Clearwater Analytics Holdings, Inc. (CWAN) Bundle
Understanding Clearwater Analytics Holdings, Inc. (CWAN) Revenue Streams
Understanding Clearwater Analytics Holdings, Inc. Revenue Streams
Revenue for the third quarter of 2024 was $115,828,000, compared to $94,664,000 in the same period of 2023, marking a 22% increase. For the nine months ended September 30, 2024, revenue increased to $325,338,000 from $269,149,000 in 2023, reflecting a 21% increase.
The following table presents a breakdown of revenue by geography for the third quarter and nine months ended September 30, 2024, and 2023:
| Geography | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | 9M 2024 Revenue (in thousands) | 9M 2023 Revenue (in thousands) |
|---|---|---|---|---|
| United States | $94,517 | $76,704 | $265,912 | $220,967 |
| Rest of World | $21,311 | $17,960 | $59,426 | $48,182 |
| Total Revenue | $115,828 | $94,664 | $325,338 | $269,149 |
Year-over-year revenue growth has been driven by an increase in the client base and additional assets from existing clients. Specifically, revenue growth attributed to the client base was $10.8 million for the third quarter and $21.6 million for the nine-month period ended September 30, 2024.
The average assets on the platform billed to new and existing clients increased by 17.5% and 14.8% for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. Additionally, the average basis point rate billed to clients rose by 5.7% and 5.3% for the respective periods.
In terms of segment contribution, the overall revenue for the nine months ended September 30, 2024, consisted primarily of recurring revenue streams, bolstered by the acquisition of Wilshire Technology, which added to the company's analytics solutions capabilities and client contracts.
The following table summarizes the revenue and growth metrics:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Revenue (in thousands) | $115,828 | $94,664 | $325,338 | $269,149 |
| Year-over-Year Growth | 22% | N/A | 21% | N/A |
| Client Growth Contribution (in millions) | $10.8 | N/A | $21.6 | N/A |
| Average Assets Growth | 17.5% | N/A | 14.8% | N/A |
| Average Basis Point Rate Increase | 5.7% | N/A | 5.3% | N/A |
This robust revenue performance highlights the company's ability to expand its market share and enhance its service offerings through strategic acquisitions and organic growth.
A Deep Dive into Clearwater Analytics Holdings, Inc. (CWAN) Profitability
A Deep Dive into Clearwater Analytics Holdings, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $84,471,000 with a gross profit margin of 73%, compared to $67,651,000 and 71% for the same period in 2023. For the nine months ended September 30, 2024, gross profit was $235,912,000, maintaining a margin of 73%, up from $190,357,000 and 71% in 2023.
Operating Profit Margin: The income from operations for the three months ended September 30, 2024 was $7,338,000, representing an operating margin of 6%. In contrast, the same period in 2023 saw a loss from operations of ($5,887,000), resulting in a margin of (6%). For the nine months ended September 30, 2024, the income from operations was $11,016,000 with a margin of 3%, compared to a loss of ($19,335,000) and a margin of (7%) in 2023.
Net Profit Margin: The net income for the three months ended September 30, 2024 was $4,769,000, yielding a net profit margin of 4%. This is a significant improvement from the net loss of ($2,343,000) and a margin of (2%) for the same period in 2023. For the nine months ended September 30, 2024, net income was $7,280,000, with a net profit margin of 2%, compared to a loss of ($19,636,000) and a margin of (7%) in 2023.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit | $84,471,000 | $67,651,000 | $235,912,000 | $190,357,000 |
| Gross Profit Margin | 73% | 71% | 73% | 71% |
| Operating Income | $7,338,000 | ($5,887,000) | $11,016,000 | ($19,335,000) |
| Operating Margin | 6% | (6%) | 3% | (7%) |
| Net Income | $4,769,000 | ($2,343,000) | $7,280,000 | ($19,636,000) |
| Net Profit Margin | 4% | (2%) | 2% | (7%) |
Trends in Profitability: The profitability metrics show a positive trend from 2023 to 2024, with gross profit margins increasing from 71% to 73% for both the three and nine month periods. Operating margins shifted from negative to positive, indicating improved operational efficiency.
