Executive Summary / Key Takeaways

• Clearwater Analytics is transforming from a leading investment accounting and analytics platform into a comprehensive front-to-back solution provider through strategic acquisitions, aiming to address industry fragmentation and capture a larger market share.
• The company's core single-instance, multi-tenant, cloud-native technology, underpinned by a single security master, provides a significant competitive advantage, driving operational efficiency, data integrity, and enabling rapid innovation, including leveraging Generative AI.
• Clearwater has demonstrated strong standalone financial performance, consistently exceeding 20% revenue growth and expanding profitability margins (Adjusted EBITDA margin reached 35.5% in Q1 2025), fueled by high retention rates (98%+ GRR, 114% NRR in Q1 2025) and successful new product adoption.
• Recent acquisitions of Enfusion (ENFN), Beacon (BECN), and Bistro significantly expand CWAN's capabilities across asset classes (alternatives, private credit) and the investment lifecycle (front office, risk analytics), positioning the combined entity to deliver a unified, real-time platform.
• Management's outlook for the combined entity forecasts continued strong growth (59-61% total revenue growth in FY 2025) and profitability expansion (approx. 32% Adjusted EBITDA margin in FY 2025), with a phased integration strategy focused on maximizing standalone potential, driving cross-sell, and ultimately unifying the platform.

The Foundation: A Modern Approach to Opaque Investment Data

Clearwater Analytics has built its business by bringing transparency and efficiency to the notoriously complex world of investment accounting and analytics. Operating a Software-as-a-Service (SaaS) platform, the company serves a diverse global clientele including insurers, asset managers, corporations, institutional investors, and government entities. At its core, Clearwater addresses the fundamental challenge faced by these organizations: managing vast, complex investment portfolios across multiple asset classes, currencies, and geographies using disparate, often manual, and outdated legacy systems. These legacy approaches lead to data silos, reconciliation headaches, slow reporting, increased risk, and high operational costs.

Clearwater's foundational strength lies in its differentiated technology architecture. Unlike many competitors who rely on stitched-together legacy platforms, Clearwater operates a single instance, multi-tenant, cloud-native platform built around a single security master. This architecture allows the company to aggregate and normalize data from over 4,100 daily data feeds and model over four million securities. The single security master is particularly powerful, creating a "Golden Copy" of comprehensive, accurate investment data that benefits all clients on the platform. This continuous process of sourcing, ingesting, modeling, reconciling, and validating data helps identify and resolve discrepancies that could otherwise introduce significant error and risk into client portfolios.

The tangible benefits of this technology are numerous and quantifiable. The single instance allows for rapid, seamless updates across the entire client base. The multi-tenant structure and single security master drive significant operational efficiency; data for a security held by multiple clients is reconciled once, reducing redundant effort. This efficiency is a key driver of the company's improving unit economics. Furthermore, the cloud-native design provides scalability, allowing the platform to handle surges in data volume (such as month-end peaks, which can increase data intake by roughly 2.5x) more efficiently by adding and reducing compute power on demand, avoiding the need to provision for peak load constantly.

Clearwater is also actively leveraging Generative AI, a capability significantly enhanced by its access to a comprehensive investment management dataset within its single logical database – a distinct advantage over competitors with fragmented data stores. Gen AI is being integrated to transform internal workflows, improve data ingestion and reconciliation, and enhance client servicing by providing conversational interaction with data and deflecting inquiry volume, contributing meaningfully to gross margin expansion. While early, new products leveraging Gen AI are already seeing client adoption.

In the competitive landscape, Clearwater's primary rivals include large, diversified financial technology providers like SS&C Technologies (SSNC), FactSet (FDS), MSCI (MSCI), and BlackRock's Aladdin platform (BLK). Many of these competitors rely on older, less integrated technologies. While SSNC offers scale and a broad suite, its M&A-driven growth can lead to integration challenges. FDS excels in data depth and customization but may lag in AI adoption. MSCI is strong in indices and specialized metrics like ESG but less integrated across the full lifecycle. BlackRock's Aladdin is a powerful enterprise platform but may be less agile for certain client segments. Clearwater's single-instance, multi-tenant architecture provides a competitive edge in efficiency and agility compared to these players, often allowing for faster onboarding and processing. The company boasts an approximately 80% win rate for new clients in deals reaching the proposal stage over the prior four years, reflecting the perceived superiority of its platform.

Performance Reflecting Strategic Execution

Clearwater's strategic focus on its core platform, operational efficiency, and targeted innovation has translated into consistently strong financial performance. The company has achieved revenue growth exceeding 20% year-over-year for the past six years. This growth has been durable, supported by an industry-leading gross revenue retention rate, which has been at least 98% in 24 of the last 25 quarters, including 98% in Q1 2025 and Q4 2024.

