Thank you, and welcome everyone to Clearwater Analytics' First Quarter 2024 Financial Results Conference Call. 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.

Expressions of future goals, intentions, and expectations, including in relation to the business outlook, future financial and product performance, and similar items, including, without limitation, expressions using the terminology may, will, can, expect, and believe and expressions which reflect something other than historical facts are intended to identify forward-looking statements.

Forward-looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section of our filings with SEC. Actual results may differ materially from any forward-looking statement.

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 on this call are presented on a non-GAAP or adjusted basis, unless otherwise noted. The 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 Sahai. .

Thank you, Joon, and thank you all for joining us. Building a durable business that grows consistently while improving gross margin, EBITDA, and cash flow has always been our stated endeavor. I'm pleased to report that Q1 2024 delivered on all those goals.

Revenue grew 21% year-over-year to $102.7 million in the quarter, and our EBITDA grew 42.9% year-over-year to $32.2 million, or 31.3% of our revenue. Let's discuss revenue growth, which was purely organic, in some more detail. It starts with NPS.

We believe our NPS scores are industry-leading and we have taken to reporting it as 60 plus because the numbers are even higher. As a direct consequence, we had incredibly low churn and gross revenue retention grew from an already outstanding 98% to an incredible 99%. Next, the revenue growth was widespread across geographies.

North America grew 20% and Europe and Asia grew faster to deliver the aggregate 21% growth. ARR growth year-on-year re-accelerated to 19.3%. The multi-product journey continues to gather momentum, and new products introduced over the last 2 quarters delivered solid wins, contributing to an NRR of 110% for the quarter.

The Clearwater JUMP platform had a very strong quarter and added 6 significant clients in the quarter. Finally, our win rates continues to be 80% when a proposal is written and stands testimony to the disruptive power of our platform.

Our plan for sustained growth is founded on 2 strategic pillars; #1, continued acquisition of new logos across an increasing breadth of industries and geographies and #2, growing NRR to 115%. Let's take some actual wins in Q1 to substantiate the progress we are making.

We welcomed a publicly traded healthcare company with multiple subsidiaries and $40 billion in AUM to the Clearwater community at this quarter. Their decision to transition to us came after growing frustration with their previous legacy technology provider.

An on-site demo followed by an RFP process demonstrated our ability to comprehensively address multiple asset classes on a single instance multi-tenant platform. Several reference calls that attested to our ability to onboard efficiently and provide exceptional service sealed the deal.

Our ever-growing solutions for alternatives continues to help us win deals and do more with current clients. We continue to see growth in these assets on our platform.

A newly introduced innovation, the Clearwater Intelligence Console or Quick LPx solution, our generative AI-based solution for LPs, is now delivering investment insights to our clients on-demand.

Institutional investors can leverage Quick LPx to easily extract actionable insights from accounting data and performance metrics, even translating general partner documentation into 96 different languages. Let's discuss a recent win driven by our capabilities in alternatives.

One of our clients had been growing very rapidly, where the complexity and size of the operations outpaced their ability to manage investment operations effectively. An acquisition added a significant number of LPs to the portfolio and they relied on a legacy platform for its processing.

To get a comprehensive picture of the portfolio, they would have had to build a brand new data warehouse. A detailed demonstration of our platform showcased how Clearwater could streamline their processes for all asset classes into 1 single instance multi-tenant platform.

They decided to adopt Clearwater LPx and Clearwater LPx Clarity, in addition to the Clearwater core platform that they had already been using. We have discussed Prism many times before. This product has become a real winner for us across geographies and market sectors.

We signed Erste Asset Management, part of Erste Group Bank AG, one of the leading asset managers in Central and Eastern Europe, managing EUR 70 billion in assets for a broad client base, including pension plans. They join a fast-growing community of European buy-side clients.

This win demonstrates Clearwater Prism's uniqueness and its ability to deliver a comprehensive view of their clients' portfolio, attracting asset flows that are so vital for asset managers in this challenging market. Talking about international markets, we signed new contracts in APAC, Germany, France, and the U.K., all in the same quarter.

We feel really good that the new leadership we announced last quarter is already adding value. We have identified new pockets of applicability for our platform, and are excited about the buildup of our pipeline. I'd like to talk about Clearwater for Stable Value funds. In Q1, we proudly announced that T.

Rowe Price selected that platform to support the firm's growing Stable Value fund business.

The core platform already addressed a vast majority of the need, but a purpose-built addition for that market, allowed us to address the complex needs of Stable Value funds, streamlining trade ticket processes for investment contract issuers and other third parties.

