we will embrace that flexibility to strategically invest now. to fortify continued growth for, say, 2027 and beyond. For the third quarter 2024, we expect adjusted EBITDA to be $36 million, which represents an adjusted EBITDA margin of 31.7%.
James S. Cox: This EBITDA Guide implies only slightly better EBITDA margins in the second half of 2024 when compared to Q2 2024. Although we have the capability to expand EBITDA margins more quickly, we are thoughtfully where we are seeing return, and we will embrace that flexibility to strategically invest now, to fortify continued growth for, say, 2027 and beyond. For the third quarter 2024, we expect adjusted EBITDA to be $36 million, which represents an adjusted EBITDA March of 31.7.
Speaker Change: Implies only slightly better EBIT margins in the second half of 2024, when compared to Q2 2024.
Speaker Change: Although we have the capability to expand EBIT margins more quickly we are thoughtfully investing.
Speaker Change: Where we are seeing returns and we will embrace that flexibility.
Speaker Change: Strategically invest now.
Speaker Change: To fortify continued growth for say 2027 and beyond.
Speaker Change: For the third quarter 2024, we expect adjusted EBITDA to be $36 million.
Speaker Change: Which represents an adjusted EBIT margin.
Speaker Change: Of 31, 7% in summary, we're excited about the strong second quarter and look forward to continuing to deliver revenue growth and margin expansion for the second half of 2024, and well well well into the future.
Jim Cox: In summary, we're excited about the strong second quarter and look forward to continuing to deliver revenue growth and margin expansion for the second half of 2024 and well, well, well into the future.
Sandeep Sahai: In summary, we're excited about the strong second quarter and look forward to continuing to deliver revenue growth and margin expansion for the second half of 2024 and well, well, well into the future. With that, I'll turn it over to Sandeep to provide some closing remarks. Thank you, Jim.
Sandeep Sahai: With that, I'll turn it over to Sandeep to provide some closing thoughts. Thank you, Jim. We are very pleased with the future results, but are even more delighted with the increasing momentum of the business, to be able to grow revenue meaningfully, improve unit economics, and grow EBITDA and cash flow. All at the same time is incredibly exciting.
Speaker Change: With that I'll turn it over to Sandeep to provide some closing thoughts.
Sandeep Sahai: Thank you Jim.
Sandeep Sahai: We are very pleased with the Q2 results but are even more delighted with the increasing momentum of the business. To be able to grow revenue, improve unit economics, and grow EBITDA and cash flow all at the same time is incredibly exciting. We are increasingly confident about our capability to execute and will make a sustained push to stake out a leadership position in the investment management industry. Not just in investment accounting. If you'd like to queue for a question, you can do so by pressing star 1 on your telephone keypad.
Sandeep Sahai: We are very pleased with our Q2 results.
Sandeep: Even more delighted with the increasing momentum of the business to be able to grow revenue meaningfully in.
Sandeep: Improved unit economics, and grow EBITDA and cash flow all at the same time is incredibly exciting.
Sandeep Sahai: We are increasingly confident about our capability to execute and will make a sustained poor to stake out our leadership position in the investment management industry, not just in investment accounting and analytics.
Sandeep: Increasingly confident about our capability to execute and we'll make a sustained path.
Speaker Change: Let's take out a leadership position in the investment management industry, not just in investment accounting and analytics.
Operator: If you'd like to queue for a question, you can do so by pressing star one on your telephone keypad.
Operator: If for any reason you'd like to remove your question, press star 2. Again, to join the question queue, please press star 1. Our first question is from Brian Schwartz with Oppenheimer. Your line is now open.
Speaker Change: If you'd like to queue for a question you can do so by pressing star one on your telephone keypad.
Operator: If there's any reason you'd like to remove your question, you can press star two. Again, to join the question queue, please press star one.
Speaker Change: If for any reason you'd like to remove your question Press Star two.
Speaker Change: Again to join the question queue. Please press star one.
Brian Schwartz: Our first question is from Brian Schwartz with Oppenheimer. Your line is now open. Yeah, hi.
Speaker Change: Our first question is from Brian Schwartz with Oppenheimer. Your line is now open.
Brian Jeffrey Schwartz: Yeah, hi, thanks for taking my question this afternoon. And congratulations on a good result. Sandeep, I wanted to ask you about thinking about the new product cadence. You know, we've seen a faster new product cadence from the company over the past year. And I'm just wondering how sustainable is this, is this trend, whether it's either through organic or inorganic R&D?
Brian Jeffrey Schwartz: Yeah, Hi, Thanks for taking my question this afternoon and congratulations on a good result.
Sandeep Sahai: Thanks for taking my question this afternoon, and congratulations on a good result. Sandeep, I wanted to ask you about thinking about the new product, Cadence. We've seen a faster new product cadence from the company over the past year, and I'm just wondering how sustainable is this trend, whether it's either through organic or inorganic R&D, and could the new product cadence possibly accelerate over the next 12 to 18 months? Yeah, thank you, Brian. I think that the new product addition is very deliberate in our path to become a multi-product company. When we funded a number of these last year, frankly, we thought they would take a reasonable amount of time to get adopted by current clients, and it has just been quicker.
Brian Jeffrey Schwartz: Sandeep I wanted to ask you about thinking about the new product cadence.
Speaker Change: We've seen a faster new product cadence from the company over the past year and I'm. Just wondering how sustainable is this is this trend whether it's either through organic or inorganic R&D.
Sandeep Sahai: And could the new product cycle possibly accelerate over the next 12 to 18 years? Thank you, Brian. I think that the new product addition is very deliberate in our path to become a multi-product company. When we funded a number of these last year, frankly, we thought they would take a reasonable amount of time to get adopted by current clients, and it has just been quicker. I think we reported in the first quarter that 25% of all bookings in Q1 came from these new products.
Speaker Change: And.
Speaker Change: Could the new product cadence, possibly accelerate over the next 12 to 18 months.
Brian: Yes, Thank you Brian.
Speaker Change: I think that the new product addition is very deliberate.
Brian: In our path to become a multi product company.
Speaker Change: When we funded a number of these lost here.
Speaker Change: Frankly, we thought they would take a reasonable amount of time to get adopted by cutting clients and they're just being quicker.
Sandeep Sahai: I think we voted in first quarter that 25% of all booking in Q1 came from these new products, and we thought, you know, is that sustainable? But if you look at Q2, I think we said earlier in the script that it was incrementally faster. I do feel that a number of these products are just getting started, though.
Speaker Change: I think we reported in the first quarter that 25% of all booking in Q1.
Sandeep Sahai: And we thought, you know, is that sustainable? But if we look at Q2, I think we said earlier in the script that it was incrementally faster. I do feel that a number of these products are just getting started. So I don't want to say here that, oh, we think we are going to run at this pace. I do think we can run faster.
Speaker Change: Came from these new products and we talk.
Speaker Change: Is that sustainable.
Speaker Change: But if you look at Q2, I think we said earlier in the script that it was incrementally faster.
Speaker Change: I do feel that a number of these products are just getting started though.
Sandeep Sahai: So I don't want to say here that, oh, we think we're going to run at this pace. I do think we can run faster. So the answer to the question is we do expect more activity from new products and more contribution in booking. And I'll tell you, when we look back, what we think is the core reason. It's the NPS. James, our NPS is really high, and our clients want us to solve problems which are adjacent with products we can provide. So I think the adoption by clients has been, frankly, very, very encouraging. I think one of the last point, Brian, there was, you know, we always thought that these products would be adopted by a current client first.
Sandeep Sahai: So the answer to the question is we do expect more activity from new products and more contribution and booking. And I'll tell you, Brian, that when we look back, what we think is the core reason is the NPS. Our NPS is really high, and our clients want us to solve problems which are adjacent with products we can provide. So I think the adoption by clients has been, frankly, very, very encouraging. I think one other last point, Brian, there was, You know, we always thought that these products would be adopted by a current client firm. But, finally, we're quite surprised to see that 50% of bookings for these new products come from new logos, where customers are not even on the Clearwater platform, and they buy a new product.
Speaker Change: So I don't want to say here that we think we are going to run at this pace I do think we can run faster. So the answer to the question is we do expect.
Speaker Change: More activity from new products and more contribution in booking.
Speaker Change: And I'll tell you Brian that when we look back.
Speaker Change: What we think is the core reason, it's the NPS.
Speaker Change: Our NPS is really high and our clients want us to solve problems which are adjacent.
Speaker Change: With products, we can provide so I think the adoption by clients has been.
Speaker Change: Frankly, very very encouraging.
Speaker Change: I think one other last point, Brian there was.
Brian Jeffrey Schwartz: We always thought that these products would be adopted by our current clients first.
Sandeep Sahai: The family were quite surprised to see the 50% of booking for these new products come from new logos where customers are not even on the Clearwater platform and they buy any product. So we're incredibly excited about it. We do think there's room to accelerate.
Sandeep Sahai: So we're incredibly excited about it. We do think there's room to accelerate. We don't have a logical point that says, hey, we're going to stop this at this point.