Recent performance highlights underscore this momentum:

• Q1 2025 Revenue: $126.9 million, a 23.5% increase year-over-year.
• Q4 2024 Revenue: $126.5 million, a 27.7% increase year-over-year, exceeding guidance by $6.3 million (partly due to pulled-forward NAIC services revenue).
• Full Year 2024 Revenue: $451.8 million, a 22.7% increase year-over-year, surpassing the original guidance midpoint by $17.8 million.
• Q1 2025 ARR: $493.9 million, up 22.7% year-over-year.
• Q4 2024 ARR: $474.9 million, up 25.3% year-over-year, one of the highest increases since the IPO.
• Net Revenue Retention (NRR): Reached 116% in Q4 2024, ahead of the Q1 2026 target of 115%. While slightly lower at 114% in Q1 2025 due to less AUM tailwind, management noted that key drivers like churn, price increases, and new product growth remained steady. NRR improvement has been driven by upsell of the core platform, cross-sell of new products, price increases, and AUM expansion.

Profitability has also seen significant expansion, exceeding stated goals.

• Gross Margin: Reached 78.9% in Q1 2025 and 78.8% in Q4 2024, nearing the long-term target of 80%. This represents a substantial improvement (370 bps from FY 2022 to Q1 2025), significantly outpacing the 50 bps per year improvement target. This is attributed to operational efficiency gains from the platform architecture, continuous improvement initiatives, and the impact of Gen AI.
• Adjusted EBITDA Margin: Stood at 35.5% in Q1 2025, a 420 bps improvement from Q1 2024. Full year 2024 Adjusted EBITDA margin was 32.2%, exceeding the 200 bps expansion goal outlined in 2023. This strong flow-through from unit economics demonstrates the scalability of the business model.

Clearwater's financial health is further evidenced by its strong liquidity and cash flow generation. As of March 31, 2025, the company held $282.9 million in cash, cash equivalents, and investments.

Free cash flow has been robust, reaching $23 million in Q1 2025 (a 168% increase Y/Y) and $48.1 million in Q3 2024 (a 55.6% increase Y/Y). Working capital has improved, with Days Sales Outstanding decreasing. This strong cash position provides strategic optionality. A significant recent event was the termination of the Tax Receivable Agreement (TRA) for a one-time settlement payment of $72.5 million (plus expenses), approved by unaffiliated shareholders. This move is expected to generate significant savings compared to estimated future TRA obligations, eliminate future cash outflows, and provide greater financial certainty.

Strategic Expansion: Building the Front-to-Back Future

Building on its strong foundation and performance, Clearwater has embarked on a transformative strategic expansion through significant acquisitions completed in early 2025. The acquisitions of Wilshire Technology (April 2024), the Bistro asset (March 2025), Enfusion (April 2025), and Beacon (April 2025) are aimed at accelerating Clearwater's vision to become the industry's first comprehensive, cloud-native, front-to-back solution provider for the entire investment management lifecycle.

The strategic rationale is clear:

• Expand Asset Class Coverage: Bistro brings visualization capabilities for alternative assets, while Beacon adds deep risk and modeling analytics for complex instruments like private credit, derivatives, and structured products. This complements Clearwater's existing strength in public equities and fixed income and addresses the growing need for comprehensive handling of private markets.
• Add Front Office Capabilities: Enfusion, a leader in SaaS solutions for investment management and hedge funds, brings industry-leading front office tools, including an Investment Book of Record (IBOR), Portfolio Management System (PMS), and Order and Execution Management System (OEMS). This extends Clearwater's reach beyond its traditional middle and back office strength.
• Enhance Risk and Analytics: Wilshire Technology and Beacon significantly bolster Clearwater's capabilities in performance measurement, risk attribution, portfolio construction, and quantitative analysis, leveraging the unified data from the core platform.
• Eliminate Fragmentation: The ultimate goal is to integrate these capabilities into a single platform with a unified data plane and single security master across all asset types and functions. This aims to eliminate the pervasive industry problem of data silos and the extensive manual reconciliation required between disparate front, middle, and back office systems.

Management has outlined a phased integration strategy for the combined entity:

1. Phase 1 (Near Term): Focus on maximizing the potential of each standalone business, driving incremental improvements. This involves leveraging Clearwater's client base for Enfusion and Beacon, and leveraging Enfusion's front office, Beacon's risk, and Bistro's alternative asset visualization capabilities to enhance Clearwater's market proposition.
2. Phase 2 (Medium Term): Implement a robust cross-sell strategy across the combined client base, building on the successful model developed with the Wilshire acquisition. A dedicated organization is being created to capitalize on the demand for a more comprehensive platform.
3. Phase 3 (Long Term): Bring the vision of a single, unified platform to fruition by developing a single security master and data plane for all asset classes. This is seen as a transformative undertaking that will revolutionize investment management technology.

