Clearwater Analytics Holdings, Inc. (CWAN)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. As discussed in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and in the section titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” included elsewhere in this Annual Report on Form 10-K.

Overview

Clearwater brings transparency to the opaque world of investment accounting and analytics with what we believe is the industry’s most trusted and innovative single instance, multi-tenant technology platform. Our cloud-native software allows clients to radically simplify their investment accounting operations, enabling them to focus on higher-value business functions such as asset allocation strategy and investment selection. Our platform provides comprehensive accounting, data and advanced analytics as well as highly-configurable reporting for global investment assets daily or on-demand, instead of weekly or monthly. We give our clients confidence that they are making the most informed decisions about investment performance, regulatory compliance and risk.

We provide investment accounting and reporting, performance measurement, compliance monitoring and risk analytics solutions for asset managers, insurance companies and large corporations. Every day, Clearwater’s powerful platform aggregates and normalizes data on over $8.8 trillion of global invested assets for over 1400 clients as of December 31, 2024. We bring modern software to an industry that has long been dominated by difficult-to-use, high cost legacy technologies and processes, which often lack data integrity and traceability, and often require significant manual intervention. The strength of our platform is demonstrated by our approximately 80% win rate for new clients over the prior four years in deals that reached the proposal stage, as well as NPS of 60+ and at least 98% gross retention in 23 of the last 24 quarters.

We allow our clients to replace legacy systems with modern cloud-native software. Our platform helps clients reduce cost, time, errors and risk and allows them to reallocate resources to other value-creating activities. Our software aggregates, reconciles and validates data from more than 4,100 daily data feeds and more than four million securities that have been modeled across multiple currencies, asset classes and countries. This cleansed and validated data runs through our proprietary accounting, performance, compliance and risk solutions to provide clients with powerful analytics and daily or on-demand configurable reporting. We offer multi-asset class, multi-basis, multi-currency accounting and analytics that provide clients with a comprehensive view of their holdings and related performance. This allows our clients to make better, more timely decisions about their investment portfolios.

Clearwater benefits from powerful network effects. With our single instance, multi-tenant architecture, every client, whether new or existing, enriches our global data set by making it more complete and accurate. Our software continually sources, ingests, models, reconciles and validates the terms, conditions and features of every investment security held by all of our clients. This continuous process helps to create a single repository of comprehensive, accurate investment data (often referred to within the industry as a “Golden Copy” of data) that benefits all our clients to the extent they otherwise have rights to the data. Through this continuous process, we are able to identify and adjudicate data discrepancies that otherwise could introduce error and risk into our clients’ investment portfolios. We believe that a meaningful competitive advantage of this network effect is that we are increasingly seen as the best and most accurate source of investment accounting data and analytics in the industry.

We have a recurring revenue model, excluding revenue from professional services and license-related revenue from the JUMP Technology acquisition. We charge our clients a fee that is based on the amount and complexity of the assets they manage on our platform as well as the breadth of the solution utilized by the customer. In 2022, we transitioned our contracting structure to a framework we describe as Base+ for all new clients. A Base+ contract framework includes a base fee for a prospective or existing client’s book of business plus an incremental fee for increases in assets on the platform. This structure is designed to limit the downside volatility in our asset-based fees. We also began to amend contracts with our existing clients to either modify the structure of such contracts from a pure asset-based fee to this Base+ model or to increase the basis point price. Prior to 2022, we charged a basis point fee based on the client’s assets on the platform subject to contracted minimums. For those clients contracted prior to 2022 and whose contract has not been amended, our revenues can more significantly fluctuate with the changes in those clients’ assets. A majority of the assets on our platform are high-grade fixed income assets, which have traditionally had lower levels of volatility, enabling our highly predictable revenue streams. The Base+ model includes annual increases in the base fee and enables us to charge additional fees for

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supplemental services provided for certain alternative asset classes (e.g., LPx, MLx) or additional products (e.g. Prism, OMS/PMS) should the client choose to utilize those services.

Recent Developments

Secondary Offerings

As required by the Registration Rights Agreement dated September 28, 2021, the Company participated in multiple underwritten offerings of shares held by our Principal Equity Owners during the year ended December 31, 2024.

Pursuant to underwriting agreements executed on March 8, June 15, November 6, and November 30, 2023, certain affiliates of Welsh Carson, Warburg Pincus and Permira (the “Selling Stockholders”) sold 14,950,000, 10,000,000, 20,000,000 and 17,000,000 shares, respectively, of Class A common stock in underwritten secondary public offerings. As part of these secondary offerings, the Selling Stockholders exchanged a total of 14,693,431 shares of Class C common stock, together with corresponding LLC Interests of CWAN Holdings, and 47,122,278 shares of Class D common stock for an equivalent number of shares of Class A common stock that were purchased by the underwriters. The Company did not sell any securities in these secondary offerings and did not receive any proceeds from the sale of the shares sold by the Selling Stockholders. The Company incurred $2.1 million in expenses associated with these secondary offerings which were recorded as general and administrative expenses.

Pursuant to underwriting agreements executed on March 6, June 10, and November 11, 2024, the Selling Stockholders sold 16,250,000, 12,000,000 and 25,000,000 shares, respectively, of Class A common stock in underwritten secondary public offerings. As part of these secondary public offerings, the Selling Stockholders exchanged a total of 14,093,593 shares of Class C common stock and 29,613,617 shares of Class D common stock, and corresponding units in CWAN Holdings, for an equivalent number of shares of Class A common stock that were purchased by the underwriter. The Company did not sell any securities in the secondary offerings and did not receive any proceeds from the sale of the shares sold by the Selling Stockholders. The Company incurred $0.6 million in expenses associated with the secondary offerings which were recorded as general and administrative expenses.

Strategic Acquisitions

On April 22, 2024, the Company completed our acquisition of Wilshire Technology that comprises the risk and performance analytics solutions businesses of Wilshire, a leading global financial services firm. This strategic acquisition allows us to provide enhanced analytical capabilities for investment managers and institutional asset owners and to strengthen our position in the institutional asset owner market.

On January 10, 2025, the Company and Enfusion entered into the Merger Agreement for the Company to acquire Enfusion, a leader in SaaS solutions for the investment management and hedge fund industry, for a purchase consideration of approximately $1.5 billion. The acquisition is expected to accelerate the Company’s vision of building the first cloud-native front-to-back platform for the entire investment management industry. The merger is expected to be completed in the second quarter of 2025, subject to approval by Enfusion’s shareholders, the receipt of required regulatory approvals and other customary closing conditions set forth in the Merger Agreement. For more information, see Note 19 “Subsequent Events” to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Key Factors Affecting Our Performance

The growth and future success of our business depends on many factors, including those described below.