Stable Value fund providers will benefit from a unified SaaS solution that offers daily reconciled investment data to both front and back office teams. Following up on that win, we now have another significant client on this platform. We also introduced Clearwater for pooled funds this quarter.

It equips state treasuries and the pooled participants with a user-friendly web-based portal that integrates seamlessly with Clearwater's accounting and reporting platform.

Again, a vast majority of the need was already addressed, but we have added a purpose-built solution to address the specific needs already regarded as a best-in-class investment accounting platform for state Treasurer's Offices, our new participant portal simplifies navigation of local government investment pools, providing participant portal logins and statement preparation all within one platform.

One of Clearwater's JUMP platform wins is a company based in France and Luxembourg that manages assets including equity, fixed income, and private debt. Prior to partnering with us, they lacked full functional coverage for front, middle, and back office operations and depended on extensive manual processes.

Clearwater JUMP closes these gaps by enhancing data accuracy, reducing manual processes through automation, and providing regulatory compliance.

Another client specializing in fund and wealth management, primarily in equity and fixed income, embraced Clearwater JUMP as its end-to-end asset management platform and the seamless coverage it provides across their front, middle, and back office investment operations.

This new client will use Clearwater to connect seamlessly with all its counterparties, leveraging critical market data and optimizing trading processes. Our newest corporate cash client, one of the world's largest pharmaceutical companies, enlisted our expertise to oversee the rapidly expanding separately managed account program.

As their investment operations have grown to include multiple asset managers, custodians, and money market fund portal partnerships, they now depend on the Clearwater platform for streamlined operations and a consolidated view of the portfolio.

We trust that these examples illustrate the very meaningful progress we are making on both the acquisition of new logos across an ever-increasing number of industries and geographies, and secondly, in our continued journey towards becoming a multi-product company that can deliver a sustained NRR of 115% and beyond.

Switching gears, let me discuss progress on the addition of capabilities that will allow us to address more of the technology spend across the investment management lifecycle and not just investment accounting.

We started with the acquisition of JUMP and the Clearwater JUMP platform is doing well and resonating with our clients in precisely the way we thought it would. We won 6 clients this quarter and are now able to offer solutions for the front, middle, and back office.

This quarter, we were thrilled to announce that we completed the acquisition of the risk performance and analytics platforms of Wilshire Advisors.

Wilshire Axiom, Wilshire Atlas, Wilshire Abacus, and Wilshire iQComposite will now be integrated with Clearwater solution in the risk and performance space to create a powerful and compelling product for our clients. We are integrating these new capabilities into our risk and performance analytics platform, enhancing our capabilities manifold.

We can now offer our clients significantly enhanced capabilities that would have taken us years to develop in-house. Risk and performance models need to establish credibility by extensive use and it often takes years or even decades to achieve that. Simply put, this acquisition allows us to capture additional TAM immediately and scale the business.

Our clients will benefit from a comprehensive suite of modular tools for portfolio construction, quantitative performance attribution, risk analysis, stress testing, and portfolio analytics, all using the same underlying data from the core Clearwater platform.

Our vision is to create the preeminent investment management platform for firms around the world. And by partnering with Wilshire and bringing their robust time-tested models into our platform, we are one step closer to that vision.

With the JUMP and Wilshire acquisitions, we are building people, technology, and market leadership to establish Clearwater as the definitive enterprise platform for the entire investment management process.

Shifting to unit economics, we are very pleased to report that we have achieved this revenue growth while simultaneously increasing our gross margin to a new record high for the company at 78%.

Our generative AI programs have started to positively impact our ability to deflect customer inquiries and enable our client servicing teams to deliver faster and more comprehensive responses. We feel very confident about our march towards our stated long-term goal of achieving 80% gross margin, perhaps meaningfully faster.

Thank you for your continued support. And we look forward to sharing more about our product offerings and the latest innovations at Clearwater Connect in London on June 19. A great event where we expect hundreds of institutional investors will gather to learn about new technologies and solutions that can help grow their business.

With that, let me turn it over to Jim to review our financial results in more detail. .

Thanks, Sandeep, and thank you all for joining us. I'm delighted to report that 2024 is off to a great start with exceptional results in Q1 across various key metric. In the first quarter, we decisively beat guidance for revenue by $2.2 million and adjusted EBITDA by $3.4 million. Our organic revenue growth reaccelerated to 21.4% over Q1 of 2023.

Revenue in the quarter was helped by incredibly low churn, resulting in a best ever reported gross retention rate of 99%. In addition to limited churn, we also expanded our relationships with our existing clients through cross-sell of products, increasing our share of our clients' investment books on Clearwater and growth in our clients' AUM.