Integration efforts are already underway, with finance, legal, operations, and client servicing teams being brought under common leadership.

Outlook and Future Potential

Clearwater's outlook for the combined entity reflects confidence in its ability to execute on this ambitious strategy and apply its successful playbook to the acquired businesses.

• Q2 2025 Guidance (Combined): Total revenue is expected to be $174 million, representing approximately 63% year-over-year growth. This includes an estimated $45 million contribution from Enfusion and Beacon from their respective acquisition dates. Combined Adjusted EBITDA is guided at approximately $53 million (30.5% margin), including an estimated $8 million contribution from the acquired businesses (18% margin). This implies a significant step-up in profitability for the acquired entities compared to their historical standalone margins, reflecting initial synergy expectations.
• Full Year 2025 Guidance (Combined): Revenue is projected to be between $720 million and $728 million, representing approximately 59% to 61% year-over-year growth. Adjusted EBITDA is expected to be between $230 million and $235 million, resulting in an Adjusted EBITDA margin of approximately 32%. This guidance incorporates the expectation to reaccelerate Enfusion's growth from its recent ~13% rate towards Clearwater's historical 20%+ pace over the next two years.
• Long-Term Targets (Combined): Management believes the combined entity can sustain approximately 20% annual growth, achieve 50 basis points of gross margin improvement per year, and expand Adjusted EBITDA margin by 200 basis points per year, consistent with Clearwater's historical performance.

The long-term potential lies in realizing the vision of a unified front-to-back platform. Creating a single security master and data plane across all asset classes promises to eliminate reconciliation work, provide a comprehensive global portfolio view, enable deep drill-down analysis of exposure and risk across asset classes, and facilitate an event-driven platform where changes are immediately reflected across the entire lifecycle. This transformative potential is expected to drive significant value for clients and capture a larger share of the estimated $5.9 billion core TAM.

Risks and Challenges

Despite the compelling vision and strong execution track record, several risks and challenges could impact the investment thesis:

• Integration Risk: Successfully integrating Enfusion, Beacon, and Bistro, each with its own technology, culture, and client base, is a significant undertaking. Failure to integrate effectively could strain resources, disrupt operations, and delay or prevent the realization of expected synergies and the unified platform vision.
• Market Volatility: While the "Base" contract model mitigates downside risk from AUM fluctuations, a severe or prolonged market downturn could still impact revenue growth and client spending, particularly in discretionary areas like new product adoption or large-scale platform migrations.
• Competition: The investment management technology market is highly competitive. While Clearwater's technology offers advantages, large competitors like SS&C Technologies, FactSet, MSCI, and BlackRock's Aladdin platform possess significant scale, established relationships, and resources that could challenge CWAN's market share gains.
• Talent Retention: Attracting and retaining top talent, particularly in engineering and sales, is crucial for innovation and growth, especially during integration periods.
• Reliance on Third Parties: The business relies heavily on cloud-based services and third-party IT systems, exposing it to risks of failures or disruptions.
• Deleveraging: The acquisitions were financed with significant debt ($800 million term loan). While management is pausing further M&A, deleveraging the business will be important and could impact financial flexibility in the near term.

Management is addressing these risks through a disciplined integration approach, focusing on execution, leveraging the strength of the core business, and maintaining a strong balance sheet.

Conclusion

Clearwater Analytics stands at a pivotal juncture, leveraging its proven track record of execution and a differentiated technological foundation to pursue a transformative strategic vision. The company's core single-instance, multi-tenant platform and single security master have consistently driven strong organic growth, operational efficiency, and profitability expansion, exceeding previously set targets. The recent acquisitions of Enfusion, Beacon, and Bistro represent a bold step towards building the industry's first truly integrated, cloud-native, front-to-back investment management platform, addressing the deep-seated challenges of fragmentation and data silos.

While the integration of these significant acquisitions presents execution risks, management's phased approach and commitment to applying their successful operational playbook to the acquired entities provide a clear path forward. The outlook for the combined entity signals continued strong growth and profitability expansion, supported by cross-selling opportunities and the long-term potential of a unified platform. For investors, Clearwater Analytics offers a compelling narrative of a company strategically expanding its market leadership, underpinned by a robust core business and a clear vision for the future of investment technology. The success of the integration and the realization of the unified platform vision will be critical factors to watch as the company aims to capture a larger share of the investment management technology market.