•Adding New Clients in Established End Markets: Our future growth is dependent upon our ability to continue to add new clients, and in 2024 we added over 100 net new clients. We are focused on continuing to increase our client base in our established client end-markets of corporations, insurance companies and asset managers, and doing so with increasingly large and sophisticated clients. As we add clients, it takes time to fully onboard their assets to the platform. Our revenue generally increases as assets are added to the platform, while the effort to serve the client is relatively consistent over time. Therefore, we expect revenues and gross margins to increase for a client as the client transitions from the onboarding process to a steady state once assets have been onboarded. In any period, our gross margins may fluctuate based on the relative size and number of clients that we are onboarding at that time.

•Expanding and Retaining Relationships with Existing Clients: Our future growth is dependent upon retaining our existing clients and expanding our relationships with these clients through increases in the amount of their assets on our platform. We have enjoyed consistent gross revenue retention rates of at least 98% in 23 of the past 24 quarters. The consistency in revenue retention creates predictability in our

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business and enables us to better plan our future investments. Our relationships with our clients expands as these clients add more assets to our platform, with our quarterly net revenue retention rates (as defined below under “—Key Operating Measures”) between 110% and 116% in 2024. Clients may add assets as a result of acquiring new clients themselves or by acquiring new businesses or simply through organic growth, which produces additional assets that they manage using our platform. We believe that our client service model and technology platform are strong contributing factors in our attractive retention rates. As such, we expect to continue to invest in both our operations and research and development functions to maintain and increase our high levels of client satisfaction, which we believe will lead to strong client retention and expansion.

•International Expansion: We believe that the value provided by our platform is equally applicable to asset owners and asset managers outside of North America, and there is a significant opportunity to expand our client base and usage of our platform internationally. Our future growth is dependent upon our ability to successfully enter new international markets and to expand our client base in our current international markets. Our cost to acquire clients in international markets is currently greater than in North America because there is less awareness of the Clearwater brand and our product capabilities, and we have to date invested less in sales and marketing internationally. For these reasons, we expect to invest more in sales and marketing in international markets relative to North America in order to achieve growth in these international markets.

•Adding New Clients in Adjacent or Nascent End-Markets: Our strategy is to also add new clients in our more nascent end-markets, which include state and local governments, pension funds, sovereign wealth funds, as well as endowments and foundations. Traditionally, our existing clients have been among our best resources for referring new clients to us, and we will continue to invest in sales and marketing to build awareness of our brand, engage prospective clients and drive adoption of our platform, particularly as it relates to expanding into new end-markets. As we establish our presence in new end-markets, we expect sales and marketing expenditures will be less efficient than in our established verticals and we will become increasingly more efficient at acquiring clients in new end-markets over time.

•Expanding Solutions and Broadening Innovation: Our future growth is dependent upon our continued expansion of our solutions in order to better retain our current clients and to develop new use cases that appeal to new clients. While we believe we will be able to reduce our research and development expenses as a percentage of revenues as we achieve greater scale, our priority is to maintain and grow our technological advantage over our competitors. As we identify opportunities to increase our technological and competitive advantages, we may increase our investments in research and development at rates that are faster than our growth in revenues in order to enhance our long-term growth and profitability.

•Fluctuations in the Market Value of Assets on the Platform: Although we generally have a base fee and adopted our Base+ model in 2022, we also bill our clients monthly in arrears based on a basis point rate applied to our clients’ assets on our platform, which can be influenced by general economic conditions. While 77% of the assets on our platform were high-grade fixed income securities and structured products as of December 31, 2024 and traditionally subject to lower levels of volatility, the value of our clients’ assets on our platform varies on a daily basis due to changes in securities prices, cash flow needs, incremental buying and selling of assets and other strategic priorities of our clients. For these reasons, our revenue is subject to fluctuations based on economic conditions, including market conditions and the changing interest rate environment.

Key Components of Results of Operations

The following discussion describes certain line items in our consolidated statements of operations.

Revenue

We generate revenue from fees derived from providing clients with access to the solutions and services on our SaaS platform. Sales of our offering include a right to use our software in a hosted environment without taking possession of the software. Our contracts are generally cancellable with 30 days’ notice without penalty. We invoice clients monthly in arrears based on a percentage of the average daily value of assets within a client’s accounts on our platform during that month, or based on a fixed monthly base fee. Payment terms may vary by contract but generally include a requirement of payment within 30 days following the month in which services are provided. Fees invoiced in advance of the delivery of

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the Company’s performance obligations are deemed set-up activities and are deferred as a material right and recognized over time, typically 12 months. Through JUMP, which we acquired on November 30, 2022, we also earn license revenue.

Cost of Revenue

Cost of revenue consists of expenses related to delivery of revenue-generating services, including expenses associated with client services, onboarding, reconciliation and agreements related to the purchase of data used in the provision of our services. Salary and benefits for certain personnel associated with supporting these functions, in addition to allocated overhead, amortization of JUMP-related developed technology intangible asset, and depreciation for facilities, are also included in cost of revenue.

Operating Expenses

Research and development expense consists primarily of salary and benefits for our development staff as well as contractors’ fees and other costs associated with the enhancement of our offering, ensuring operational stability and performance and development of new offerings.

Sales and marketing expense consists of the costs of personnel involved in the sales and marketing process, sales commissions, advertising and promotional materials, sales facilities expenses, and the cost of trade shows and seminars.

General and administrative expense consists primarily of personnel costs for IT, finance, administration, human resources and general management, as well as expenses from legal, corporate technology and accounting service providers.

Interest Income, Net

Interest income, net reflects interest received on our cash and cash equivalents based on interest rates in the course of the applicable period, and interest received from our other investments. Interest expense reflects expense on our outstanding term loans under the Credit Agreement during the course of the applicable period. The interest expense varies depending on the timing and amount of borrowings and repayments during the period as well as fluctuations in interest rates.

Tax Receivable Agreement Expense

In connection with the IPO and related transactions, we entered into a TRA that, prior to the TRA Amendment, provided for the payment by us of 85% of certain tax benefits that we realized, or in some cases were deemed to realize, as a result of Tax Attributes, as defined in the Tax Receivable Agreement. Tax receivable agreement expense relates to payments we made, or to be made, under the TRA prior to or in connection with the TRA Amendment.

On November 4, 2024, the Company entered into the TRA Amendment, which amended the TRA to provide for one-time settlement payments in a gross amount of approximately $72.5 million, inclusive of approximately $69.2 million to be paid to the TRA Parties (net of the TRA Bonus Payments) and approximately $3.3 million TRA Bonus Payments to be paid to certain executive officers of the Company (collectively, the “TRA Settlement Payments”), plus approximately $6.5 million in third-party expenses. Upon the payment of the TRA Settlement Payments, the TRA Parties will have no further rights to receive payments (past, current, or future) under the TRA, and the Company will have no further payment obligations (past, current, or future) to the TRA Parties under the TRA. Most of the TRA Settlement Payments were made in December 2024. The remaining TRA Settlement Payments are expected to be made in the first quarter of 2025. Refer to Note 17 “Tax Receivable Agreement Liability” to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Other Income, Net

Other income, net, consists of gains and losses of foreign currency and investments.