When you put that together, it results in net revenue retention of 110% and solid revenue growth. The impressive improvement in both net revenue retention rate and gross retention rate is reflective of our market leading competitive position.

Our single instance multi-tenant product was stronger than ever in the first quarter versus legacy tech incumbents. The strong revenue results flowed through to both gross margin and adjusted EBITDA.

We achieved adjusted gross margin of 78% and an adjusted EBITDA margin of 31.3%, which is a stunning increase of 470 basis points from the first quarter of 2023. The unit economics of this single instance multi-tenant platform are simply phenomenal.

When you compare the EBITDA growth over the last year to the growth in revenue, the marginal EBITDA expansion is 53% over a year. And during that time, we increased research and development spend by 13%. So we are investing more in developing new products and generated more than $0.50 of EBITDA for every incremental dollar of revenue.

With profitability characteristics like that, investors can have high confidence in our long-term EBITDA targets of 40%. It was also satisfying to see tangible progress on our path to NRR 115%, with our net revenue retention rate increasing to 110% as of March 31, 2024.

I want to remind investors that we expect our NRR 115% path to progress directionally upwards in future quarters, but not necessarily in a linear fashion. The first quarter continued to show good signs of progress in upselling.

And we believe that the positive momentum in upselling should continue to increase beginning in the second half of this year, as we roll out new products and modules developed by the more than 60% of R&D capacity, we are focusing on these growth initiatives. In addition, JUMP progressed nicely in Q1, with the key booking wins as Sandeep mentioned.

JUMP has proven to be a good proof point as our first ever acquisition. And we continue to explore tuck-in acquisitions and JUMP and Wilshire platforms that can allow us to harness strategic functionalities adjacent to our core strength and bring those functionalities to market more quickly for our clients.

As of March 31, 2024, ARR increased to $402.3 million, representing a reaccelerated year-over-year increase of 19.3% from the prior years, $337.4 million. This year-over-year growth is purely organic. Furthermore, ARR grew sequentially by $23.2 million, our highest ever sequential quarterly growth in ARR. Now let's turn to profitability results.

On the heels of blockbuster results in margin expansion throughout 2023, we made further tangible progress on our margin expansion path in the first quarter of 2024. This displays the power of our profitable unit economics and shows the true leverage of our business and the clear pathway towards our long-term adjusted EBITDA margin goal of 40%.

In Q1, we achieved gross profit of $80.2 million and 78% gross margin, an increase of 210 basis points over Q1 of 2023. This results demonstrates that we are progressing quite nicely towards our long-term gross margin goal of 80%.

In addition, we reported $32.2 million in adjusted EBITDA and 31.3% adjusted EBITDA margin in the first quarter, which handily beat our EBITDA guidance expectation and improve over the prior year's EBITDA margin by 470 basis points, in line with prior quarters, the outperformance in our revenue flowed straight through to EBITDA.

Having already achieved our EBITDA margin full year guidance target of 31% in the first quarter, we expect to moderate the EBITDA margin expansion in the second quarter of 2024 to prudently reinvest some of that excess profitability back into our growth initiatives in R&D, including the integration of the acquisition of the Wilshire platform, which recently closed on April 22.

Additionally, we will continue to lean heavily into the investments in international go-to-market activities. They are producing results, and we see an addressable market that is right for the same disruption we've been able to achieve in North America.

As we have indicated in the prior quarter's earnings call, R&D spend as a percent of revenue will continue to moderate over time, since we have already completed our migration to the public cloud last year. In Q1, R&D dollar expense was up 13%, but as a percentage of revenue, it decreased to 24.9%, which was 190 basis points lower than Q1, 2023.

In Q1, equity-based compensation was $28.5 million, a decrease of $4 million from Q1 of 2023. As we noted in our Investor Day presentation in September 2023, the high watermark of equity-based compensation as a percentage of revenue is behind us. Going forward in future years, including 2024, this percentage should continue to trend down.

Lower equity-based compensation expense, as well as lower income tax and tax receivable agreement expense in the first quarter contributed to GAAP net income being positive in the first quarter. Let's turn to the balance sheet and cash flow. Operating cash flow was $10 million in Q1, a 26.5% increase year-over-year.

Free cash flow was $8.6 million for Q1, which again was a year-over- year improvement of 38.3%. Due to the seasonality of free cash flow, the conversion rate of EBITDA to free cash flow is generally lower in Q1 than other quarters.