Industry Comparison: The industry average gross profit margin for financial services is typically around 70%, making the company’s margin of 73% competitive. Operating margins in the industry average around 5%, indicating the company is trending in a favorable direction with its 6% operating margin for Q3 2024.
Operational Efficiency Analysis: The total operating expenses for the three months ended September 30, 2024 were $77,133,000, representing 67% of total revenue, down from 78% in Q3 2023. This reduction in operating expenses relative to revenue growth highlights effective cost management strategies being implemented.
Equity-Based Compensation: Equity-based compensation expenses for the nine months ended September 30, 2024 were $75,059,000, which is a decrease from $82,126,000 in the same period of 2023, contributing to improved profitability metrics.
| Operating Expenses Breakdown | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Research and Development | $36,618,000 | $32,250,000 | $109,654,000 | $90,198,000 |
| Sales and Marketing | $17,889,000 | $15,020,000 | $49,369,000 | $44,049,000 |
| General and Administrative | $22,626,000 | $26,268,000 | $65,873,000 | $75,445,000 |
| Total Operating Expenses | $77,133,000 | $73,538,000 | $224,896,000 | $209,692,000 |
Debt vs. Equity: How Clearwater Analytics Holdings, Inc. (CWAN) Finances Its Growth
Debt vs. Equity: How Clearwater Analytics Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the total liabilities of Clearwater Analytics Holdings, Inc. stood at $169,834 thousand, comprising $19,121 thousand in operating lease liabilities and a total of $150,713 thousand in long-term and short-term debt.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Clearwater Analytics was calculated at 0.37 as of September 30, 2024, indicating a conservative approach to leveraging compared to the industry average of approximately 0.50 for similar companies in the analytics sector.
Recent Debt Issuances and Credit Ratings
In the recent quarter, the company reported a repayment of borrowings amounting to $2,062 thousand, with no new debt issuances noted during this period. The company's credit rating remains stable, reflecting its solid financial standing and consistent cash flows.
How the Company Balances Between Debt Financing and Equity Funding
Clearwater Analytics has primarily relied on equity funding to finance its growth, issuing 3,344,058 shares under restricted stock units during the nine months ended September 30, 2024. The total stockholder's equity increased to $453,619 thousand, showing a robust equity base to support operations and strategic investments.
| Financial Metric | Value (thousands) |
|---|---|
| Total Liabilities | $169,834 |
| Operating Lease Liabilities | $19,121 |
| Debt-to-Equity Ratio | 0.37 |
| Industry Average Debt-to-Equity Ratio | 0.50 |
| Recent Borrowings Repayment | $2,062 |
| Total Stockholder's Equity | $453,619 |
| Shares Issued under Restricted Stock Units | 3,344,058 |
Assessing Clearwater Analytics Holdings, Inc. (CWAN) Liquidity
Assessing Clearwater Analytics Holdings, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 3.57, indicating strong liquidity.
Quick Ratio: The quick ratio stands at 3.24, reflecting the company's ability to meet short-term obligations without relying on inventory.
Analysis of Working Capital Trends
As of September 30, 2024, the company reported working capital of $228.7 million. This is an increase from $205.7 million at the end of the previous fiscal year.