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists of income taxes related to federal, state, and foreign jurisdictions where we conduct our business, net of any valuation allowance. Our effective tax rate may increase in the future as our ownership in CWAN Holdings increases via exchanges from historical partners. In addition, our discrete items (e.g. changes in tax rates or laws, equity-based compensation deductions, or mix of income between tax jurisdictions) may not be consistent from year to year and could cause volatility in our effective tax rate.

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Key Operating Measures

We consider certain operating measures, such as annualized recurring revenue, gross retention rates and net retention rates, in measuring the performance of our business.

Annualized Recurring Revenue

Annualized recurring revenue is calculated at the end of a period by dividing the recurring revenue in the last month of such period by the number of days in the month and multiplying by 365.

The following table summarizes the Company’s annualized recurring revenue as of the dates presented:

Because a substantial majority of the assets on our platform are fixed income securities that typically have low levels of volatility with respect to their market value, the growth in annualized recurring revenue is generally not attributable to the fluctuating market value of the assets on our platform. Rather, the growth in annualized recurring revenue is due to an increase in the number of clients using our offering as well as from onboarding more assets of our existing clients onto our platform.

Annualized recurring revenue increased 25% from December 31, 2023 to December 31, 2024 due to growth in our client base as we brought new clients onto our platform and added additional assets from existing clients.

Revenue Retention Rate

Gross revenue retention rate represents annual contract value (“ACV”) at the beginning of the 12-month period ended on the reporting date less client attrition over the prior 12-month period, divided by ACV at the beginning of the 12-month period, expressed as a percentage. ACV is comprised of annualized recurring revenue plus contracted-not-billed revenue, which represents the estimated annual contracted revenue for new and existing client opportunities prior to revenue recognition. In order to arrive at total ACV, we include contracted-not-billed revenue, as it is contracted revenue that has not been recognized but that we expect to produce recognized revenue in the future. Client attrition occurs when a client provides a contract termination notice. The amount of client attrition is calculated as the reduction in annualized revenue of the client at the time of the notice and is recorded in the month the final billing occurs. In the case of client attrition where contracted-not-billed revenue is still present for a client, both annualized recurring revenue and contracted-not-billed revenue associated with such client are deducted from ACV.

Net revenue retention rate is the percentage of recurring revenue retained from clients on the platform for 12 months and includes changes from the addition, removal or value of assets on our platform, contractual changes that have an impact to annualized recurring revenues and lost revenue from client attrition. We calculate net revenue retention rate as of a period end by starting with the annualized recurring revenue from clients as of the 12 months prior to such period end. We then calculate the annualized recurring revenue from these clients as of the current period end. We then divide the total current period end annualized recurring revenue by the 12-month prior period end annualized recurring revenue to arrive at the net revenue retention rate.

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The following table summarizes our retention rates as of the dates presented:

Gross revenue retention rates have remained consistently at least 98% in 23 of the past 24 quarters. We believe the extremely consistent and high gross revenue retention rate is a testament to the value proposition that our leading solution offers.

Non-GAAP Financial Measures

We also consider certain non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), such as adjusted EBITDA and adjusted EBITDA Margin, in measuring the performance of our business. The non-GAAP measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. However, we believe that this non-GAAP information is useful as an additional means for investors to evaluate our operating performance, when reviewed in conjunction with our GAAP financial statements. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP, and because these amounts are not determined in accordance with GAAP, they should not be used exclusively in evaluating our business and operations. In addition, undue reliance should not be placed upon non-GAAP or operating information because this information is neither standardized across companies nor subjected to the same control activities and audit procedures that produce our GAAP financial results.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA and Adjusted EBITDA Margin are supplemental performance measures that our management uses to assess our operating performance. We define Adjusted EBITDA as net loss plus (i) interest income, net, (ii) depreciation and amortization expense, (iii) equity-based compensation expense and related payroll taxes, (iv) tax receivable agreement expense, (v) transaction expenses, (vi) amortization of prepaid management fees and reimbursable expenses, (vii) provision for (benefit from) income taxes, (viii) other income, net, and (ix) Up-C structure expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA (as defined above) divided by revenue.

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The following table reconciles net loss to Adjusted EBITDA and includes amounts expressed as a percentage of revenue for the periods indicated.

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Results of Operations

The following tables set forth our results of operations for the years ended December 31, 2024, 2023 and 2022:

(1)Amounts include equity-based compensation as follows:

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The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:

Comparison of the Years Ended December 31, 2024, 2023 and 2022

Revenue

Revenue increased $83.6 million, or 23%, in 2024 compared to 2023. The increase was due to new clients brought onto our platform which resulted in an increase in revenue of $21.3 million, acquired customer base related to the Wilshire Technology acquisition of $4.2 million, as well as changes to our existing clients’ assets on our platform and an increase in revenue not related to assets on our platform. Average assets on our platform that were billed to new and existing clients increased 15% from 2023 to 2024 and average basis point rate billed to clients increased by 6.2% from 2023 to 2024.

Revenue increased $64.7 million, or 21%, in 2023 compared to 2022. The increase was on account of growth in our client base as we brought new clients onto our platform, as well as changes to our existing clients’ assets on our platform. Average assets on our platform that were billed to new and existing clients increased 19% from 2022 to 2023 while average basis point rate billed to clients decreased by 2.2% from 2022 to 2023. Additionally, license revenues related to JUMP were $6.6 million in 2023.

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Cost of Revenue

Cost of revenue changed as follows:

The increase in cost of revenue in 2024 was primarily due to increased payroll and related costs as a result of headcount growth, increases in merit-based compensation, and changes in our employee base leading to higher compensation and increased equity-related payroll taxes for vested equity awards. In addition, cost of revenue increased due to higher data costs for acquiring vendor data contracts related to the Wilshire Technology acquisition, increased depreciation and amortization related to the amortization of capitalized IT projects and acquired Wilshire Technology intangible assets, increased equity-based compensation due to additional headcount, increased allocation of facilities cost due to additional office space in international locations, increased travel and entertainment expense as employees travelled more between our office locations to support client onboarding, and higher utilization of third-party contractors in connection with operational activities, partially offset by decreased technology costs from hosting services.

The increase in cost of revenue in 2023 was primarily due to increased payroll and related costs as a result of headcount growth of additional employees across our client services, onboarding and reconciliation teams to support a larger client base and headcount growth related to the JUMP acquisition. In addition, cost of revenue increased due to increased depreciation and amortization related to the amortization of capitalized IT projects and JUMP-related intangible assets, increased equity-based compensation due to additional headcount, increased allocation of technology costs from hosting services as we completed the migration of IT applications to a cloud environment, increased allocation of facilities cost due to additional office space, increased travel and entertainment expense as employees travelled more between our office locations to support client onboarding, increased data costs to support a larger client base and higher utilization of third-party contractors in connection with operational activities.