However, as previously mentioned, when looking at this conversion rate on an annual basis, the steady state should be approximately 70%, taking into account quarterly seasonality in free cash flow. We ended the quarter with $296.5 million in cash, cash equivalents and investments.

This total cash amount reflects the payment of $28.8 million in taxes for the net settlement of equity awards, which is a financing cash flow, and was completed to reduce share count dilution from the issuance of equity awards. Total debt was $47.9 million, thereby resulting in net cash holdings of approximately $249 million.

We closed the Wilshire Risk and Performance Product acquisition on April 22, and we paid $40 million from our bank. Even with this payment, we have plenty of dry powder should we choose to execute another tuck-in acquisition. Now let's turn to guidance.

For the full year 2024, we have meaningfully raised our revenue guidance to $438 million to $442 million, representing an improved year-over-year growth rate of approximately 19% to 20%. This represents an increase at the lower end of $7 million and at the higher end of $5 million.

This full year guidance has incorporated both the outperformance in revenue in the first quarter and the forecasted uplift of revenue from the Wilshire acquisition. When we announced the acquisition, we indicated the asset run rate was approximately $7 million.

So you can assume 2/3 of that amount, or $4.5 million have been incorporated into our 2024 annual guidance. For the second quarter of 2024, we expect revenue to be in the range of $105 million to $106 million, representing a year-over-year growth rate of approximately 17% to 18%.

Q2 2023 is a tough comparable, as a very large client went live in April of last year, resulting in 22% growth last year.

For the full year 2024, we have also raised our EBITDA guidance by $2 million to $137 million at the low end to $139 million at the high end, which provides an adjusted EBITDA margin of 31% and an uplift of approximately 260 basis points from 2023.

We continue to have confidence in our margin improvement for the remainder of 2024, because of the significant efficiency improvements we are continuing to see throughout the business, including our Gen AI activities. In the second quarter of 2024, we expect adjusted EBITDA to be $31 million, or approximately 29% to 30% adjusted EBITDA margin.

For the full year, we remain committed to our 31-plus percent EBITDA margin, and we can remain committed to greater than 200 basis points improvement in EBITDA margin over 2023.

In summary, we're excited about our very clean first quarter in 2024 and look forward to utilizing this excellent start to build on our revenue growth, continue on our NRR 115% path and deliver on margin expansion for the rest of 2024. With that, I'll turn it over to Sandeep to provide some closing thoughts. .

Thank you, Jim. As we reflect on our Q1 results, I want to express my deep gratitude to our dedicated team at Clearwater. Their tireless efforts and commitment to innovation has allowed us to delight our customers and partner with them to build new products.

Our achievements highlight not only our dedication to client success, but also our ability to grow and evolve. We are more excited than ever about the future and remain focused on a strategic path of customer-driven innovation, operational excellence and market expansion.

As we push ahead into the second quarter and beyond, I'm confident in our company's ability to maintain its momentum. Our strategic acquisitions, JUMP and Wilshire have laid the groundwork for continued growth and expansion into new markets, together with our industry-leading client retention rates and growing portfolio of innovative offerings.

We believe the company is uniquely positioned in the market. Our focus continues to be on creating meaningful value for our shareholders, clients and employees. .

[Operator Instructions] Our first question today is from the line of Rishi Jaluria of RBC. .

Nice to see the ARR uptick again this quarter. Maybe 2. First, Sandeep, maybe if you could dig a little bit into Wilshire and the acquisition made there.

Strategically, can you help us understand kind of what it brings to the table that you felt developing in-house, I guess, was superior to developing something in-house? And what's the path to integrate the assets you're buying there, especially given the learnings that you have after a relatively successful acquisition with JUMP.

And then I've got a quick follow-up. .

Yes. So about the Wilshire platform acquisition. So the first thing is strategically, we want to address more of the investment management technology versus just investment accounting. So if you go back to the Investor Day, we talked about changing our ability to address 4 bps of what our clients spend instead of 1 bp.

One large pocket of that is risk and performance. And if you -- when you think about risk and performance, it needs reconcile, accurate, and timely data. And we do that already. Now, we could have built it, but building risk and performance is expensive and cumbersome.

But the most important point is, Rishi, that these models have to be out in the market for a period of time. People have to use it quite extensively, and then they mature. And that could take you years. It could take you decades to get the right amount of respect, if you will, in the market.

So given all of that, we had the opportunity to partner with Wilshire and go and buy this. We felt it was frankly a no-brainer. One of the items we were planning to build was risk and performance. So we can now take that, integrate it into the work we already do. So we already do risk and performance for our clients.