Brian Jeffrey Schwartz: But frankly, we're quite surprised to see that 50% of our booking for these new products come from new logos.
Speaker Change: Where.
James S. Cox: But as you know, we invest 60% of our capacity; that's a lot. I don't know, Jim, whether you'd add anything to that. Oh, that's great. The follow-up question I had for Jim was, just wanted to see if you could provide a little more color on what you're seeing in terms of sales cycles and buying patterns for the new logos in 2Q and if the business had experienced any shifts in 2Q when compared to earlier in the year.
Speaker Change: Customers are not even on the Clearwater platform and they buy a new product sort of incredibly excited about it. We do think there's room to accelerate we don't have a logical point, which says hey, we're going to stop this at this point.
Sandeep Sahai: We don't have a logical point which says, hey, we're going to stop this at this point. But, as you know, we're investing 60% of our own capacity. That's a lot.
Speaker Change: As you know, we investing 60% of water and the capacity that's a lot.
Jim Cox: On the gym, whether you'd add anything to that, no, that's great.
Speaker Change: I wanted to know whether you'd add anything to that.
Speaker Change: No that's great.
Jim Cox: The follow-up question I had for Jam was, just wanted to see if you could provide a little more color on what you're seeing in terms of sales, I call and buying pattern for the new logos into Q. And if the business is experiencing shifts into Q when compared to earlier in the year, trying to get a read to see if that is going to work. But the macro challenges that are out there are having any impact; at least in the buying pattern, doesn't look like it based on your A or R results. But what are you seeing in terms of sales cycles and buying patterns on the new logo side?
Speaker Change: The follow up question I had for exam was.
Speaker Change: Wanted to see if you could provide a little more color on what you're saying in terms of sales cycles and buying pattern for the new logos into Q and if the businesses experienced any shifts into Q when compared to earlier in the year, just trying to get a read to see if that is the macro.
James S. Cox: Just trying to get a read to see if the macro challenges that are out there are having any impact, at least in the buying patterns. Doesn't look like it based on your ARR results, but what are you seeing in terms of sales cycles and buying patterns on the new logo side? Thanks for taking my questions this afternoon, Brian. Thanks, and Sandeep, I'll start, but please feel free to chime in. What I would say is, you know, we're obviously optimistic about the second half of the year, and I would say we're incrementally more optimistic relative to where we were at the beginning of the year. Pipelines are good for the environment.
Speaker Change: <unk> that are out there are having any impact at least in the buying pattern doesn't look like it based on your <unk> results, but what are you seeing in terms of sales cycles and buying patterns on the new logo side. Thanks for taking my questions. This afternoon.
Jim Cox: Thanks for taking my questions this afternoon. Thanks, Brian. Thanks.
Brian Jeffrey Schwartz: Brian Thanks.
Jim Cox: And some deep all start, but please feel free to chime in. What I would say is, you know, we're obviously optimistic. About the second half of the year, and I would say we're incrementally optimistic relative to where we were at the beginning of the year. Pipelines are good. And I think we see a lot of opportunity out there. And I think that's really reflected in the increment, not only the results you can see, which is that ARR expansion, but also in our guidance. And as we look to the second half of the year, we've always felt good about that, and we're feeling even better.
Speaker Change: And Sandeep I'll start, but please feel free to chime in what I would say is as you know.
Sandeep: Were obviously optimistic.
Sandeep: About the second half of the year and I would say, we're incrementally optimistic relative to where we were at the beginning of the year.
James S. Cox: And I think we see a lot of opportunity out there. And I think that's really reflected in the increment, not only the results you can see, which is that ARR expansion, but also in our guidance. And as we look to the second half of the year, we've always felt good about that. And we're feeling even better.
Sandeep: Pipelines are good.
Sandeep: And I think we see a lot of opportunity.
Sandeep: Out there and I think that's really reflected in the increment not only the results you can see which is that a our expansion, but also in our guidance and as we look to the second half of the year. We've always felt good about that and we're feeling even better.
Sandeep Sahai: Yeah, I would just add, Brian, that look, if you look at our second full year guidance, you can see that we feel pretty confidently that we will continue to grow at this pace or higher. So if you're very good, but we are super watchful, we are very aware that a number of enterprise software companies solve weakness in pipeline and eventually in booking and eventually in revenue. And so, with the last several months, we continue to be watchful. We haven't seen anything change in new logo momentum towards our platform and very little change in new products also.
Speaker Change: Sandeep.
Sandeep Sahai: Yeah, I would just add, Brian, that if you look at our second full year guidance, you can see that we feel pretty confident that we will continue to grow at this pace or higher. So we feel very good, but we are super watchful. We are very aware that a number of enterprise software companies saw weakness in pipeline, and eventually in booking, and eventually in revenue. And so, over the last several months, we have continued to be watchful. We haven't seen anything change in the new logo momentum towards our platform.
Sandeep: I would just add Brian that look if you look at our second full year guidance you can see that we feel pretty confidently that we will continue to grow at this pace or higher so we feel very good but we are super watchful.
Speaker Change: We are very aware that a number of enterprise software companies saw weakness in pipeline and eventually in booking and eventually in revenue and so over the last several months, we continue to be watchful and we haven't seen anything change in new logo momentum towards our platform.
Speaker Change: And very little change in new products also like I said, our new products.
Sandeep Sahai: Like I said, our new products' adoption will be faster than we thought. So always very, very positive right now.
Speaker Change: Adoption is even faster than we've talked to is always very very positive right now.
Rishi Jaluria: Thank you, Brian. Our next question is from Rishi Jalaria with RBC. Your line is now open. Great, thank you.
Brian Jeffrey Schwartz: Thank you Brian.
Sandeep Sahai: And very little change in new products also. Like I said, our new products. Adoption has been faster than we thought, so everything is very, very, very positive right now. Thank you, Brian. Our next question is from Rishi Jaluria with RBC. Your line is now open. Great, thank you. This is Chris Fountain on Rishi Jaluria.
Brian Jeffrey Schwartz: Our next question is from Rishi Galeria with RBC. Your line is now open.
Chris Fountain: Thanks for taking the question. You've mentioned a couple times using Gen AI internally to speed up implementations and onboarding for customers. It's really exciting to hear about what that can do for margins over time. But do you also think this initiative could also accelerate new business if the onboarding process is just easier as well? Yeah, Chris. Thank you for the question. Look, we are very excited about GNI.
Chris Faunonemri: Great. Thank you. This is Chris found noncommercial jewelry, thanks for taking the question.
Sandeep Sahai: This is Chris Bountone, Rishi Jaluria. Thanks for taking the question. You've mentioned a couple of times using GNII internally to speed up implementations and onboarding for customers. It's really exciting to hear about what that can do for margins over time. But do you also think this initiative could also accelerate new business if simply the onboarding process is just easier as well?
Chris: You've mentioned a couple of times using gen II internally to speed up implementation and Onboarding for customers.
Speaker Change: Really exciting to hear about what that can do for margins over time, but do you also think this initiative could also accelerating new business if simply the onboarding process is just easier as well.
Sandeep Sahai: Chris, thank you for the question. Look, we are very excited about GNII. We continue to make a very significant amount of investment in that. Obviously, the gross margin has continued to improve, at least partially because of that. The second thing is onboarding, like you mentioned, but onboarding also accelerates revenue growth. Now, has this holding initiative been as effective in growing booking and revenue? Not yet. Have we got 10 clients who have signed up on new products we're developing for GNII? Yes. So I think the right answer would be a lot of promise by clients actually signing up, but the impact on revenue and booking is not as significant as what we have seen on the efficiency side.
Sandeep Sahai: We continue to make a very significant amount of investment in that. Obviously, the gross margin has continued to improve, at least partially because of that.
Speaker Change: Yeah, Chris. Thank you for the question look we're very excited about to the eye. We continue to make very significant amount of investment in that obviously the gross margin has continued to improve at least partially because of that so one one is that that is true. The second thing is Onboarding Lake you mentioned.
Sandeep Sahai: The second thing is onboarding, like you mentioned, but onboarding also accelerates revenue growth, right? Now, has this whole initiative been as effective in growing bookings and revenue? Not yet.
Speaker Change: But onboarding also accelerated revenue growth right.
Speaker Change: Now has the has this fall than they should have been as effective in growing bookings and revenue not yet.
Sandeep Sahai: We've got 10 clients who have signed up for the new products we're developing for Gen-AI. Yes. So, I think the right answer would be a lot of promise by clients actually signing up, but the impact on revenue and booking is not as significant as what we have seen on the efficiency side.
Speaker Change: Heavy got 10 clients, who have signed up on new products. We are developing Virginia, yes. So I think the right answer would be.
Speaker Change: A lot of promise.
Speaker Change: By clients actually signing up but the impact on revenue and booking is not as significant as what we have seen on the efficiency side. The efficiency side. We've done came right away shockingly fast, but if you will but on the revenue side is being more.