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Operating Expenses

Research and Development

Research and development expense changed as follows:

The increase in research and development expense in 2024 was primarily due to increased equity-based

compensation due to grants of additional awards to employees, and movement of a key employee to research and development with a change in responsibilities, as well as increased payroll and related costs as a result of headcount growth, increases in merit-based compensation, and changes in our employee base leading to higher compensation and increased equity-related payroll taxes for vested equity awards. In addition, research and development expense increased due to increased technology costs from higher utilization of third-party cloud computing and other third-party IT services, and increased allocation of facilities cost due to additional office space. These increases were partially offset by decreased use of outside services and contractors due to lower utilization of third-party consultants on development activities due to a focus on internal hiring of developers.

The increase in research and development expense in 2023 was primarily due to increased payroll and related costs as a result of headcount growth of additional employees to focus on new offerings, headcount growth related to the JUMP acquisition and lower capitalization of payroll costs related to IT projects, offset by a tax credit related to JUMP based on research and development expenses incurred in France. In addition, research and development expense increased due to increased technology costs from higher utilization of third-party cloud computing and other third-party services as well as increased equity-based compensation due to additional headcount, increased allocation of facilities cost due to additional office space, and increased travel and entertainment costs as employees travelled more between our office locations to support new offering initiatives.

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Sales and Marketing

Sales and marketing expense changed as follows:

The increase in sales and marketing expense in 2024 was primarily due to increased payroll and related costs as a result of headcount growth to expand sales coverage and increases in merit-based compensation. In addition, the increase in sales and marketing expense was driven by higher utilization of third-party consultants to support marketing initiatives, increased marketing costs due to additional marketing events and IT subscriptions supporting market development programs. These increases were partially offset by a decrease in equity-based compensation due to fewer performance-based awards being granted.

The increase in sales and marketing expense in 2023 was primarily due to increased equity-based compensation due to grants of additional awards to employees, and increased payroll and related costs as a result of the hiring of additional employees to expand sales coverage. In addition, the increase in sales and marketing expense was driven by increased travel and entertainment expense as employees travelled more between our office locations and clients to support sales and marketing initiatives, as well as higher utilization of third-party consultants to support marketing initiatives.

General and Administrative

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General and administrative expense changed as follows:

The increase in general and administrative expense in 2024 was primarily due to increased outside services and contractors due to higher utilization of professional services supporting accounting, legal and human resources related to secondary transactions, acquisition-related activities and Tax Receivable Agreement settlement, increased payroll and related costs as a result headcount growth and increases in merit-based compensation, increased allocation of facilities cost due to additional office space, and increased recruiting expense to support key hires. These increases were partially offset by decrease in equity-based compensation primarily due to the movement of a key employee to research and development with a change in responsibilities, and decreased insurance costs for our directors and officers.

The increase in general and administrative expense in 2023 was primarily due to increased equity-based compensation expense due to JUMP acquisition-related equity awards and grant of additional awards to employees, increased payroll and related costs as a result of headcount growth. In addition, general and administrative expense increased due to higher utilization of IT services, increased recruiting costs to support key hires, increased transaction expense related to the Secondary Offerings, higher utilization of professional services supporting accounting, legal and human resources, and higher travel and entertainment expense as employees travelled between our office locations more. These increases were partially offset by decreased insurance costs for our directors and officers, reduction in our accruals for sales tax exposure as we finalize voluntary disclosure agreements with jurisdictions, and decreased allocation of facilities costs.

Non-Operating Expenses

Interest Income, Net

Interest income, net increased for the year ended December 31, 2024 and 2023 due to increased interest income on our cash, cash equivalents and investments from higher interest rates, and higher average investment balances.

The TRA expense relates to amounts incurred under our Tax Receivable Agreement or in connection with the TRA Amendment. TRA expense increased for the year ended December 31, 2024 due to the TRA Settlement Payments (as defined below). As a result of the TRA Amendment and the TRA Settlement Payments made thereunder, TRA expense is not expected to be recurring in the future as, once the remaining TRA Settlement Payments are made in full, the Company

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will no longer have any payment obligations under the TRA . Refer to Note 17 “Tax Receivable Agreement Liability” to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Other income, net relates to foreign exchange gains and losses driven by fluctuations in exchange rates, and gains and losses related to our investments.

Provision for (benefit from) Income Taxes

The benefit from income taxes in 2024 primarily relates to the valuation allowance release on our U.S. federal and state deferred tax assets. We have maintained a valuation allowance on all of our U.S. net deferred tax assets since our inception as it was determined that it was more likely than not that we would not recognize the benefits of these assets. In the fourth quarter of the year ended December 31, 2024, based on the relevant weight of positive and negative evidence, including the amount of our taxable income in recent years which is objective and verifiable, and consideration of our expected future taxable earnings, we concluded that the valuation allowance related to most U.S. federal and state deferred tax assets was no longer needed. Accordingly, we have recognized a non-recurring tax benefit of $472 million related to the valuation allowance reversal.

We consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under tax law, and results of recent operations.

The decrease in provision for income taxes in 2023 primarily relates to change in the mix of foreign jurisdiction income in the period and decreased pre-tax income in foreign jurisdictions.

Liquidity and Capital Resources

To date, we have primarily financed our operations through cash flows from operations and financing activities.

As of December 31, 2024, we had cash, cash equivalents and investments of $285.7 million, including cash and cash equivalents of $177.3 million, short-term investments of $78.1 million and long-term investments of $30.3 million. Cash, cash equivalents and short-term investments primarily consist of highly-liquid investments in money market funds, corporate debt securities, US government bond, commercial paper and certificates of deposit. Long-term investments primarily consist of US government bond, U.S. agency securities and corporate debt securities.

We believe our existing cash and cash equivalents will be sufficient to meet our operating working capital and capital expenditure requirements over the next 12 months. Our future financing requirements will depend on many factors, including our growth rate, revenue retention rates, the timing and extent of spending to support development of our platform and any future investments or acquisitions we may make. As announced on January 13, 2025, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) on January 10, 2025 to acquire Enfusion for purchase consideration of $1.5 billion that includes approximately $800 million in cash. We plan to obtain a senior secured term loan B facility due 2033 in an aggregate principal amount of $800 million (“2025 Term Loan”) and a revolving credit facility agreement that provides an unsecured $200 million revolving credit facility with a tenure of 5 years to finance this acquisition, and any other acquisitions we may make in the next 12 months. For more information, see Note 19 “Subsequent Events” to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Additional funds may not be available on terms favorable to us or at all, including as a result of disruptions in the credit markets. See “Risk Factors” elsewhere in this Annual Report on Form 10-K.

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The following table shows our cash flows from operating activities, investing activities and financing activities for the stated periods:

Cash Flows from Operating Activities

Net cash provided by operating activities of $74.3 million during 2024 was primarily the result of our net income plus non-cash charges, including equity-based compensation, operating lease expense and depreciation and amortization, offset by deferred tax benefits of $460 million and changes in operating assets and liabilities that decreased operating cash flow by $21.2 million. Accounts receivable increased $13.6 million, which is comprised of $25.5 million from growth in revenues, offset by $11.9 million from improved collections of receivable balances. Deferred commissions increased $6.2 million due to higher revenue in the year. TRA liability decreased $18.9 million due to the TRA Settlement Payments, in a gross amount of approximately $72.5 million plus approximately $6.5 million in third-party expenses in 2024. TRA payments are net of $53.2 million TRA expense recognized in the year ended December 31, 2024.