This just takes it to a completely different level. So it felt super strategic, and we are really cannot be more delighted with being able to close this deal earlier this month, oh, pardon me, last month. .

All right. And then maybe one for, I guess, both Jim and Sandeep. Just thinking through the guide, especially for Q2, Jim, I understand your comments on having a tougher comp in Q2 of last year, but I mean, factually right, we saw ARR accelerate this quarter to a really healthy level. We saw NRR kick up.

And when I look at the guide, you're talking about an organic 2-year CAGR. That still implies meaningful deceleration from what you saw in Q1.

Were there any one-time factors? Or maybe can you help us understand the puts and takes of the Q2 guide?.

Okay. So look, I'll give you my perspective, and Jim, maybe you can add to that. So, firstly, we feel really confident about our annual guide. Now, in Q1, churn was meaningfully lower. You've never seen a churn this low, and it's lower than the 2% historic number. So it's not like we expect churn to go up, but we just don't model this kind of churn.

Third thing was that one of our larger clients were expected to go live in Q2, and they went live in February instead. So that's good news, but it pulls some revenue from Q2 into Q1. Now, having said all of that, obviously, the NRR is a contributing factor, and that is driven mostly, Rishi, by new products.

So I went through a whole litany of examples, but the point is, we just feel that new products are a little bit difficult to predict exactly when it'll happen and how it'll happen. In the aggregate, we feel, yes, this revenue annual guide is really good, but quarter-by-quarter, we're still a little bit -- we feel concerned about projecting too high.

Now, Q1 was great. We had said, I think, 100.5%, if I remember correctly, and we came in with a really good number. And so we do feel, we should be conservative on a quarterly level, while feeling really confident at an annual level.

How about you, Jim, would you add?.

That's great. .

Our next question today is from the line of Dylan Becker of William Blair. .

It's Faith on for Dylan.

If I could start with maybe a more high-level question, but as we move back to base sales and engineering talent and the prioritization of the platform innovation, how should we think about the ramp cadence of these different initiatives? And how to benchmark the success and progress of them throughout both this year and beyond?.

Yes. So Jim, why don't you take that question? But I do want to just say something quickly, which is I don't think there's any let up in chasing new logos. We don't see any difference in the market. We continue to see a demand for new logos to be quite high and robust.

And the question is, should we also be building new products, which we can take to current clients and also use them to open new logos. Jim can provide a little bit more detail about the products we're investing in and just the size of those and what it could be. .

Yes. So just at the high level, think about one of the key elements of driving to NRR 115% is really adding these incremental products back into our client base. And we have 4 products of the many that we're developing that are in market now. And we feel like we're getting good traction with them.

You won't be surprised by these, because you've heard these names before. LPx, Sandeep talked about the good traction we're getting there. PRISM, Sandeep talked about the big win we had in PRISM in Europe. Risk, that's very aligned to the Wilshire acquisition, but also we're already delivering on that. And JUMP, which was an acquisition from 2022.

Those are in the market and we see those doing very well. And as we see those continue to grow, we will continue to see ultimately NRR 115%, that metric tracking there. But those aren't the only R&D initiatives that we're driving to. There's a couple that are more focused on new logos, where we actually have a great solution.

One of the best things about the Clearwater platform is that it is so flexible and has proven to be market-leading, not only in corporates and in insurance companies and in asset managers and now in governments. And we move forward from there. There's 2 areas where as we add incremental functionality to the platform, it opens up those new TAM areas.

And 2 of those examples that Sandeep spoke to. 1 is the pooled funds, right? The second is stable value funds. And those are in one instance, in a pooled fund very area, that facilitates state and local governments interacting better together and it opens up that government market.

In the stable value fund market, that's another element within these broader asset management complexes that we're able to drive. So we'll see what -- you'll continue to see traction and you'll listen to us as we talk about those new logos in those markets. And you'll also be able to see traction through seeing NRR 115%.

At the highest level, you might say, hey, wait a second, what's -- what are the size of those markets? And I think we've talked about it. We get excited about $100 million markets.

And so as you think about those, many of those are $100 million markets, but others of them are smaller, but like, for example, stable value, but we are so close to being able to achieve it that it makes sense for us to add that incremental functionality to add those customers. One data point that just is a reference point.

In Q1, about 25% of our total bookings in Q1 were related to these go initiatives. So we won't share that all the time, because we don't want to get into disaggregating all of that information. But I think that's useful for you to understand the pleasant trajectory we're seeing from these development initiatives.

What else would you add?.

It's good. .