Sandeep Sahai: The efficiency side return came right away, shockingly faster, but if you will. But on the revenue side, it is being more incremental, if you will, as we have taken products out to market. But like I said, 10 clients signed on real purchase orders with deals and ARR. Yes, they have. In the longer term, this fish was increasing. In the longer term, we do believe that it may be a massive role in the expansion also. Great.
Sandeep Sahai: The efficiency side return came right away, shockingly faster, but if you will, but on the revenue side, it has been more, You know, more incremental, if you will, as we have taken products out to market, but like I said, we have 10 clients signed on real purchase orders with deals and ARR, yes, they have. In the longer term, I'll just finish by saying, Chris, in the longer term, we do believe that it will play a massive role in revenue expansion also. Great Thanks, Sandeep. Thanks, Chris. Our next question is from Alexei Gogolev of J.P. Morgan. Your line is now open. Thank you. Hi Sandeep.
Speaker Change: You know more incremental if you will as we have taken products out to market.
Speaker Change: And like I said have 10 10 clients signed on.
Speaker Change: Real bushes autos with deals and E. R. R. Yes, they have.
Sandeep: And along with the August fish was increase in the longer term.
Sandeep: We do believe there'll be a play a massive role in revenue expansion also.
Sandeep Sahai: Great. Thanks Sandeep.
Sandeep Sahai: Thanks, Andy.
Sandeep Sahai: Thanks, Chris.
Chris: Thanks, Chris.
Alexei Gogolev: Our next question is from Alexi Gogolov with JP Morgan. Your line is now open. Thank you. Hi, Andy. Hi, Jim. Great to hear from you.
Speaker Change: Our next question is from Alexia <unk> with Jpmorgan. Your line is now open.
Alexei Mihaylovich Gogolev: Hi Jim. Great to hear from you. My first question is probably more to Jim. Would you be able to provide us with the organic growth of your revenue in both 2Q and also for your guidance in 3Q and 4Q of this year without Wilshire? Sure, Alexei, what we said at the time of the acquisition was that it was about a $7 million run rate, and that is reflected in our ARR now in Q2, and so what we said on the call was, although our ARR grew 22.2%, even if you take out that amount, that then we're still growing ARR organically north of 20% in Q2.
Alexia: Thank you Hi, Sandeep hygiene, great to hear from you.
Jim Cox: My first question is probably more to Jim. Would you be able to provide us with the organic growth of your revenue in both 2Q and also for you guys in 3Q and 4Q of this year without low share? Sure, Alexi. What we said at the time of the acquisition was that it was about a $7 million run rate, and that is reflected in our ARR now in Q2. And so what we said on that call was although our ARR grew 22.2%, even if you take out that amount, that then we're still growing ARR organically north of 20% in Q2.
Alexia: My first question, probably more to Jim would.
Alexia: Would you be able to provide us with.
Speaker Change: Organic growth of your revenue and both <unk> and also for your guidance in <unk> and <unk> of this year without Wilshire.
Speaker Change: Sure Alexia, what we said at the time of the acquisition was that it was about a 7 million dollar run rate.
Speaker Change: And that is.
Speaker Change: Reflected in our IRR now in Q.
Speaker Change: In Q2, and so what we said on that call was although our air anchored 22, 2%, even if you take out that.
Speaker Change: Amount.
Speaker Change: That then.
Speaker Change: We're still growing <unk> organically north of 20% in Q2.
Jim Cox: I think the other thing we said was we said about 2 thirds of that $7 million was incorporated in our guidance in Q when we did the Q1 update on guidance. And I think that's kind of that was what was acquired, obviously. We're out in the market selling that, along with our other products. That is now in our stable. And so we're hopeful to see that grow going forward and hope that helps.
Alexei Mihaylovich Gogolev: I think the other thing we said was that about two-thirds of that $7 million was incorporated in our guidance in Q1 when we did the Q1 update on guidance. And, and I think that's, you know, kind of what was acquired. Obviously, we're out in the market, selling that along with our other products, you know, that is now in our stable. And so we're hopeful to see that grow going forward. Hope that helps.
Speaker Change: The other thing we said was we said about two thirds of that $7 million was incorporated in our guidance in Q. When we did the Q1 update on guidance.
Speaker Change: And and I think that's kind of that was what was acquired obviously.
Speaker Change: We're out in the market.
Speaker Change: Selling that along with our other.
Speaker Change: Products that is now in our stable and so we're hopeful.
Speaker Change: To see that grow going forward.
Speaker Change: Hope that helps.
Jim Cox: James. Thank you, Jim. And then the second question on NRR, obviously it's still at a very solid level. I'm changed sequentially.
James S. Cox: Thank you, Jim. And then the second question on NRR. Obviously, it's still at a very solid level and has changed sequentially. What is your new outlook for NRR for the rest of the year?
Speaker Change: Thank you, Jim and and then the second question on NR.
Speaker Change: Obviously.
Speaker Change: It's a very solid level.
Speaker Change: Sequentially, what is your new outlook for NR won't be rest of the year and can you update us on the path to 115% by first quarter of 2026.
Jim Cox: What is your new outlook for NRR for the rest of the year? And can you update us on the path to 115% by 1st quarter of 2026? Yeah, I think that, you know, when we look at NRR in Q2 and compare that to NRR in Q1, it's very, very similar. Not only was the top line similar, but the elements of it remained very similar between those periods, which is to say AUM was not a headwind in either Q1 or Q2, but it was also not a meaningful tailwind within the first half of this year. Where we, you know, when you think about the components of doing more with our clients, cross-selling, upselling, increasing wall share, those numbers were strong.
Alexei Mihaylovich Gogolev: And can you update us on the path to 115 percent by the first quarter of 2026? Yeah, I think that when we look at NRR in Q2 and compare that to NRR and Q1, it's very, very similar.
Speaker Change: Yeah, I think that when we look at NR in Q2.
James S. Cox: Not only was the top line similar, but the elements of it remained very similar between those periods, which is to say, AUM was not a headwind in either Q1 or Q2, but it was also not a meaningful... tailwind, within the first half of this year, where we, you know, when you think about the components of, Doing more with our clients, cross selling, upselling, increasing wallet share, those numbers were strong. And as we look to grow that NRR from 110 to 115 or beyond, you know, as we have more of these solutions in the hands of our salespeople and deliver them to our clients.
Speaker Change: And compare that too in our or in Q1 is very very similar not only was the topline similar.
Speaker Change: But the elements of it.
Speaker Change: Remained very similar between those periods.
Speaker Change: Which is to say.
Speaker Change: A U N.
Speaker Change: It was not a headwind in either Q1 or Q2.
Speaker Change: But it was also not a meaningful.
Speaker Change: Tailwind.
Speaker Change: Within the first half of this year.
Speaker Change:
Speaker Change: Where are we you know when you think about the components of.
Speaker Change: Doing more with our clients cross selling upselling, increasing wallet share those numbers were strong.
Jim Cox: And as we look to grow that NRR from 110 to 115 or beyond, that, you know, as we have more of these solutions in the hands of our salespeople and delivering them to our clients, we see that expanding. I think Cindy mentioned this earlier, but I think the interesting thing was we had thought of these multiple product sales as all the back-to-back sales. And about half of them are just larger bundles up front as we're selling core with these additional products to our new clients. And so that's encouraging as we're able to do that sweet sale both back-to-base as well as to new clients.
Speaker Change: And as we look to grow.
Speaker Change: That NRI from 110 to $1 15 or beyond.
Speaker Change: That you know as we have more of these solutions.
Speaker Change: In the hands of our salespeople and delivering them to our clients.
Speaker Change: We we see that expanding.
James S. Cox: We see that expanding. I think Sandeep mentioned this earlier, but I think the interesting thing was we had thought of these multiple product sales as all being back-to-bay sales, and about half of them are just larger bundles up front as we're selling the core with these additional products to our new clients.
Speaker Change: I think Sandeep mentioned this earlier, but I think the interesting thing was we had thought of these multiple product sales as all being back to base sales and about half of them are just larger bundles upfront as we're selling core with these additional products to our new clients and so that's.
James S. Cox: And so that's encouraging as we're able to do that sweet sale both back-to-base as well as to new clients. And then the last thing I'll say, Alexei, is that you are as excited as we are about these new products, right? We're just booking that now.
Speaker Change: Encouraging.
Speaker Change: As as we're able to do that suite sale, both back to base as well as.
Speaker Change: To new clients and then the last thing I'll say Alexia is.
Jim Cox: And then the last thing I'll say, Alexi, is, as excited as we are about these new products, right, we're just booking that now. And so then, obviously, it then has to get into revenue. And then once it's in revenue, then it starts to reflect an NRR. So I think we expect a larger impact from that as we look out and these products mature.
Alexia: Is as excited as we are about these new products right. We're just booking that now.
James S. Cox: And, and so obviously, it then has to get into revenue. And then once it's in revenue, then it starts to reflect in NRR. So I think we expect a larger impact from that, kind of as we look out and these products mature. Sandeep, anything to add?
Alexia: And and so obviously that then has to get into revenue and then once it's in revenue then it starts to reflect an NRI. So I think we expect a larger impact from that.
Alexia: As we look out and these products mature Cindy.
Sandeep Sahai: Cindy, if anything, Dad. No, I think there's a comprehensive. Thank you. Thank you very much, Jim. Thank you, Cindy. Thank you.
Sandeep: Sandeep anything to add.
Sandeep Sahai: No, I think that was very comprehensive. Thank you very much, Jim. Thank you, Cindy.
Alexia: No.
Cindy: That's very comprehensive thank you.
Alexia: Yeah.
Alexia: Thank you very much Jim Thank you Sandeep.
Alexia: Thank you. Thank you.
David Unger: We have a question from Michael Turin with Wells Fargo. Your line is now open. Thank you, guys. It's David Ungron for Michael Turin tonight. Thanks for taking the question. So I just wanted to go back to the 60% of R&D capacity on the prepared remarks. So would you mind just kind of giving us the way to think about the margin impacts in the near term? And you know, if you continue to see momentum and bookings from this, how should we think about the LTV to CAC dynamics in the long run? Thank you.
James S. Cox: Thank you. We have a question from Michael Turrin with Wells Fargo. Your line is now open. Hey guys, it's David Unger on for Michael Turrin tonight.
Speaker Change: We have a question from Michael <unk> with Wells Fargo. Your line is now open.
David B. Unger: Thanks for taking the question. So I just wanted to go back to the 60% of R&D capacity in the prepared remarks. So would you mind just kind of giving us a way to think about the margin impacts in the near term? And you know, if you continue to see momentum and bookings from this, how should we think about the LTV to CAC dynamics in the long run? Thank you. Jim, do you want to answer that?
Speaker Change: Hey, guys, it's David Undrawn for insurance Tonight, Thanks for taking the questions. So I just wanted to.
David B. Unger: Go back to the 60% of R&D capacity on the prepared remarks. So would you mind, just kind of giving us the way to think about the margin impacts in the near term and you continue to see momentum in bookings from this how should we think about the LTV to CAC dynamics in the long run. Thank you.
Jim Cox: Jim, do you want to answer that? Sure. So thanks, David. So obviously we already have a very highly efficient sales and marketing when you look function, when you look at that. And you know, that is attributed to the fact that we have high MPS with good references from clients that helps us sell. I think a natural course across the SAS industry is that as you're selling back to base, that the time period to close that deal would be shorter than a new logo. And so you would get yet incremental efficiency in that selling process. So I think long term, we expect more efficiency from that back to base sales motion than we do from the new logo.
Speaker Change: Jim do you want to answer that.
James S. Cox: Sure. Thanks. Thanks, David. So, obviously, we already have a very highly efficient sales and marketing function when you look at it, and you know that is attributed to the fact that we have high mps, and we have good references from clients that helps us sell. I think a natural course across the SaaS industry is that as you're selling back to your base, the time period to close that deal would be shorter than a new logo. And so you would get yet incremental efficiency in that selling process. So I think long term.
Speaker Change: Sure.
James S. Cox: Thanks, David.
Speaker Change: So.
James S. Cox: We obviously, we already have a very highly.
Speaker Change: Fishing.
Speaker Change: Sales and marketing when you look a function when you look at that and you know that.
Speaker Change #106: That is attributed to the fact that we have high NPS with good references from clients that helps us out.
Speaker Change: Uh huh.
Speaker Change: I think a natural course across the SaaS industry is that as you're selling back to base.
Speaker Change: The time period to close that deal would be shorter than a new logo and so you would get yet incremental efficiency.
Speaker Change: In that selling process, so I think long term.
James S. Cox: We expect more efficiency from that back-to-basics sales motion than we do from the new logo. However, I caution you, to bet that I think, and Cindy will keep me honest on this, but I think we collectively feel like that efficiency we then want to pour into our global expansion of our sales and marketing, right as we add more opportunities. We're very encouraged by the European signals that we've seen in the French speaking market, in the German speaking market, and Asia is still very, very early for us. And so I think we could see incremental investments there, which perhaps offset that incremental efficiency in the back-to-base motion.
Speaker Change: We expect more efficiency from that back to base sales motion than we do from the new logo. However, I'd caution you.
Sandeep Sahai: So, however, I caution you that I think, and Sandeep, keep me honest on this, but I think we collectively feel like that efficiency, we then want to pour into our global expansion of our sales and marketing. As we add more opportunities, we're very encouraged by the European signals that we've seen in the French-speaking market and the German-speaking market, and Asia is still very, very early for us. And so I think we could see incremental investments there, which perhaps offset that incremental efficiency in the back-to-base motion.
Speaker Change: Todd.
Speaker Change: Pink and Cindy keep me honest on this but I think we collectively feel like that efficiency. We then want to pour into our global expansion of our sales and marketing.
Speaker Change: As we add.
Speaker Change: More opportunities, we're very encouraged by.
Speaker Change: By the European.
Speaker Change: The signals that we've seen in in the French speaking market in the German speaking market in Asia is still very very early for us and so I think we could see incremental investments.
Speaker Change: There.
Speaker Change: Which perhaps offset that incremental efficiency.
Speaker Change: In fact based motion.
Sandeep Sahai: David, I would just add that our attitude to this is we have a disruptive platform where we win 80% of the time. And once we get a client, our gross revenue retention for the last two quarters was 99%, and before that it was largely 98%. So our sense is that you have the advantage; you have a disruptive product, which is superior, suppressed the advantage. But we want to do this in a disciplined way, which is why we said we will grow EBITDA 200 basis points while continuing to make these investments. Now, do we expect that R&D investment into new products to become more efficient?
Sandeep Sahai: Yeah, David, I would just add that our attitude to this is, We have a disruptive platform where we win 80% of the time. And once we get a client, our gross revenue retention for the last two quarters was 99%, and before that, it was generally 98%.
Speaker Change: Yeah, David I would just add that.
David: Attitude to this is Lee.
Speaker Change: We have a disruptive platform.
David: Where we win 80% of the time and once we get our client our gross revenue retention for the last two quarters was 19, 9% and before that it was largely 98%.
Sandeep Sahai: So our sense is that you have the advantage, you have a disruptive product which is superior, so exploit that advantage. But we want to do this in a disciplined way, which is why we said we would grow EBITDA by 200 basis points while continuing to make these investments. Now, do we expect that R&D investment into new products to become more efficient? Yes.
Speaker Change: So our sense is that do you have the advantage of <unk>, you'll have a disruptive disruptive product, which is superior suppressed the advantage.
Speaker Change: But we wanted to do this in a disciplined way, which is why we said we will grow EBITDA 200 basis points, while continuing to make these investments.
Speaker Change: Now do we expect that R&D investment into new products to become more efficient yes.
Sandeep Sahai: Yes, we started to make that investment at the end of last year. And there's a learning about what succeeds, what doesn't succeed, what GTM works, and what doesn't work. So do we expect that to become more efficient? Yes, do we expect that number to continue to grow? No. And that is why we have said that this 25, 26% R&D expense will trend down in the mid long term to 20%. So again, we have set up a discipline about how to think about this, but we're also pretty aggressive about pushing our advantage, which we know we have technologically.
Sandeep Sahai: We started to make that investment at the end of last year, and there's been learning about what succeeds, what doesn't succeed, what GTM works, and what doesn't work. So do we expect that to become more efficient? Yes. But do we expect that number to continue to grow? No.
Speaker Change: We started to make that investment at the end of last year and Theres, a learning about what succeeds or doesn't succeed what GDN works and what doesn't work. So do we expect that to become more efficient yes, do we expect that number to continue to grow no.
Sandeep Sahai: And that is why we have said that this 25-26% R&D expense will trend down in the mid-long term to 20%. So again, we have set up discipline about how to think about this, but we are also pretty aggressive about pushing our advantage, which we know we have technologically. I appreciate the comprehensive answer there.
Speaker Change: And that is why we have said that this.
Speaker Change: 25, 26% R&D expense will trend down.
Speaker Change: In the mid long term to 20% so again, we have setup.
Speaker Change: A discipline about how to think about this but we're also pretty aggressive about <unk>.
Speaker Change: Pushing or advantage, which we know we have technologically.
Jim Cox: I appreciate the comprehensive answer there. And if I could just squeeze one more and, you know, you're balancing growth with investment, but just on the gross margin side, I know we've talked about 80%. Can we just hit on that and kind of where we see gross margin trending, perhaps over the next three years, maybe just going back to the investor day and then you could elaborate on there. Thank you. Yeah, I think what we've committed to at the investor day was 50%, pardon me, I'd love that, 50 bips of gross margin improvement, kind of year over year over year, until we get to that 80%.
David B. Unger: And then if I could just squeeze one more in, you know, you're balancing growth with investment, but just on the gross margin side, I know we've talked about 80%. Can we just hit on that and kind of where we see gross margin trending, perhaps over the next three years, maybe just going back to Investor Day, anything you could elaborate on there? Thank you. Yeah, I think what we committed to at Investor Day was 50%. So pardon me; I'd love that.
Speaker Change: I appreciate the comprehensive answer there and then if I could just squeeze one more in.
Speaker Change:
Speaker Change #101: Youre balancing growth with investments that just from the gross margin side I know, we talked about 80% and we just hit on that and kind of where we see gross margin trending perhaps over the next three years, maybe just coming back to your Investor Day, you could you could elaborate on that thank you.
Speaker Change: Yes, I think what we've committed to at the Investor Day was 50%. So pardon me I'd love that Uh Huh.
James S. Cox: 50 BIP of Gross Margin Improvement, kind of year over year over year until we get to that 80 percent. Now we've been able to do better in 2023 than that and kind of in the beginning of 2024, but I think we're very comfortable with 50 BIP improvement year over year. I would just add, Jim, that, you know, when we did the investor day last year, while it feels like a long time ago, the impact of Gen AI wasn't fully understood.
Speaker Change: 50 bps of gross margin improvement.
Speaker Change: And on a year over year over year until we get to that 80%.
Jim Cox: Now we've been able to do better in 2023 than that, and kind of in the beginning of 2024, more, but I think we're very comfortable with 50 depth improvement year over year consistently.
Speaker Change #112: Now we've been able to do better.
Speaker Change: In 2023, and that and kind of in the beginning of 2024, but I think we're very comfortable with 50 that improvement year over year consistent.
Sandeep Sahai: I would just add, Jim, that you know, when we did the investor day last year, why it feels like a long time back, the impact of Gen.A.I. wasn't fully understood, and I think what you've said in the past few months is, we think that we have a glide path through the 80%, which you can see, but is there other numbers which are higher than that, which we could get behind? And I think the answer is yes, but we also said that we'll take a couple more quarters to come up with a number we feel like we have a real plan for, and that would be in the use of Gen.A.I. and machine learning to improve data ingestion, to improve onboarding, to improve client servicing, and so we feel there is room there because of Gen.A.I., and the impact has already been felt, but we don't have a number yet about what this could be.
Speaker Change: I would just add Jim that.
Speaker Change: You know when we did the Investor day last here, while it feels like a long time back in.
Jenny: The impact of Jenny I wasn't.
James S. Cox: And I think what you've said in the past few months is, We think that we have a glide path to the 80%, which you can see. But are there other numbers which are higher than that which we could get behind?
James S. Cox: Fully understood and I think what you said in the past few months as well.
Speaker Change #105: We think that we have a glide path to the 80%, which you can see.
Speaker Change: But is there other numbers, which are higher than that which we could get behind and I think the answer is yes, but we also said that we will take a couple more quarters to come up with a number we feel like we have a real plan for and that would be in the use of Jennie O and machine learning to improve data ingestion to improve onboard.
Sandeep Sahai: And I think the answer is yes, but we also said that we'd take a couple more quarters to come up with a number we feel like we have a real plan for. And that would be the use of Gen AI and machine learning to improve data ingestion, to improve onboarding, to improve client service. And so we feel there is room there because of Gen AI. And the impact has already been felt, but we don't have a number yet about what this could be.
Speaker Change: Adding to improve client servicing.
Speaker Change: And so we feel there is room, there because of Jennie O.
Speaker Change: And the impact has already been felt but we don't have a number yet about what this could be.
David Unger: Thank you, David. Thank you.
Michael Nicholas Infante: Thank you, David. Thank you. Our next question is from Michael Infante with Morgan Stanley. Your line is now open.
David: Thank you David.
Speaker Change: Okay.
Michael Infante: Our next question is from Michael in Fonte with Morgan Stanley. Your line is now open. Hey guys, thanks for taking our question. Apologies if I missed it, but I just wanted to clarify whether or not interest rate cuts are directly contemplated in the 24-hour look. It doesn't seem to be when I look at the full-year race versus the prior guide. So I was curious if you have a view surrounding the impact of perhaps the 25 basis point rate cut just in terms of NRR and revenue growth and 24 and beyond. Thanks. You're exactly right, Michael.
Speaker Change #120: Our next question is from Michael and Fontana with Morgan Stanley. Your line is now open.
Michael Nicholas Infante: Hey guys, thanks for taking our question. Apologies if I missed it, but I just wanted to clarify whether or not interest rate cuts are directly contemplated in the 24-hour outlook. It doesn't seem to be when I look at the full-year raise versus the prior guide.
Speaker Change: Hey, guys. Thanks for taking our question apologies if I missed it but I just wanted to clarify whether or not interest rate cuts are directly contemplated in the 24 outlook. It doesn't seem to be when I look at the four areas versus the prior guide. So I was curious if you have a view surrounding the impact of perhaps.
Speaker Change: 25 basis point rate cut just in terms of <unk> and revenue growth in 'twenty four and beyond thanks.
Michael Nicholas Infante: So I was curious if you had a view surrounding the impact of perhaps a 25 basis point rate cut, just in terms of NRR and revenue growth in 24 and beyond. Thanks. You're exactly right, Michael; no rate cut or AUM impact from that is included in our 2024 guidance. Remember, at the beginning of this year, we thought we were going to have seven cuts.
Speaker Change #121: You're exactly right Michael It is a no rate cut or AUM.
Michael Infante: It is no right cut or AUM impact from that is included in our 2024 guidance. Remember, at the beginning of this year, we thought we were going to have seven cuts, and so I think I saw the note quickly from the meeting that nothing this time. So we'll definitely have a point of view. Should they adjust rates in September? Got it.
Speaker Change #123: The impact from that is included in our 2020 for guidance.
Speaker Change: Yes.
Speaker Change #109: You remember at the beginning of this year, we thought we were going to have seven cuts.
James S. Cox: And so I think I saw the note quickly from the meeting that nothing this time. So we'll definitely have a point of view should they adjust rates in September.
Speaker Change #103: And so I think I saw the note quickly from the meeting.
Speaker Change #100: In this time so.
Speaker Change #100: We will have we will definitely have a point of view I should day yeah.
Speaker Change #100: Adjust rates in September.
James S. Cox: Got it. That's helpful. And then just in terms of the commentary surrounding 50% of the new products, new product bookings being driven by new clients, I think we're all well accustomed to your 80% plus win rate. I was just curious if those new products, in and of themselves, are either driving win rates higher or perhaps allowing you to close deals that maybe would have taken a little bit longer to get some prospective customers over the hump. I'm just curious if you have any commentary on that.
Speaker Change: Got it that's helpful. And then just in terms of the commentary.
Michael Infante: That's helpful. And then just in terms of the commentary surrounding 50% of the new products, new product bookings being driven by new clients, I think we're all well accustomed to your 80% plus win rate. I was just curious if those new products, in and of themselves, are either driving win rate higher or perhaps allowing you to close deals that maybe would have taken a little bit longer to get some perspective customers over the hump. I'm just curious if you have any commentary there. Thanks.
Speaker Change: <unk>, 50% of the new products new.
Speaker Change #135: New product bookings being driven by new clients I think were all well accustomed to near 80% plus win rate I was just curious if those new products in and of themselves are either driving win rate is higher or perhaps who are new to the closed deals that maybe would have taken a little bit longer to get.
Speaker Change: You know some some prospective customers over the hump I'm just curious if you have any commentary there. Thanks.
Michael Nicholas Infante: Thanks. Yeah, we could actually just go through many instances. But the answer to both of those is yes, I do think the new products help us close deals faster. There's no question about that. The value proposition is superior to what it would be without that new product. So I think that has helped many a deal in Q1 and Q2, which is why I'm feeling really good about the second half of the year.
Sandeep Sahai: Yeah, we could actually just go through many instances, but the answer to both of those is yes. I do think the new products help us close deals faster. There is no question about that. The value proposition is superior to what it would be without that new product. So I think that has helped many a deal in Q1 and Q2, which are feeling really good about the second half of the year. So we feel like that does happen. I think when we sell to current clients, I think the only reason we don't win would be the client decided to push the decision out a little bit.
Speaker Change: Yes, we.
Speaker Change #104: We could actually just go through many instances, but the answer to both of those is yes, I do think the new products help us close deals faster. There's no question about that the value proposition is superior to what it would be without that new product. So I think that has helped many of deal in Q1, and Q2, which is I am feeling really good about the second half of the year.
Speaker Change #104: So we feel like that does happen I think when we sell to current clients.
Michael Nicholas Infante: So we feel like that does happen. I think when we sell to current clients, I think the only reason we don't win would be the client decides to push the decision out a little bit. But the win rate is very high. I don't have a number for you, Michael.
Speaker Change #104: I think the only reason we don't win would be to try and decides is to push the decision out a little bit but the win rate is very high.
Sandeep Sahai: But the win rate is very high. I don't have a number for you, Michael, but the answer to both your questions is a very strong game. Yes.
Sandeep Sahai: But yeah, the short answer to both your questions is a very strong yes. Thank you both. Thank you, Michael. Our next question is from Gabriela Borges with Goldman. Your line is now open. Good afternoon.
Speaker Change #104: Number for you, Michael but yes, those the answer short answer to both your questions is have a strong gas.
Michael Infante: Thank you both.
Speaker Change: Thank you Beth Thank you Michael.
Gabriela Borges: Thank you, Michael. Our next question is from Gabriela Borges with Goldman. Your line is now open. Good afternoon, thanks for taking the question. Sandeep, you made an interesting comment earlier about how some other companies have talked about a slowdown in enterprise. And it's not something that you're seeing. I'll ask you about the insurance industry in particular. We had TCC last night talking about how their new product construction is flowing because their customers are evaluating a more wholesale transformation and digitization type to AI. Are you seeing any of that in the insurance industry? How do you think about the risk that perhaps your business also sees a cause?
Speaker Change #102: Our next question is from Gabriela Borges with Goldman Your line is now open.
Gabriela Borges: Thanks for taking the question. Sandeep, you made an interesting comment earlier about how some other companies have talked about a slowdown in enterprise, and it's not something that you're seeing.
Gabriela Borges: Good afternoon, and thanks for taking that question Sandeep you made an interesting comment earlier about how other companies have talked about a slowdown in enterprise.
Gabriela Borges: Something that you are seeing all asked you about the insurance in the chain in particular, we had TCT last night talking about how their new product construction slowing.
Speaker Change #113: Their customers are evaluating a more wholesale transformation.
Speaker Change #114: I think she tied to AI.
Sandeep Sahai: I'll ask you about the insurance industry in particular. We had CCC last night talking about how their new product introduction is slowing because their customers are evaluating a more wholesale transformation and digitization tied to AI. Are you seeing any of that in the insurance industry? How do you think about the risk that perhaps your business will also see a pause, not because the new products aren't valuable, but because customers are trying to think through more holistically how they want to adopt them over a longer period of time?
Speaker Change: Are you seeing any of that in the insurance industry.
Speaker Change #115: How do you think about the Revpar perhaps.
Speaker Change: Okay.
Sandeep Sahai: Not because the new product on value will be because customers are trying to think through more holistically how they want to adopt a longer period of time.
Speaker Change: Not because the new product volume global Buckhead tuck in like we're trying to think train more particularly how they want to adopt.
Speaker Change #117: I don't want a paradigm.
Sandeep Sahai: Yeah, thank you, Gabriela. I'll free him very strongly, very, very strongly that when it comes to our platform, we lead the industry today in how to think about Gen A.I. in the insurance industry and in the asset management world.
Sandeep Sahai: Thank you, Gabriela. I feel very strongly, very, very strongly that when it comes to our platform, we lead the industry today in how to think about the NEI in the insurance industry in the asset management world. So I feel like if things change and they change quickly, we are at the forefront of it. What we are achieving today, even financially, when you look at how much we've been able to grow gross margin and how quickly, it is the real impact of the NEI. We have products in the hands of many, many clients today who are using it today.
Speaker Change #107: Yes, Thank you <unk>.
Speaker Change #108: I feel.
Speaker Change #108: Very strong they're very very strongly that when it comes to.
Speaker Change: Our platform, we lead the industry today, and how to think about NII in the insurance industry in the asset manager in the world. So I feel like.
Sandeep Sahai: So I feel like, if things change and they change quickly, we are at the forefront of it, what we are achieving today, even financially. When you look at how much we've been able to grow gross margin and how quickly, It is the real impact of Gen AI. We have products in the hands of many, many clients today who are using them today. So, I feel like if these changes continue to occur faster... We will be a big recipient of the positive. The second thing is, and I would love for you to think about this a little bit, is, What is the core skill you have to have?
Speaker Change: If things change and they change quickly we are at the forefront of it.
Speaker Change: What we are achieving today even financially.
Speaker Change: When you look at how much we've been able to grow gross margin and how quickly.
Speaker Change: It has a real impact of journey II, we have products in the hands of many many clients today, we are using it today.
Sandeep Sahai: So I feel like if these changes continue to occur faster, we will be a big recipient of the on the positive. The second thing is, and I would love for you to think about this a little bit, is what is the core skill you have to have for NEI to do better? Access to training data; that's what you need. It's about how much data do you have on which these models can be trained. And if we think about training, what is model, all of our data, the data of all thousand plus clients is in one logical database, and none of our competitors have that at all.
Speaker Change: So I feel like if these changes continue to occur faster.
Speaker Change: We will be a big reserpine off on the positive. The second thing is and I would love for you to think about this a little bit is.
Speaker Change: What is the core skill you have to have.
Sandeep Sahai: for GNI to do better. Access to training data is what you need. It's about how much data you have on which these models can be trained.
Speaker Change: For Jennie O to do better.
Speaker Change #134: Access to training data, that's what you need is about how much data do you have on which these models can be trained.
Sandeep Sahai: And if we think about Clearwater's model. All of our data, the data of all our thousand plus clients is in one logical database, and none of our competitors have that at all. So our access to data and our push on GMAI very early in the cycle and the continued push, I think positions us very strongly. We have many, many clients come to us and say, "What are you all doing? What can you do to help us?"
Speaker Change: And if you think about clear waters model.
Speaker Change: All of our data the data of all.
Speaker Change #122: <unk> thousand plus clients isn't one logical database and none of our competitors have that at all.
Sandeep Sahai: So our access to data, and I push on to NEI very early in the cycle and the continued push, I think positions are very strongly. We have many, many clients who come to us and say, "What are you all doing?" What can you do to help us adopt to Jenny? I'm more broadly. So I feel like Jenny AI is a very strong strength of clear water. One more point here is, yeah, it's not a horizontal solution which can be just disrupted. Accounting, as I was saying, is super nuanced. No two companies do accounting exactly the same way.
Speaker Change: So our access to data and our push on Chile are very early in the cycle and the continued bush.
Speaker Change: I think positions us very strongly we have many many clients who come to us and say what are you all doing what can you do to help us.
Sandeep Sahai: adopt Gen AI more broadly. So I feel like Gen AI is a very strong strength of Clearwater. I want to make one more point here: Yeah, it's not a horizontal solution that can be just disrupted. Accounting, as I was saying, is super nuanced. No two companies do accounting exactly the same way.
Speaker Change: Adopt Jennie O more broadly so I feel like <unk> is.
Speaker Change: Very strong strength of Clearwater.
Speaker Change: Want to make one more point here is.
Speaker Change: Yeah, it's not a horizontal solution.
Speaker Change #116: Which can be just disrupted account.
Speaker Change: Accounting as I was saying is super nuanced note two companies do accounting exactly the same way.
Sandeep Sahai: And so you have to be thinking: it's not just a horizontal path which can be disrupted. The nuance matters through what I have that built on our platform today. So I feel we are competitively very strongly positioned and mostly because of our platform we have and the single instance multi-tenant platform we have.
Sandeep Sahai: And so you have to be thinking, it's not just a horizontal project which can be disrupted. The nuance matters. Clearwater has that built on our platform today. So I feel we are competitively very strongly positioned, and mostly because of the platform we have and the single instance multi-tenant platform we have. So I didn't mean to go on for this long, but JNEI is something where I think we lead. And we look forward to having a real impact on that on a continuing basis. That's helpful.
Speaker Change: And so you have to be thinking it's not just a horizontal project is can be disrupted.
Speaker Change: The nuance matters shearwater has that built on our platform today so.
Speaker Change #137: So I feel we are competitively very strongly positioned and mostly because of our platform, we have and the and the single instance, multi tenant platform. We have so I didn't mean to go on for this long, but Jennie O is something where I think we need.
Gabriela Borges: So I didn't mean to go on for this long, but Jenny is something where I think we need and we look forward to having real impact on a continuing basis. That's helpful. Thank you.
Speaker Change: And we look forward to having real impact of that on a continuing basis.
Gabriela Borges: Thank you. Jim, the follow-up question for you is on sales and marketing productivity. I know that Clearwater has been thoughtful over the last six to nine months on how you think about which leaders go in which geographies.
Speaker Change #127: That's helpful. Thank you, so I'll follow up and U S.
Jim Cox: So the follow-up to you is on sales and marketing productivity. I know that Clearwater has been thoughtful over the last 59 months on how you think about which leaders do and which geographies. Help us understand how you're thinking about hiring over the next 12 months, and it sounds like the productivity that curve is coming up nicely. Any additional colleague can provide on sales and marketing productivity will also be helpful. Thank you. Sure thing, Gabriela. Sorry. So I do think that we've obviously been leaning into hiring around the globe, and I think we're happy with the pace of people onboarding.
Speaker Change #141: Marketing productivity I know that quite a while has been awful.
Speaker Change #127: It's nine months from how you think about which later on which geography.
James S. Cox: Help us understand how you're thinking about hiring over the next 12 months. And it sounds like the productivity curve is coming up nicely. Any additional call you can provide on sales and marketing productivity will also be helpful to us. Thank you. Sure thing, Gabriela.
Speaker Change #119: Help us understand how you're thinking about hiring over the next 12 months and it sounds like the productivity.
Speaker Change #140: That's coming up nicely any additional kite and provide on marketing productivity.
Speaker Change #119: Thank you.
James S. Cox: So I do think that we're, we've obviously been leaning into hiring around the globe, and I think we're happy with the pace of people onboarding. In fact, we're implementing the concept of everboarding as we onboard these new reps. We're also refreshing all of our existing reps because we have so many more solutions for them to sell today. And so perhaps if they joined years ago, it's a little bit of a different story.
Gabriele: Sure thing Gabriele sorry.
Speaker Change #131: So I do think that we're at.
Speaker Change: We've obviously been leaning into hiring.
Speaker Change: Around the globe.
Speaker Change #138: And I think we're happy with the pace of people Onboarding in fact, we're implementing that content than ever boarding as we're onboarding. These new reps. We're also refreshing all of our existing reps because we have so many more solutions.
Jim Cox: In fact, we're implementing the concept of ever-boarding as we're onboarding these new reps. We're also refreshing all of our existing reps because we have so many more solutions for them to sell today. And so perhaps if they joined years ago, it's a little bit of a different story, and so I think that's helping with the onboarding. I think that I think we feel comfortable with where we are with sales and marketing as a percentage of revenue. As I mentioned, you know we're able to deliver these expanded EBITDA margins while, you know, incrementally investing, and I think we're open to that and leaning into that across these different products.
Speaker Change: For them to sell today.
Speaker Change: And so perhaps if they joined here's ago.
Speaker Change: It's a little bit of a different story and so I think that's helping with the on boarding.
James S. Cox: And so I think that's helping with the onboarding. I think we feel comfortable with where we are with sales and marketing as a percentage of revenue. As I mentioned, we're able to deliver these EBITDA, expanded EBITDA margins while, you know, incrementally investing. And I think we're open to that and leaning into that across these different products. Sandeep, anything to add?
Speaker Change: And I think that I think we feel comfortable with where we are with our sales and marketing as a percentage of revenue.
Speaker Change: As I mentioned.
Speaker Change: We were able to deliver these EBIT.
Speaker Change: Expanded EBIT margins, while incrementally investing and I think we're open to that and and leaning into that across these different products sandeep anything to add.
Jim Cox: Cindy, anything to add?
Jim Cox: No, Jim, that's good. Thanks. Thank you.
Sandeep Sahai: No, Jim, that's good. Thanks. Thank you. Thanks, everyone. Our next question is from Dylan Becker with Blair. Your line is now open. Hey, Jim. Hey, Sandeep.
Speaker Change: No that's good thanks.
Sandeep: Thank you.
Dylan Becker: Thanks, hope to. Our next question is from Dylan Becker with Blair. Your line is now open. Hey Jim, hey, Sandy. Appreciate the questions and really nice job here.
Abigail: Thanks Abigail.
Speaker Change #124: Our next question is from Dylan Becker with Blair. Your line is now open.
Dylan Tyler Becker: Appreciate the questions and really nice job here. Maybe, Sandeep, starting with you, going back to kind of the 50% of new bookings from new logos, maybe some additional color on kind of how that's creating a greater surface area. I think you called out some jump wins in the quarter as well, but unlocking kind of some of those newer capabilities, given this inherently is kind of that untapped funnel that you can leverage more of that back to base effort in the future.
Dylan Tyler Becker: Hey, Jim Thanks, Andy appreciate the questions and really nice job here.
Sandeep Sahai: Maybe Sandy, starting with you, going back to kind of the 50% of new bookings from new logos. Maybe it's some additional color on kind of how that's creating greater surface area. I think you called out some some jump winds in the quarter as well, but unlocking kind of some of those newer capabilities given this inherently is kind of that untapped funnel that you can leverage more of that back to base effort in the future. Yeah, thank you for the question, Dylan. So you know, just we obviously are building products, as you know, not in isolation.
Speaker Change #130: Maybe sandy starting with you going back kind of at 50% of new bookings.
Speaker Change: Our new logos.
Speaker Change #145: Some additional color on kind of how that's creating greater surface area. I think you called out some jump wins in the quarter as well, while unlocking kind of some of those newer capabilities given its inherently is kind of that untapped funnel that you can leverage more of that back to base effort in the future.
Dylan Tyler Becker: Yeah, thank you for the question, Dylan. So, you know, we obviously are building products, as you know, not in isolation. So what we do is we go to clients in separate industries and geographies and try to understand what else we could do in an adjacent space. So let me give you some examples, okay?
Speaker Change #146: Yeah. Thank you. Thank you for the question. So you don't just we obviously are building products as you know not in isolation. So what we do is we go to clients.
Sandeep Sahai: So what we do is we go to clients in separate industries and geographies and try to understand what else we could do in adjacent space. Let me take some examples, right? So I think one of the best standout product family, if you will, which emerged in the first half was Fun. and so we did really well with stable value funds, we did really well with pool funds and uniting funds. Now these were things we did at a certain level in accounting, but our ability to go deep into addressing the need of these industries, essentially 90% of it is still already in the Clear Water core platform, and we had to build a layer on top of it to make it work for pool funds, and then we have built a certain amount to make it work for stable value funds, and likewise for uniting funds.
Speaker Change #147: And separate industries, and geographies and trying to understand what else we could do in an adjacent space. So let me take some examples right. So I think one of the <unk>.
Sandeep Sahai: So I think one of the standout product families, if you will, which emerged in the first half was fun. And so we did really well with stable value, which did really well with pooled fonts and unit links. Now, these are things we did at a certain level in accounting, but our ability to go deep into addressing the needs of these industries is, essentially, 90% of it is still already in the Clearwater core platform.
Speaker Change: Best standout.
Speaker Change: Family, If you will which emerged in the first half was funds.
Speaker Change: And so we did really well with stable value funds related.
Speaker Change: Well with pool funds and unit linked funds now these are the things we did at a certain level and accounting, but our ability to go deep into addressing the need of these industries.
Speaker Change: Essentially 90% of it is still already in the Clearwater core platform and we had to build a layer on top of it to make it work for both funds and then we have built a certain amount to make it both for stable value funds and likewise for unit linked funds. So these products tend to be adjacent which is why they are doing doing well.
Sandeep Sahai: And we had to build a layer on top of it to make it work for pooled funds. And then we built a certain amount to make it work for stable value funds and likewise for unit-linked funds. So these products tend to be adjacent, which is why they are doing well, and they're getting adoption faster than we imagined, so we expect to continue to make these investments, but we also will be prudent about cutting back on areas which don't get client traction or which look very difficult to build. And one of those examples is risk.
Sandeep Sahai: So these products tend to be adjacent, which is why they are doing well and they're getting adoption faster than they imagined. And so, look, we expect to continue to make these investments, but we also will be prudent about cutting back on areas which don't get client traction or which look very difficult to build. And one of those examples is risk. You know we started to build it, and we talked to clients. Is there a need? Yes. How long will it take for us to come up with a credible product which people can use, and we felt the timeline was too long.
Speaker Change: And theyre getting adoption faster than we imagined.
Speaker Change: So look we expect to continue to make these investments, but we also will.
Speaker Change: We are prudent about cutting back on areas with don't get client traction or which look very difficult to build in one of those examples those risk.
Sandeep Sahai: You know, we started to build it, and we talked to clients. Is there a need? Yes. But how long will it take for us to come up with a credible product that people can use? We felt the timeline was too long.
Speaker Change: Started to build it and we talked to clients is there a need yes.
Speaker Change #139: How long will it take for us to come up with the incredible product with people can use can be felt the timeline was too long so that it made sense to say, let's go buy a certain asset and use that.
Sandeep Sahai: So then it made sense to say, let's go buy a certain asset and use that. Intermingle it with the work we are doing already and then come up with a stronger product. So again, I still think we are learning, and we will continue to evolve how we think about investing in these initiatives. But very happy with the bookings we are getting from there and subsequent revenue. Okay, that's great. Thanks, Andy.
Sandeep Sahai: So that it made sense to say, let's go buy a certain asset and use that. Intermingle it with the work we are doing already, and then come out with a stronger product. So again, I still think we are learning and we will continue to evolve how we think about investing in these initiatives, but very happy with the booking we are getting from there and subsequent revenue.
Speaker Change: Intermingled with the work we are doing already and then come out with a with a stronger product. So again I still think we're learning it.
Speaker Change #151: And we will continue to evolve how we think about investing in these in these initiatives, but very happy with the bookings you are getting from there and subsequent revenue.
Jim Cox: Okay, that's great. Thanks, Andy. Maybe switching over to GM. Pretty impressive million-dollar ARR customer account growth metrics there. In fact, I believe it's given that it's growing above your guys's broader growth target. I would assume that many of these customers aren't entirely tapped out, though. So actually we think about the runway within that large enterprise base and maybe kind of the potential dynamics here. Is that enterprise cohort maybe becomes a larger contributor to the IRG business. Thanks. Yeah, that's it.
Dylan Tyler Becker: Maybe switching over to Jim, pretty impressive million dollar ARR customer count and growth metrics there. But, effectively, given that it's growing above kind of your guys' broader growth target, I would assume that many of these customers aren't entirely tapped out, though. So actually think about kind of the runway within that large enterprise base and maybe kind of the potential dynamics here as that enterprise cohort maybe becomes a larger contributor to the aggregate business. Thanks. Yeah, that's it. Dylan, you're exactly right. That's why we track that metric; that's not a finishing point.
Speaker Change #151: Okay. That's great. Thanks, Sandeep, maybe switching over to Jim pretty impressive million dollar IRR customer.
James S. Cox: Growth metrics there.
Speaker Change #133: Given that it's growing above kind of your guys is broader.
Speaker Change #143: Broader growth target I would assume that many of these customers arent entirely tapped out those should we think about kind of the runway with that large enterprise space and maybe kind of the potential dynamics here at that enterprise cohort, maybe becomes a larger contributor to the aggregate business. Thanks.
Speaker Change #143: Yeah, that's it.
Sandeep Sahai: Fill in your exactly right. That's why we track that metric; it's not that finishing point, that's a starting point with many of these clients, and so you're right. You know it's a great vertical to be in because you know our clients are generally quite successful and they have lots of problems that they need solved, and they are looking to value partners to help them with those. And so that's we're very at a place with our clients. So we hope to optimize on that. Yeah, Jim, if I could add a little bit to that, it is that this client obviously is significantly in clients if they are spending that much money on investment accounting and analytics.
Speaker Change #125: So and you're exactly right. That's why we track that metric is that's not that finishing point, that's a starting point with many of these clients and so.
James S. Cox: That's a starting point with many of these clients, and so you're right. It's a great vertical to be in because, you know, our clients are generally quite successful. And they have lots of problems that they need solved, and they are looking for valued partners to help them with those, and so we're very fortunate to be in that position with our clients.
Speaker Change #142: Youre right.
Speaker Change #125: It's a great vertical to be because our clients.
Speaker Change: Are generally quite successful.
Speaker Change: And they have lots of.
Speaker Change: Problems that they need solved and they are looking to.
Speaker Change: Our valued partners to help them windows and so that's.
Speaker Change: We're very fortunate to be in that.
Sandeep Sahai: So we hope to optimize. Yeah, Jim, if I could add a little bit Dylan to that, these clients are obviously significant clients if they're spending that much money on investment accounting analytics. We have a really high NPI. But we also know that they're spending a total of four billion on investment management technology, while we are getting one BIP or whatever that number close to that for investment accounting.
Speaker Change: In that place.
Speaker Change: Place with our clients. So we are we hope to optimize on that yes.
Speaker Change #136: Jim if I could add a little bit dilutive to that is that debt.
James S. Cox: These clients overseas significant clients as they're spending that much money on the investment accounting.
Speaker Change: <unk>.
Sandeep Sahai: We have a really high MPS, but we also know that they're spending a total of four bips on investment management technology, while we are getting one bip or whatever that number close to that for investment account. So there is usually Roman investment accounting, but there's also a big runway in this four-bip market, which is why you see us launch these products and make this, you know, significant, significant R&D investment because you want to go try and capture that and thereby extend the runway with those clients.
Speaker Change: We have a really high NPS, but.
James S. Cox: But we also know that they're spending a total of four bips.
Speaker Change #152: On the investment management technology, while we're getting one babe or whatever that number close to that four investment accounting.
Speaker Change: So there is a usually roland and restaurant accounting, but there's also a big runway.
James S. Cox: So there is usually room in investment accounting, but there is also a big runway in this 4-bit market, which is why you see us launch these products and make this, you know, significant, significant R&D investment because you want to try and capture that and thereby extend the runway with those clients. Great. Thanks, Jim. Thanks, Cindy.
Speaker Change: In this <unk> market, which is why you'll see us launch these products and make this.
Speaker Change: Significant significant R&D investment because you want to try and capture that.
Speaker Change: And thereby extend the runway with those clients.
Dylan Becker: Great, thanks, Jim; thanks, Sandeep.
Speaker Change #148: Great. Thanks, Jim Thanks, Andy Thank you too.
Yun Kim: Thank you, David.
Jim Cox: We have a question from Yun Kim with Loop Capital Markets. Your line is now open. All right, I'll make this pretty quick. Jim, course margin, again, showed a pretty big improvement in the quarter. Can you remind us of the drivers behind that improvement and how much it's still left, and also I am assuming a new customer on RAM continues to shorten. Is that also providing the better visibility into your revenue flow? Thanks.
Yun Suk Kim: Thank you. We have a question from Yun Kim with Luke Capital Markets. Your line is now open. All right. I'll make this pretty quick. Jim, gross margin again showed a pretty big improvement in the quarter. Can you remind us the drivers behind that improvement and how much is still left?
Speaker Change #153: We have a question from <unk> Kim with loop capital markets. Your line is now open.
Speaker Change #149: Alright, I'll make this pretty quick.
Kim: <unk> gross margin again chosen showed a pretty big improvement in the quarter can you remind us the drivers behind that improvement and how much is still left and then also I am assuming a new customer on ramp continues to shorten and is that also providing better visibility into your revenue flow.
Yun Suk Kim: And then also, I am assuming the new customer on-ramp continues to shorten. Is that also providing better visibility into your revenue flow? Thanks. Sure. So I think for a lot, it's a virtuous cycle, right?
Jim Cox: Sure. So I think for a lot, it's a virtuous cycle, which is when we onboard clients faster. Generally, that, you know, in the onboarding process, clients have a lower gross margin than they do it. In the steady state process. And so is that shortened? That helps on the gross margin and helps for all those reasons that you alluded to. And so I would just say that, but don't, don't forget the fundamental reason why our gross margin goes up over time is because of the single instance multi-tenant platform, the single security master. Every client is more efficient.
James S. Cox: Which is, when we onboard clients faster, generally, that's, you know, in the onboarding process, clients have a lower gross margin than they do in the steady state process. And so as that shortens, that helps with the gross margin and helps for all those reasons that you alluded to. And so I would just say that, but, but don't, don't forget that the fundamental reason why our gross margin goes up over time is because of the single instance multi-tenant platform, the single security master.
Speaker Change #149: Sure.
Speaker Change: And so I think for a lot and it's a it's a virtuous cycle, which is when we onboard clients faster.
Speaker Change #128: Generally that are in the Onboarding process clients have a lower gross margin than they do in the steady state process and so as that shortens that helps on the gross margin and helps for all those reasons.
Speaker Change #128: Regions that you alluded to and so I would just say that Don.
Don: Don't forget that.
Don: The fundamental reason why our gross margin goes up.
Don: Over time is because of the single instance, multi tenant platform the single security Master.
James S. Cox: Every client is more efficient, and every new security that's held by more than one client helps us with that. And that is the fundamental reason. I think if you look at the marginal gross margin in the last two quarters, it's, I don't have the number in front of me, it's like 88 or 89% on the marginal dollar to the marginal gross profit. And that just comes from that is truly the financial expression of the network effect.
Don: Every client is more efficient.
Jim Cox: Every, you know, new security that's held by more than one client helps us with that. And that is the fundamental reason. I think if you look at the marginal gross margin in the last two quarters, it's, I don't have the number of companies like 88, 89% on the marginal dollar to the marginal gross profit. And that just comes from that is truly the financial expression of the network fact. Okay.
Don: Every new security that's helped by more than one client helps us with that and that is the fundamental reason I think if you look at the marginal gross margin in the last two quarters. It I don't have the number in front of me, it's like 80, 889% on the marginal dollar to the marginal gross profit and.
Don: That just comes from that is truly.
Don: The financial expression of the network effect.
James S. Cox: Okay, great. Thank you so much. Thank you. We have no additional questions, so I'll pass the call to Sandeep for any closing remarks. Thank you all for joining the call. Look, we really appreciate your questions and your advice throughout the quarter, and you're following our company. So thank you again. We appreciate all your support, and we look forward to continuing to talk to you and to more formally talk to you at the end of next quarter. Thank you. That concludes today's call. Thank you all for your participation. You may now disconnect your line.
Don: Okay, great. Thank you so much.
Jim Cox: Great. Thank you so much.
Operator: Thank you. We have no additional questions.
Speaker Change #154: Thank you.
Don: We have no additional questions. So I'll pass the call to Sandeep <unk> for any closing remarks.
Sandeep Sahai: So I'll pass the call to Sandy for any closing remarks. Yeah, thank you all for joining the call. Look, we really appreciate your questions, your advice throughout the quarter. And you're following our company. So thank you again. We appreciate all your support, and we look forward to continue to talk to you and more formally talk to you at the end of next quarter.
Sandeep: Thank you all for joining the call look we really appreciate your questions your advice throughout the quarter and.
Sandeep: Youll following our company. So thank you again, we appreciate all your support and we look forward to continuing to talk to and more formally doctor you at the end of next quarter. Thank you.
Operator: Thank you.
Operator: That concludes today's call. Thank you all for your participation. You may now disconnect your line. Thank you all for joining us.
Speaker Change #144: That concludes today's call. Thank you all for your participation you may now disconnect your line.