Net cash provided by operating activities of $84.6 million during 2023 was primarily the result of our net loss plus non-cash charges, including equity-based compensation, operating lease expense and depreciation and amortization offset by changes in operating assets and liabilities that decreased operating cash flow by $30.5 million. Accounts receivable increased $19.3 million, which is comprised of $14.3 million from growth in revenues and $5.0 million from the aging of receivable balances for certain customers due to deterioration in days sales outstanding which we continue to believe is collectible. Deferred commissions increased $5.1 million due to higher revenue in the year. TRA payments were $8.4 million in 2023. The remaining $2.2 million TRA payments related to 2022 was made in the first quarter of 2024. TRA payments are presented net of $14.4 million TRA expense recognized in the year ended December 31, 2023.

Net cash provided by operating activities of $58.0 million during 2022 was primarily the result of our net loss plus non-cash charges, including equity-based compensation, tax receivable agreement expense, operating lease expense and depreciation and amortization. Cash flows resulting from changes in assets and liabilities include an increase in accounts receivable, increase in prepaid expenses and other assets and an increase in deferred commissions. Accounts receivable increased $19.1 million, which is comprised of $9.5 million from growth in revenues and $9.6 million from aging of receivable balances for certain customers due to short-term deterioration in days sales outstanding which we continue to believe is collectible. Prepaid expenses and other assets increased $5.0 million due to timing of payments to data vendors, and deferred commissions increased $5.8 million due to higher revenue in the year.

Cash Flows from Investing Activities

Net cash used in investing activities of $55.6 million during 2024 was primarily due to the purchase of $114.6 million available-for-sale investments, acquisition of Wilshire Technology, net of cash acquired of $40.1 million, purchase of $3.0 million held-to-maturity investments and $5.3 million attributable to the purchase of property and equipment, including internally developed software, which was offset by $107.4 million in proceeds from the sale and maturity of investments.

Net cash used in investing activities of $95.1 million during 2023 was primarily due to the purchase of $124.2 million available-for-sale investments, purchase of $3.0 million held-to-maturity investments and $5.6 million attributable to the purchase of property and equipment, including internally developed software, which was offset by $37.8 million in proceeds from the sale and maturity of investments.

Net cash used in investing activities of $76.5 million during 2022 was primarily due to $65.8 million related to the acquisition of JUMP, net of cash acquired, $3.0 million attributable to the purchase of short-term investments, and $7.8 million attributable to the purchase of property, plant and equipment, including internally developed software.

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Cash Flows from Financing Activities

Net cash used in financing activities during 2024 was $61.7 million, of which $55.3 million was used to pay minimum tax withholding on behalf of employees related to net share settlement, $4.7 million was used for the payment of business acquisition holdback liability, $2.8 million was used in the repayment of borrowings and $3.9 million was used for the payment of tax distributions to Continuing Equity Owners, which was partially offset by $4.7 million of proceeds from the employee stock purchase plan.

Net cash used in financing activities during 2023 was $19.3 million, of which $20.8 million was used to pay minimum tax withholding on behalf of employees related to net share settlement, $2.9 million was used for the payment of business acquisition holdback liability, $2.8 million was used in the repayment of borrowings and $2.2 million was used for the payment of tax distributions to Continuing Equity Owners, which was partially offset by $4.8 million of proceeds from the exercise of options and $4.6 million of proceeds from the employee stock purchase plan.

Net cash provided by financing activities during 2022 was $16.2 million, of which $18.3 million was proceeds from the exercise of options and $4.2 million was proceeds from our employee stock purchase plan, which was offset by $3.2 million from minimum tax withholding paid on behalf of employees for net share settlement, and $2.8 million used in the repayment of borrowings.

Indebtedness

For a discussion of our indebtedness, refer to Note 8 “Credit Agreement” to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements and related notes, which have been prepared in accordance with GAAP. We review the accounting policies used in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities.

On an ongoing basis, we evaluate the process we use to develop estimates. We base our estimates on historical experience and on other information that we believe is reasonable for making judgments at the time the estimates are made. Actual results may differ from our estimates due to actual outcomes being different from those on which we based our assumptions.

We believe the following accounting policies contain the more significant judgments and estimates used in the preparation of our consolidated financial statements:

•Revenue recognition

•Equity-based compensation

•Income taxes

•Tax receivable agreement expense

Revenue Recognition

We earn revenues primarily from providing access to our SaaS platform solution to our customers, services that support the implementation on the SaaS platform, selling perpetual and term-based software licenses and providing maintenance and support and professional services under contracts with customers. We recognize revenue when performance obligations are satisfied under the terms of the contract in an amount that reflects the consideration we expect to receive in exchange for the services or licenses. We determined the appropriate amount of revenue to be recognized using the following steps: (i) identification of contracts with customers, (ii) identification of the performance obligations in the contract, (iii) determination of transaction price, (iv) allocation of contract transaction price to the performance obligations, and (v) recognition of revenue when or as a performance obligation is satisfied. Contracts often contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct services that are promised to the customer.

SaaS

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We typically bill our SaaS customers monthly in arrears based on a percentage of the average of the daily value of the assets within a customer’s accounts on the platform. Payment terms may vary by contract but generally include a requirement of payment within 30 days following the month in which services were provided.

Our services allow the customer to access the services without taking possession of the software. Non-refundable fees invoiced in advance of the delivery of our performance obligations are deemed set-up activities and are deferred as a material right and recognized over time, typically 12 months. After set-up activities, customers typically receive benefits from implementation services prior to the “go live” date, at which point they can use the platform as intended in the arrangement. We have determined these implementation services are generally a separate performance obligation. As our platform must stand ready to provide the services throughout the contract period, revenues are recognized as the services are provided over time beginning on the date the service is made available as intended in the arrangement. Customers generally have the right to cancel with 30 days’ notice with no penalty.

Licenses

As a result of the acquisition of JUMP on November 30, 2022, we earn license revenue through the sale of software license agreements to new customers and sales of additional licenses to the existing customers who can purchase additional users for existing licenses or purchase new licenses. Licenses can be either perpetual or term-based and provide the customer with a right to use the software. When a term license is purchased, maintenance and support is bundled with the license for the term of the license period. We require customers purchasing perpetual licenses to also purchase maintenance and support services covering at least one year from the beginning of the perpetual license. We also offer professional services, including consulting and training, that are not integral to the functionality of the license.