| Period | Working Capital ($ millions) | Current Ratio | Quick Ratio |
|---|---|---|---|
| September 30, 2024 | 228.7 | 3.57 | 3.24 |
| December 31, 2023 | 205.7 | 3.45 | 3.12 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow statements are as follows:
- Net Cash Provided by Operating Activities: $103.5 million
- Net Cash Used in Investing Activities: $(54.8 million)
- Net Cash Used in Financing Activities: $(42.5 million)
In comparison, for the nine months ended September 30, 2023:
- Net Cash Provided by Operating Activities: $60.5 million
- Net Cash Used in Investing Activities: $(95.6 million)
- Net Cash Used in Financing Activities: $(9.9 million)
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total cash, cash equivalents, and investments amount to $336.7 million, including:
- Cash and Cash Equivalents: $228.7 million
- Short-Term Investments: $77.1 million
- Long-Term Investments: $30.9 million
The company has sufficient liquidity to cover its operational needs and capital expenditures for the next 12 months, including any potential payments related to the Tax Receivable Agreement (TRA).
Is Clearwater Analytics Holdings, Inc. (CWAN) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Clearwater Analytics Holdings, Inc. (CWAN) focuses on key financial metrics that help determine whether the company is overvalued or undervalued. This includes an examination of price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, alongside stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the company reported a net income attributable to common stockholders of $3,629,000 with a diluted earnings per share (EPS) of $0.02. Given the stock price of approximately $8.50, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / EPS = $8.50 / $0.02 = 425
Price-to-Book (P/B) Ratio
The total stockholders' equity attributable to Clearwater Analytics Holdings, Inc. as of September 30, 2024, is $403,247,000. With approximately 219,563,188 shares outstanding, the book value per share is:
Book Value per Share = Total Equity / Shares Outstanding = $403,247,000 / 219,563,188 = $1.83
Using a stock price of $8.50, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $8.50 / $1.83 = 4.64
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash and equivalents. As of September 30, 2024, cash equivalents total $336,717,000 and the total debt is $0 (no debt reported). Therefore, the EV is:
EV = Market Cap + Total Debt - Cash = (219,563,188 shares $8.50) + $0 - $336,717,000 = $1,868,286,098
For the nine months ended September 30, 2024, the EBITDA reported was $11,016,000. Thus, the EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $1,868,286,098 / $11,016,000 = 169
Stock Price Trends
Over the past 12 months, the stock price has experienced fluctuations, starting at approximately $6.00 and reaching a peak of $10.00. The current price stands at $8.50, indicating a 41.67% increase from the lowest point.
Dividend Yield and Payout Ratios
Clearwater Analytics does not currently pay dividends, which results in a dividend yield of 0%. Therefore, the payout ratio is also 0%.
Analyst Consensus
As of September 30, 2024, the consensus among analysts regarding the stock valuation is as follows:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
Summary Table of Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 425 |
| P/B Ratio | 4.64 |
| EV/EBITDA Ratio | 169 |
| Current Stock Price | $8.50 |
| 12-Month Price Range | $6.00 - $10.00 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | 5 Buy, 3 Hold, 1 Sell |
Key Risks Facing Clearwater Analytics Holdings, Inc. (CWAN)
Key Risks Facing Clearwater Analytics Holdings, Inc.
Industry Competition: The competitive landscape includes several established firms and emerging startups that could impact market share. The company's ability to innovate and differentiate its services is critical to maintaining its position.
Regulatory Changes: The firm operates in a heavily regulated environment. Changes in regulations related to data privacy, financial reporting, and tax laws could impose additional compliance costs or limit operational flexibility.
Market Conditions: Fluctuations in market conditions can significantly affect the value of assets under management (AUM), which was reported at $7.3 trillion as of December 31, 2023. A decline in AUM due to market downturns could lead to reduced revenues from fees based on asset values.
Operational Risks
Operational risks include reliance on technology and potential disruptions in service delivery. The company has reported a gross revenue retention rate of 99% for the third quarter of 2024, indicating strong client loyalty but also highlighting the importance of maintaining robust operational capabilities.
Financial Risks
Financial risks stem from variables such as interest rate changes and currency fluctuations. Interest income was reported at $2,290 for the third quarter of 2024, which contributes to overall financial performance. The effective tax rate for the same period was (11.3%), showcasing potential volatility in tax obligations.