No, that was all super helpful.

And then with a quick follow-up question, if I've heard -- just curious, with the shift to the T+1 settlement coming up at the end of May, how might this be causing any stress to the capabilities of legacy systems and workflows? And you've been seeing anything from a pipeline perspective about this change? Is it causing any anxiety with customers? Or any incentives to maybe push through some transformation and innovation a little bit quicker?.

Yes, Faith, that's a great call out. And yes, it does. Obviously, that is helpful, right? But it's 1 of 1 million different changes, regulatory changes and environmental changes that our clients and more importantly, our prospects are feeling every day.

Another one, for example, is there are huge changes to NAIC reporting that we're helping our clients build for. T+1 is also important for folks. And so I would say that it's just another example of this long-term trend that prospects not on Clearwater Solutions, feel more pain and the more pain the better we feel about our ability to solve it. .

Our next question today is from the line of James Faucette of Morgan Stanley. .

It's Michael Infante for James. Jim, you had previously mentioned last quarter that your objectives for NRR for 2024 were roughly in line with '23 levels, sort of in that 106%, 107% range, obviously really strong result in NRR this quarter.

Do you think that 106%, 107% level is conservative at this stage? I know you called out quarterly variability, but would be great to hear how you're thinking about it.

Yes. I think if I can just help clarify, it was my fault. I said, hey, as we thought about our annual guide, right, for the year, we thought about NRR looking like that. And obviously, we were very happy with the result that we saw in Q1, and we feel optimistic about the whole year.

Having said that, Michael, you're exactly right, it's don't draw a straight line anywhere, but we are definitely trending. And I think it is fair to say that we feel like 106%, 107% would be conservative at this point. .

Maybe Sandeep, one for you, really nice win with Aegon on the PRISM side.

I was just hoping you could level set with us in terms of the customer profile, the use case on the PRISM side today, and sort of how that's incremental functionality to the core Clearwater platform?.

Yes. Essentially the functionality helps asset managers provide a better service to their clients, and they were improving AUM inflow. So in that use case, it is really, PRISM is helping build client reporting functionality for their clients.

And so really, if you think about data that comes in and makes up our entire client report, there's data from internal systems, there's data from accounting systems and risk systems, and several other components from within the company.

And what PRISM does is takes all of that, intermingles what Clearwater does and other parties do, and come up with one comprehensive view of data and one comprehensive report. So as you can imagine, it makes the client's reporting very easy.

And when you can do that, people tend to provide -- give you more assets, if you will, when you go in for the RFP. So again, it's something which helps clients improve client service, and therefore, attract more assets. .

Our next question today is from the line of Michael Turrin of Wells Fargo. It's David Unger for Michael Turrin tonight. Just one from you guys. So you mentioned in the prepared remarks, you're seeing Gen AI investments having a positive impact.

Can you just remind us how we should think about the percentage of spend of Gen AI that's going to revenue versus expense efficiencies?.

Yes. Look, I think that Gen AI is a really -- it's a really strategic initiative within the company. And like you pointed out, there are 2 different streams. One is that, can it make us more efficient? And that we've continued to see progress on that.

And if you notice what we said on Investor Day about gross margin and the improvement we thought we would get, we had talked about 50 basis point improvement every year. And we already had 78%, which is what we thought we would be in 2025. And definitely some of that is coming from Gen AI. So what does it really do for us? The 2 points.

One is, can it deflect client inquiries? So when a client has a question, can they go to the Gen AI tool they have and get that question answered, and therefore, not even ask us that question? That obviously makes us more efficient. And the second one is when they ask a question, can Gen AI sort of propose a response to our client service rep.

We said, this is a fully comprehensive response, and the client service rep reviews it and feels it's the right one, they can click it, so much more efficient. So the case for helping us improve gross margin is very clear, frankly going a whole lot faster than we thought. That you have started to see a little bit on the P&L itself.

The second one is this quick suite of products with applicability across various personas in various industries that you haven't started to see though, in the sense that they are being built so that we can drive revenue from them.

So right now, they are very much in the client design stage, which means we have got client partners who are helping us design this product and bring value from it. So that I would say is still several quarters out of being able to say meaningful improvement in revenue.

So I think if you remember, Jim spoke about 6 products, didn't mention Quick because of that. It is a big area of investment for revenue growth also, it's just that it is not getting traction from a revenue point of view today. Do we expect that at 3 and 4 quarters? Absolutely. But do we expect that in Q2 and Q3? We don't.

So that just gives you a wholesome response if that makes sense. .

Our next question today is from the line of Brian Schwartz of Oppenheimer. .

This is Ari Friedman fitting in for Brian Schwartz.

I was wondering like with the Wilshire transaction, could you talk a little bit more about the customer profile that you're kind of getting from the Wilshire Advisors? Are they similar to the clients that you guys already have? Are they a little bit different? Is there a good opportunity there to tell them on like more of the Clearwater platform products?.

Ari, this is Jim. So, that is one of the very interesting attributes obviously the most interesting elements are those models time tested and stress tested over time to really benefit us there. But less than 20% of their clients are also Clearwater clients.

So to your point, we have initiatives to how do we cross-sell Clearwater to their clients and how do we then obviously cross-sell those Wilshire solutions into our clients once those integrations are done. .

Yes, I think -- also the interesting part here is when you think about risk models and performance models, they're used by asset owners. So asset owners may use them for exactly that performance and attribution, but they may also use it for regulatory reporting.

So we feel like this could be taken to a wide swath of Clearwater clients, same thing with risk. Risk obviously is used pretty extensively across the entire universe of clients. So we feel like there's strong applicability of these models to the Clearwater client base.

But we also think that we could take the Clearwater platform and sell it to the current clients of Wilshire analytics. So we think there is a potential to do both. But what we expect to do is, not expect, we have already merged both these 2 businesses and coming out with 1 comprehensive reporting around risk performance and attribution.

So we feel like we have a real strong proposition for our clients here. .

Our next question today is from the line of Alexei Gogolev of JPMorgan. .

This is Eleanor Smith on Alexei's team calling in.

So first, Jim, I know you've said many times before that NRR will fluctuate quarter-to-quarter, but I was wondering if there was anything to call out for that 110%?.

Sorry, Eleanor. I'm so excited about it, I'm all choked up. Sorry. So #1, obviously, we always have tremendous -- we always have tremendous gross revenue retention at 98%, but we got an additional one, additional percent to 99%, the best ever and really terrific there. So that helped on the margin.

Secondly, we saw a nice up-tick of the cross-sell of those solutions that we were discussing. I think I mentioned earlier, it was about 25% of our bookings in the quarter. Now, not all of that is reflected in the NRR because we have to onboard and get those assets flowing, but that was another important piece.

And then the third element is, as we have always historically done, we've grown as our clients have grown. And so we were able to help with the additional asset expansion as well. And the last thing I would say is, we were not hurt with the market changes at our client base.

And over the last few years, we certainly weren't helped dramatically by that, but we weren't hurt, which was helpful as well. .

And Sandeep, maybe for you. So earlier, Jim had mentioned that you have enough cash on hand for additional tokens.

How are you thinking about your decision framework moving forward about when you buy versus organically build new technology?.

Yes, thank you for that. So as you know, we haven't done this programmatically and systematically, but we did announce 2 really senior executives we've brought in the company to do this on a more systematic way.

And so when you think about how we look at these things, first, remember, the bar is always really high because we don't want to go mess up really clean business model that we have. But would we do it in the service of improving TAM? Yes. Would we do it in the service of improving geography coverage? Yes.

Would we do it in the service of improving 1 bps bit to 4 bps? Yes. So I don't think we have changed anything here, but we just expect to become more programmatic about it. So I think you should expect us to do, is that 2 tuck-ins in a year or whatever that number is, but do it in the service of what our clients want.

And the basis of it is we have a really satisfied client base. You're really high NPS. So they would like us to do more. And so we have to, I feel our job is to go find out what causes them the most pain and can we develop things to go solve that. Now, our first instinct, unfortunately, is always to build it.

But sometimes we recognize also that building it will take too long. And when that occurs, then we tell the M&A team, you've got to go find something. And the problem is often you can't find things which sort of fit nicely. So we don't want to just do deals because we wanted to do deals, but we do expect programmatically to do such talking deals. .

Our next question today is from the line of Gabriela Borges of Goldman Sachs. .

Sandeep and Jim, over the course of the last several months, you've announced a handful of high profile leaders, particularly in your go-to-market functions. I'd love to hear the feedback that these leaders are giving you as they get in the weeds and as they talk to customers.

And in particular, are there a couple of initiatives where you've got some of the leadership team coming back and saying, we should be doing ABC to really jumpstart the next phase of our growth?.

Sorry, you broke up a little with Gabriela. So, Sandeep, I think she said new sales leaders, new high profile leaders.

What's the early feedback? What's the early, what are the observations?.

Yes. I think there is no question that the first order of business is to continue the growth in North America. So we were quite excited to say, look, North America this quarter, you're on a year basis grew at 20%. So we feel good about that.