Revenue is recognized when the performance obligation is satisfied. Revenue from our perpetual and term-based licenses is recognized when the software is delivered or made available to the customer and all other revenue recognition criteria are satisfied. We satisfy our maintenance and support performance obligations and recognize revenue ratably over the maintenance and support term or license term, consistent with the pattern of benefit to the customer of such services. Professional services are provided on a time basis or over a contract term. We satisfy our professional services and training performance obligations and recognize the associated revenue as services are delivered.

We typically bill customers for licenses and maintenance annually in advance and professional services are billed monthly in arrears as services are performed.

Professional services

Professional services consists primarily of professional services provided to our clients to configure and optimize the use of our solutions, as well as training services related to the configuration and operation of our solutions. We recognize the revenues associated with these professional services on a time and materials basis as we deliver the services or provide the training, or milestones are achieved. We generally recognize the revenues associated with our services in the period the services are performed, provided that collection of the related receivable is reasonably assured.

Equity-Based Compensation

We measure and recognize equity-based compensation expense for instruments based on the estimated fair value of equity-based awards on the date of grant using the Black-Scholes option-pricing model for options and the fair value of the equity on the date of grant for RSUs. We recognize equity-based compensation expense over the requisite service period on a straight-line basis, which is generally consistent with the vesting of the awards, based on the estimated fair value of the equity-based awards issued to employees and directors. Equity-based compensation that vests on a performance event, such as annual targets for the Company, begins to be recognized at the date that the performance event becomes probable, and compensation expense is recognized through a cumulative catch-up, if necessary, then ratably over each performance period. If there are any modifications of equity-based awards, we may be required to accelerate, increase, decrease or reverse any equity-based compensation expense on the unvested awards. The Company records forfeitures when they occur for all equity-based awards.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred income taxes are recognized for the expected future tax consequences attributable to temporary differences between the carrying amount of the existing tax assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied in the years in which temporary differences are

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expected to be recovered or settled. The principal items giving rise to temporary differences are basis differences due to exchange transactions, loss and tax credit carryforwards, equity-based compensation, and intangible asset amortization. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe it is more likely than not that they will not be realized. We consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under tax law, and results of recent operations.

We record uncertain tax positions in accordance with ASC 740, Income Taxes on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position, and (2) for those tax positions that meet the more likely than not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. We consider many factors when evaluating our uncertain tax positions, which involve significant judgment and may require periodic adjustments. The resolution of these uncertain tax positions in a manner inconsistent with management’s expectations could have a material impact on our consolidated financial statements. We recognize interest and penalties related to uncertain tax positions as a component of our provision for (benefit from) income taxes. Accrued interest and penalties are included with the related tax liability.

Tax Receivable Agreement

In connection with the IPO and related transactions, we entered into a TRA that, prior to the TRA Amendment, provided for the payment by us of 85% of the amount of any tax benefits that we actually realized, or in some cases were deemed to realize, from any redemptions or exchanges of CWAN Holdings units.

We have historically accounted for amounts payable under the TRA in two parts. The first was to accrue the TRA liability that has been incurred as of the balance sheet date. The second was to record the TRA liability related to all future years that was probable and reasonably estimable. We determined the amount that was probable and reasonably estimable by mirroring the net deferred tax asset balance such that the TRA liability was 85% of the net deferred tax asset balance.

On November 4, 2024, the Company entered into the TRA Amendment, which amended the TRA to provide for one-time settlement payments in a gross amount of approximately $72.5 million, inclusive of approximately $69.2 million to be paid to the TRA Parties (net of the TRA Bonus Payments) and approximately $3.3 million TRA Bonus Payments to be paid to certain executive officers of the Company (collectively, the “TRA Settlement Payments”), plus approximately $6.5 million in third-party expenses. Upon the payment of the TRA Settlement Payments, the TRA Parties will have no further rights to receive payments (past, current, or future) under the TRA, and the Company will have no further payment obligations (past, current, or future) to the TRA Parties under the TRA. Most of the TRA Settlement Payments were made in December 2024. The remaining TRA Settlement Payments are expected to be made in the first quarter of 2025. Refer to Note 17 “Tax Receivable Agreement Liability” to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Recently Issued Accounting Pronouncements

Refer to Note 2 “Basis of Presentation and Summary of Significant Accounting Policies” to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. As discussed in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and in the section titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” included elsewhere in this Annual Report on Form 10-K.

Overview

Clearwater brings transparency to the opaque world of investment accounting and analytics with what we believe is the industry’s most trusted and innovative single instance, multi-tenant technology platform. Our cloud-native software allows clients to radically simplify their investment accounting operations, enabling them to focus on higher-value business functions such as asset allocation strategy and investment selection. Our platform provides comprehensive accounting, data and advanced analytics as well as highly-configurable reporting for global investment assets daily or on-demand, instead of weekly or monthly. We give our clients confidence that they are making the most informed decisions about investment performance, regulatory compliance and risk.

We provide investment accounting and reporting, performance measurement, compliance monitoring and risk analytics solutions for asset managers, insurance companies and large corporations. Every day, Clearwater’s powerful platform aggregates and normalizes data on over $7.3 trillion of global invested assets for over 1,300 clients. We bring modern software to an industry that has long been dominated by difficult-to-use, high cost legacy technologies and processes, which often lack data integrity and traceability, and often require significant manual intervention. The strength of our platform is demonstrated by our approximately 80% win rate for new clients over the prior six years in deals that reached the proposal stage, as well as NPS of 60+ and 98% gross retention in 19 of the last 20 quarters.

We allow our clients to replace legacy systems with modern cloud-native software. Our platform helps clients reduce cost, time, errors and risk and allows them to reallocate resources to other value-creating activities. Our software aggregates, reconciles and validates data from more than 4,100 daily data feeds and more than four million securities that have been modeled across multiple currencies, asset classes and countries. This cleansed and validated data runs through our proprietary accounting, performance, compliance and risk solutions to provide clients with powerful analytics and daily or on-demand configurable reporting. We offer multi-asset class, multi-basis, multi-currency accounting and analytics that provide clients with a comprehensive view of their holdings and related performance. This allows our clients to make better, more timely decisions about their investment portfolios.

Clearwater benefits from powerful network effects. With our single instance, multi-tenant architecture, every client, whether new or existing, enriches our global data set by making it more complete and accurate. Our software continually sources, ingests, models, reconciles and validates the terms, conditions and features of every investment security held by all of our clients. This continuous process helps to create a single repository of comprehensive, accurate investment data (often referred to within the industry as a “Golden Copy” of data) that benefits all our clients to the extent they otherwise have rights to the data. Through this continuous process, we are able to identify and adjudicate data discrepancies that otherwise could introduce error and risk into our clients’ investment portfolios. We believe that a meaningful competitive advantage of this network effect is that we are increasingly seen as the best and most accurate source of investment accounting data and analytics in the industry.