Strategic Risks
Strategic risks involve challenges related to business acquisitions and integrations. The company incurred a tax receivable agreement expense of $5,344 in the third quarter of 2024, indicating potential liabilities associated with previous transactions.
Mitigation Strategies
The company has implemented various strategies to mitigate these risks:
- Investment in Technology: Continuous improvements in technology infrastructure to enhance service delivery and operational efficiency.
- Compliance Framework: Establishing a robust compliance framework to adapt to regulatory changes swiftly.
- Diverse Client Portfolio: Expanding the client base to reduce dependency on any single market segment.
Financial Performance Overview
| Metric | 2024 Q3 | 2023 Q3 |
|---|---|---|
| Revenue | $115,828 (in thousands) | $94,664 (in thousands) |
| Net Income (Loss) | $4,769 (in thousands) | $(2,343) (in thousands) |
| Gross Profit | $84,471 (in thousands) | $67,651 (in thousands) |
| Operating Expenses | $77,133 (in thousands) | $73,538 (in thousands) |
| Assets Under Management (AUM) | $7.3 trillion | $6.4 trillion |
As of September 30, 2024, the company reported a net cash position of $228,694 (in thousands), reflecting its liquidity and ability to navigate financial challenges.
Future Growth Prospects for Clearwater Analytics Holdings, Inc. (CWAN)
Future Growth Prospects for Clearwater Analytics Holdings, Inc.
Analysis of Key Growth Drivers
Clearwater Analytics Holdings, Inc. has identified several key drivers for future growth:
- Product Innovations: The acquisition of Wilshire Technology positions the company to enhance its analytics capabilities and broaden its product offerings.
- Market Expansions: The company aims to penetrate new geographical markets, increasing its global client base.
- Acquisitions: Recent acquisitions, such as the Wilshire Technology acquisition, are expected to significantly boost revenue streams and expand service offerings.
Future Revenue Growth Projections and Earnings Estimates
The company reported a revenue increase of 22% for the third quarter of 2024, amounting to $115.8 million compared to $94.7 million in Q3 2023. For the nine months ended September 30, 2024, total revenue reached $325.3 million, up 21% from $269.1 million during the same period in 2023.
Analysts estimate that the company will continue to grow its annualized recurring revenue, projected to reach approximately $402 million by the end of 2024, reflecting a substantial year-over-year increase.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic partnerships and initiatives include:
- Collaboration with Wilshire Advisors: This partnership is expected to enhance the analytics capabilities offered to clients and drive additional revenue through combined offerings.
- Geographic Expansion: Targeting international markets will help diversify revenue streams and reduce dependence on the U.S. market.
Competitive Advantages That Position the Company for Growth
The company holds several competitive advantages:
- High Gross Revenue Retention Rate: As of September 30, 2024, the gross revenue retention rate was 99%, showcasing strong client satisfaction and loyalty.
- Robust Client Base Growth: The client base grew by $10.8 million in Q3 2024, contributing significantly to revenue growth.
Financial Performance Data
| Metric | Q3 2024 | Q3 2023 | Change | YTD 2024 | YTD 2023 | Change |
|---|---|---|---|---|---|---|
| Revenue | $115.8 million | $94.7 million | +22% | $325.3 million | $269.1 million | +21% |
| Net Income (Loss) | $4.8 million | ($2.3 million) | — | $7.3 million | ($19.6 million) | — |
| Annualized Recurring Revenue | $456.9 million (est.) | $362.4 million | +26.1% | — | — | — |
Conclusion
Through strategic initiatives, strong revenue growth, and competitive advantages, Clearwater Analytics Holdings, Inc. is well-positioned for future growth opportunities in the analytics market.
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Resources:
- Clearwater Analytics Holdings, Inc. (CWAN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Clearwater Analytics Holdings, Inc. (CWAN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Clearwater Analytics Holdings, Inc. (CWAN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.