Now the question is, where else do we see progress? So Europe is really, really interesting because of the immediate applicability of what our platform can do and the proof points we have already sort of produced and sort of announced. So we feel Europe is priority one, if you will.

Asia also is a really high priority, especially with a really strong leader we brought in last quarter. So we feel like those 2 priorities are really are going to drive growth for us for a period of time. So those are the 2 now, in terms of what products or what areas customers are most concerned about, alternative assets.

So we talked about LPx for that. Comprehensive reporting for clients, we talked about Prism. Lots and lots of discussions about risk performance and attribution. So the wheelchair should help with that. Obviously the OMS, PMS, and so JUMP functionality.

So just top of mind, we think about North America, then we think about Europe, we think about Asia, think about LPx, Prism, risk and performance, and finally job. So if you were to ask me what are the biggest ones you worry about, those are the 6, I sort of think about or what we can do to drive growth from there. .

And Jim, as a follow-up, you mentioned the about 25% of total booking statistic related to cross-line issues.

Could you just clarify for us how you're calculating that and what products are in that? And I know you said you're not going to give it to us since it's a waste, so I'll take the opportunity to ask what has it been historically or give us some kind of grounding in history so we can understand the measure of success that you're reporting?.

Yeah, no, good call out, Gabriela, and that's very fair. So why would we crow about 25%? It's because it's been about 10% if you look back. And what are those solutions? It's LPx, it's the same that he just identified. LPx, Prism, JUMP, Portfolio Management, Middle Office, those, et cetera, et cetera. Sorry, yes. .

It's a little, Gabriela, it is a little bit earlier than we thought. As Jim said, just because you sell something doesn't mean it shows up in ARR right away. But yes, we are, that's how we use the term sort of booking to sort of show that we're making progress. But yes, it's just that with innovation, it's always chopping.

We're obviously happy about where we are, but, we're also worried about people drawing a straight line. So it's not, there's no reason to be cautious. It's just we feel it's the right way to make sure investors know that. .

Excellent, congratulations on the quarter. .

Our next question today is from the line of Yun Kim of Loop Capital. .

First, congrats on a strong execution. Sandeep, last year was marked by the influx of alternative assets. I believe that you mentioned that 40% of new AUM was, came from that, from the alternative assets.

Do you see that trend continuing this year? And is that also driving the trend this year? And is that also driving the multi-product adoption?.

Yes. Thank you so much for that question. So I don't have a percent for you, but I do know that in the sales process, almost the first things client talk about is the difficulty in managing alternative assets.

So a lot of our sales are, some of the discussions about how do I merge alternative asset reporting with public securities and give a comprehensive view. So I still think it's really, really important for our business. And if you look at it, one of the first products we always talk about is LPx, which are limited partnerships.

And how do you process them more effectively? So I, look, we continue to believe that that is a really important one. And then Prism, what it does is it brings public, private, all of it together and gives you one comprehensive view. So we continue to see a really big impact from the growth of alternative assets among our clients.

I just don't have a percent of how much it grew in the last quarter. And we can get you that. .

Okay, great. Because I think the word alternative assets were not mentioned as much this time around, but just last year, that's why that I ask.

If you can also talk about the mix between asset managers and insurance companies, is that mixed feeling towards one or the other? And is that changing your go-to-market motion at all?.

Yes, this is Sandeep again. I'll let Jim sort of add to it. I don't think it's changing very meaningfully at all, but is it moving up 2% this way? Yes, it is. So I think that these are quarterly numbers.

From a market perspective, we think it hasn't moved very much at all, but would it be 2% points up in 1 sector versus another sector for the given quarter? Absolutely possible. Yes, I was going to say that it remains very consistent.

That same trend remains very consistent, but one notable thing is that, we talked a little bit about these portals, right? The investment portal at the government agency. And I think we've seen nice momentum where that's off of a small number, it's growing nicely as a percentage of revenue, the state and local governments. .

With no further questions in the queue, this will bring us to the end of Q&A. At this time, I would like to hand back to Sandeep for any closing remarks. .

Yes, we would like to thank all of you for your continued support and interest in Clearwater. We would also like to acknowledge the tremendous partnership we've had with Welsh, Carson, XII, which invested in Clearwater in 2016, and fully exited the position in March of 2024.

We note that they continue to have a significant investment to Welsh, Carson, XIII, which invested in our company in 2020. Thank you all. And we really appreciate the support of Clearwater. .

This concludes today's conference call. Thank you all for joining. You may now disconnect your lines..