We have a 100% recurring revenue model, excluding revenue from professional services and license-related revenue from the JUMP Technology acquisition. We charge our clients a fee that is based on the amount and complexity of the assets they manage on our platform as well as the breadth of the solution utilized by the customer. In 2022, we transitioned our contracting structure to a framework we describe as Base+ for all new clients. A Base+ contract framework includes a base fee for a prospective or existing client’s book of business plus an incremental fee for increases in assets on the platform. This structure is designed to limit the downside volatility in our asset-based fees. We also began to amend contracts with our existing clients to either modify the structure of such contracts from a pure asset-based fee to this Base+ model or to increase the basis point price. Prior to 2022, we charged a basis point fee based on the client’s assets on the platform subject to contracted minimums. For those clients contracted prior to 2022 and whose contract has not been amended, our revenues can more significantly fluctuate with the changes in those clients’ assets. A majority of the assets on our platform are high-grade fixed income assets, which have traditionally had lower levels of volatility, enabling our highly predictable revenue streams. The Base+ model includes annual increases in the base fee and enables us to charge additional fees for supplemental services provided for certain alternative asset classes (e.g., LPx, MLx) or additional products (e.g. Prism, OMS/PMS) should the client choose to utilize those services.

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Recent Developments

Secondary Offerings

As required by the Registration Rights Agreement dated September 28, 2021, the Company participated in multiple underwritten offerings of shares held by our Principal Equity Owners during the year ended December 31, 2023.

Pursuant to underwriting agreements executed on March 8 and June 15, 2023, certain affiliates of Welsh Carson (the “WCAS Selling Stockholders”) sold 14,950,000 and 10,000,000 shares, respectively, of Class A common stock in underwritten secondary public offerings. As part of these secondary offerings, the WCAS Selling Stockholders exchanged a total of 8,039,841 shares of Class C common stock, together with corresponding LLC Interests of CWAN Holdings, and 16,910,159 shares of Class D common stock for an equivalent number of shares of Class A common stock that were purchased by the underwriters. The Company did not sell any securities in these secondary offerings and did not receive any proceeds from the sale of the shares sold by the Selling Stockholders. The Company incurred $1.6 million in expenses associated with these secondary offerings which were recorded as general and administrative expenses.

Pursuant to underwriting agreements executed on November 6 and November 30, 2023, certain affiliates of Welsh Carson, Warburg Pincus and Permira (the “Selling Stockholders”) sold 20,000,000 and 17,000,000 shares, respectively, of Class A common stock in underwritten secondary public offerings. As part of these secondary offerings, the Selling Stockholders exchanged a total of 6,653,590 shares of Class C common stock, together with corresponding LLC Interests of CWAN Holdings, and 30,212,119 shares of Class D common stock for an equivalent number of shares of Class A common stock that were purchased by the underwriters. The Company did not sell any securities in these secondary offerings and did not receive any proceeds from the sale of the shares sold by the Selling Stockholders. The Company incurred $0.5 million in expenses associated with these secondary offerings which were recorded as general and administrative expenses.

Key Factors Affecting Our Performance

The growth and future success of our business depends on many factors, including those described below.

•Adding New Clients in Established End Markets: Our future growth is dependent upon our ability to continue to add new clients, and in 2023 we added over 80 net new clients. We are focused on continuing to increase our client base in our established client end-markets of corporations, insurance companies and asset managers, and doing so with increasingly large and sophisticated clients. As we add clients, it takes time to fully onboard their assets to the platform. Our revenue generally increases as assets are added to the platform, while the effort to serve the client is relatively consistent over time. Therefore, we expect revenues and gross margins to increase for a client as the client transitions from the onboarding process to a steady state once assets have been onboarded. In any period, our gross margins may fluctuate based on the relative size and number of clients that we are onboarding at that time.

•Expanding and Retaining Relationships with Existing Clients: Our future growth is dependent upon retaining our existing clients and expanding our relationships with these clients through increases in the amount of their assets on our platform. We have enjoyed consistent gross revenue retention rates of approximately 98% in 19 of the past 20 quarters. The consistency in revenue retention creates predictability in our business and enables us to better plan our future investments. Our relationships with our clients expands as these clients add more assets to our platform, with our quarterly net revenue retention rates (as defined below under “—Key Operating Measures”) between 106% and 109% in 2023. Clients may add assets as a result of acquiring new clients themselves or by acquiring new businesses or simply through organic growth, which produces additional assets that they manage using our platform. We believe that our client service model and technology platform are strong contributing factors in our attractive retention rates. As such, we expect to continue to invest in both our operations and research and development functions to maintain and increase our high levels of client satisfaction, which we believe will lead to strong client retention and expansion.

•International Expansion: We believe that the value provided by our platform is equally applicable to asset owners and asset managers outside of North America, and there is a significant opportunity to expand our client base and usage of our platform internationally. Our future growth is dependent upon our ability to successfully enter new international markets and to expand our client base in our current international markets. Our cost to acquire clients in international markets is currently greater than in North America because there is less awareness of the Clearwater brand and our product capabilities, and we have to date invested less in sales and marketing internationally. For these reasons, we expect to

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invest more in sales and marketing in international markets relative to North America in order to achieve growth in these international markets.

•Adding New Clients in Adjacent or Nascent End-Markets: Our strategy is to also add new clients in our more nascent end-markets, which include state and local governments, pension funds and sovereign wealth funds, as well as a variety of alternative asset managers. Traditionally, our existing clients have been among our best resources for referring new clients to us, and we will continue to invest in sales and marketing to build awareness of our brand, engage prospective clients and drive adoption of our platform, particularly as it relates to expanding into new end-markets. As we establish our presence in new end-markets, we expect sales and marketing expenditures will be less efficient than in our established verticals and we will become increasingly more efficient at acquiring clients in new end-markets over time.

•Expanding Solutions and Broadening Innovation: Our future growth is dependent upon our continued expansion of our solutions in order to better retain our current clients and to develop new use cases that appeal to new clients. While we believe we will be able to reduce our research and development expenses as a percentage of revenues as we achieve greater scale, our priority is to maintain and grow our technological advantage over our competitors. As we identify opportunities to increase our technological and competitive advantages, we may increase our investments in research and development at rates that are faster than our growth in revenues in order to enhance our long-term growth and profitability.

•Fluctuations in the Market Value of Assets on the Platform: Although we generally have a base fee and adopted our Base+ model in 2022, we also bill our clients monthly in arrears based on a basis point rate applied to our clients’ assets on our platform, which can be influenced by general economic conditions. While 77% of the assets on our platform were high-grade fixed income securities and structured products as of December 31, 2023 and traditionally subject to lower levels of volatility, the value of our clients’ assets on our platform varies on a daily basis due to changes in securities prices, cash flow needs, incremental buying and selling of assets and other strategic priorities of our clients. For these reasons, our revenue is subject to fluctuations based on economic conditions, including market conditions and the changing interest rate environment.

Key Components of Results of Operations

The following discussion describes certain line items in our consolidated statements of operations.

Revenue

We generate revenue from fees derived from providing clients with access to the solutions and services on our SaaS platform. Sales of our offering include a right to use our software in a hosted environment without taking possession of the software. Our contracts are generally cancellable with 30 days’ notice without penalty. We invoice clients monthly in arrears based on a percentage of the average daily value of assets within a client’s accounts on our platform during that month, or based on a fixed monthly base fee. Payment terms may vary by contract but generally include a requirement of payment within 30 days following the month in which services are provided. Fees invoiced in advance of the delivery of the Company’s performance obligations are deemed set-up activities and are deferred as a material right and recognized over time, typically 12 months. Through JUMP, which we acquired on November 30, 2022, we also earn license revenue.

Cost of Revenue

Cost of revenue consists of expenses related to delivery of revenue-generating services, including expenses associated with client services, onboarding, reconciliation and agreements related to the purchase of data used in the provision of our services. Salary and benefits for certain personnel associated with supporting these functions, in addition to allocated overhead, amortization of JUMP-related developed technology intangible asset, and depreciation for facilities, are also included in cost of revenue.

Operating Expenses

Research and development expense consists primarily of salary and benefits for our development staff as well as contractors’ fees and other costs associated with the enhancement of our offering, ensuring operational stability and performance and development of new offerings.

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Sales and marketing expense consists of the costs of personnel involved in the sales and marketing process, sales commissions, advertising and promotional materials, sales facilities expenses, and the cost of trade shows and seminars.

General and administrative expense consists primarily of personnel costs for IT, finance, administration, human resources and general management, as well as expenses from legal, corporate technology and accounting service providers.

Interest (Income) Expense, Net

Interest (income) expense, net reflects interest expense on our outstanding term loans under the New Credit Agreement and Previous Credit Agreement during the course of the applicable period. The interest expense varies depending on the timing and amount of borrowings and repayments during the period as well as fluctuations in interest rates. Interest income relates to interest received on our cash and cash equivalents based on interest rates in the course of the applicable period, and interest received from our other investments.

Tax Receivable Agreement Expense

In connection with the IPO and related transactions, we entered into a TRA that provides for the payment by us of 85% of certain tax benefits that we realize as a result of Tax Attributes, as defined in the Tax Receivable Agreement. Tax receivable agreement expense relates to payments we anticipate making under the TRA.

Loss on Debt Extinguishment

Loss on debt extinguishment related to the early repayment of borrowings under the Previous Credit Agreement. The debt was extinguished on September 28, 2021 in connection with the closing of the IPO.

Other (Income) Expense, Net

Other (income) expense, net, consists of gains and losses of foreign currency and investments.

Provision for Income Taxes

Provision for income taxes consists of income taxes related to federal, state, and foreign jurisdictions where we conduct our business, net of our valuation allowance. Our effective tax rate may increase in the future as our ownership in CWAN Holdings increases via exchanges from historical partners. In addition, our discrete items (e.g. changes in tax rates or laws, equity-based compensation deductions, or mix of income between tax jurisdictions) may not be consistent from year to year and could cause volatility in our effective tax rate.

Key Operating Measures

We consider certain operating measures, such as annualized recurring revenue, gross retention rates and net retention rates, in measuring the performance of our business.

Annualized Recurring Revenue

Annualized recurring revenue is calculated at the end of a period by dividing the recurring revenue in the last month of such period by the number of days in the month and multiplying by 365.

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The following table summarizes the Company’s annualized recurring revenue as of the dates presented:

Because a substantial majority of the assets on our platform are fixed income securities that typically have low levels of volatility with respect to their market value, the growth in annualized recurring revenue is generally not attributable to the fluctuating market value of the assets on our platform. Rather, the growth in annualized recurring revenue is due to an increase in the number of clients using our offering as well as from onboarding more assets of our existing clients onto our platform.

Annualized recurring revenue increased 17% from December 31, 2022 to December 31, 2023 due to growth in our client base as we brought new clients onto our platform and added additional assets from existing clients.

Revenue Retention Rate

Gross revenue retention rate represents annual contract value (“ACV”) at the beginning of the 12-month period ended on the reporting date less client attrition over the prior 12-month period, divided by ACV at the beginning of the 12-month period, expressed as a percentage. ACV is comprised of annualized recurring revenue plus contracted-not-billed revenue, which represents the estimated annual contracted revenue for new and existing client opportunities prior to revenue recognition. In order to arrive at total ACV, we include contracted-not-billed revenue, as it is contracted revenue that has not been recognized but that we expect to produce recognized revenue in the future. Client attrition occurs when a client provides a contract termination notice. The amount of client attrition is calculated as the reduction in annualized revenue of the client at the time of the notice and is recorded in the month the final billing occurs. In the case of client attrition where contracted-not-billed revenue is still present for a client, both annualized recurring revenue and contracted-not-billed revenue associated with such client are deducted from ACV.

Net revenue retention rate is the percentage of recurring revenue retained from clients on the platform for 12 months and includes changes from the addition, removal or value of assets on our platform, contractual changes that have an impact to annualized recurring revenues and lost revenue from client attrition. We calculate net revenue retention rate as of a period end by starting with the annualized recurring revenue from clients as of the 12 months prior to such period end. We then calculate the annualized recurring revenue from these clients as of the current period end. We then divide the total current period end annualized recurring revenue by the 12-month prior period end annualized recurring revenue to arrive at the net revenue retention rate.

The following table summarizes our retention rates as of the dates presented:

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Gross revenue retention rates have remained consistently at approximately 98% in 19 of the past 20 quarters. We believe the extremely consistent and high gross revenue retention rate is a testament to the value proposition that our leading solution offers.

Non-GAAP Financial Measures

We also consider certain non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), such as adjusted EBITDA and adjusted EBITDA Margin, in measuring the performance of our business. The non-GAAP measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. However, we believe that this non-GAAP information is useful as an additional means for investors to evaluate our operating performance, when reviewed in conjunction with our GAAP financial statements. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP, and because these amounts are not determined in accordance with GAAP, they should not be used exclusively in evaluating our business and operations. In addition, undue reliance should not be placed upon non-GAAP or operating information because this information is neither standardized across companies nor subjected to the same control activities and audit procedures that produce our GAAP financial results.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA and Adjusted EBITDA Margin are supplemental performance measures that our management uses to assess our operating performance. We define Adjusted EBITDA as net loss plus (i) interest (income) expense, net, (ii) loss on debt extinguishment, (iii) depreciation and amortization expense, (iv) equity-based compensation expense and related payroll taxes, (v) equity-based compensation expense related to JUMP acquisition, (vi) tax receivable agreement expense, (vii) transaction expenses, and (viii) other expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA (as defined above) divided by revenue.

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The following table reconciles net loss to Adjusted EBITDA and includes amounts expressed as a percentage of revenue for the periods indicated.

(1)Other expenses include management fees to our investors, provision for income taxes, foreign exchange gains and losses and other expenses that are not reflective of our core operating performance, including the costs to set up our Up-C structure and Tax Receivable Agreement.

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Results of Operations

The following tables set forth our results of operations for the years ended December 31, 2023, 2022 and 2021: