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Hello, everyone, and thank you for joining CWAN's 2026 Outlook Webinar. We have a great presentation lined up that takes a data-driven look at the U.S. economic outlook and the forces shaping markets as we head into 2026. Investors are balancing persistent macro uncertainty with evolving portfolio risks, making it critical to separate short-term noise from signals that truly matter. Before we get started, I wanted to run through a few quick housekeeping notes to help you get the most of today's session.

[Operator Instructions] In the resources list, you'll find additional materials related to today's topic, and today's session will be recorded and an on-demand version will be available after we wrap up the session. So now I'm pleased to introduce Matthew Vegari, Head of Research at CWAN. Matthew leads CWAN's research desk delivering investment and portfolio insights at the intersection of macroeconomics, markets and CWAN's proprietary data, which helps identify the shifts shaping both tactical and long-term decision-making.

So with that, I'll turn it over to Matthew.

Thanks so much, Val. Pleasure to be with you all today. Happy holidays to those who are celebrating. I entitled this outlook for 2026 as Will the Economy Hang On? And the choice of words was quite deliberate because while a recession is far from my base case for next year, I don't view the current macroeconomic environment as one that is particularly comfortable for households, that is particularly comfortable for consumers.

And the question that really is top of mind is, will the economy hang on? Not will the economy thrive next year, but will it kind of stay away from the precipice and kind of muddle through for the next few quarters.

As an economist, I tend to view the macroeconomic environment often through the Federal Reserve because the Central Bank is a little bit like the maestro for the economy, setting the short-term interest rates, which can influence long-term interest rates and really trying to restrain the economy from moving too quickly and trying to prop it up when it's moving a little bit too slowly.

It was an interesting year for the Federal Reserve, however, because it has 2 policy objectives principally. The first is price stability and the second is full or maximum employment. And they became a little bit intention this year with the arrival of a new presidential administration and the imposition of the highest tariffs for several generations in the U.S.

And so to begin, I wanted to talk a little bit about the inflation story because the Federal Reserve was actually reasonably on the way to accomplishing its goal of returning to 2% price growth. After the pandemic surge, and that's the dark yellow line on the left here, you can see that inflation was coming down. It was getting close to that dotted white line, getting close to target, but not quite there.

But what happened was with the imposition of these new tariffs, durable goods inflation and goods inflation generally actually reversed course. It was providing a deflationary impulse through the economy after the pandemic frenzy. And actually, as you can see with this arrow of the light yellow line on the left, durable goods inflation turned positive this year. Why? It has a lot to do with tariffs, which we'll talk about in a little bit in a few slides.

But I think it's important to note that the Federal Reserve was getting close, but not quite there to the finish line with respect to inflation, and it was -- became a little bit tricky for it. Why was it particularly tricky? Because the other side of its mandate, which I'll now show on the right, was getting a little bit softer, and that was the U.S. unemployment rate.

The labor market, while the unemployment rate remains particularly reasonably low, there has been a notable uptick in the second half of this year. And now the Federal Reserve really is dealing with 2 sides of its mandate. And it's an ongoing question of which side is more important is should the Federal Reserve be prioritizing price stability even though inflation might be reigniting or be proved sticky above its 2% target?

Or because monetary policy has been in reasonably restrictive territory, and the labor market has continued to soften, should policymakers be more concerned with the job market and the state of whether new jobs are being added and whether people can keep their jobs and firms are not having to lay off workers.

And so this is the tension that was a big theme for the second half of 2025. It will remain an ongoing tension going into 2026. But I'd like to point out here that the unemployment rate still is reasonably low. Yes, it has ticked up, but it hasn't surged.

And what you'll notice, and this goes back to 1990, the unemployment rate tends to do two things. It's either falling gradually or it's surging suddenly during a recession. And I have taken the series on the right here and plotted it since the 1950s on a cycle-by-cycle basis on this next slide.

So you'll see here, I plotted every single unemployment rate since the 1950s indexed to its low. So while the unemployment rate it's a low 4% or low 5%, generally speaking, it is either falling. And then once it hits that cyclical low that people often will consider the peak of the cycle or when the cycle is at its strongest, within 2 years, the unemployment rate tends to surge.

Now why does it tend to surge? It's because weakness tends to beget weakness. When things go awry, they tend to go arrive very quickly, firms lay off workers, those workers no longer have spending power. They can't spend money, then other firms have to lay off workers, and this is kind of -- it results in a surge in the unemployment rate.

And this is a typical business cycles going back to the 1950s. What has puzzled economists this cycle, but is actually a bit of a good thing for how strange and unusual it has been is that for this cycle, the unemployment rate has not surged. And if you look now, I've added a pink line for the current cycle, and you'll notice that we're well past the 2-year mark. And the unemployment rate, though it has ticked up, it has not surged.

And so the question is, has the inevitable just been delayed? Or are there intrinsic things to this economy that are conferring strength and keeping a lid on the unemployment rate so that while things are softening, they're not rapidly falling apart. And I view that as my base case.

I think the unemployment rate continue to tick up a little bit, that the labor market will continue to soften a bit, but there are reasons to think that this is an anomalous cycle and that while things are softening and might not be the most comfortable right now, we should not expect a full-blown recession in the next quarter.

Now why do I think that? The first is that while hiring has been low, so has firing. So people are calling this the low hire, low fire economy. I tend to agree. On the left here, in the yellow line, I have plotted unemployment claims.

Now unemployment claims are like the economists proxy for layoffs because when workers get laid off, they tend to file for state unemployment insurance, and that data comes in weekly.

And so as you can see, it has remained extremely low since the pandemic. And this is also a chart that's not adjusted for the U.S. labor force. So it's actually even lower than it seems because the labor force has grown considerably since the year 2000.

But right now, people are not really firing, hiring -- excuse me, people are not really filing for unemployment, which means they're not being laid off by their firms. So that's keeping the unemployment rate reasonably low.

When we think about what would cause the unemployment rate to go up, it tends to be two things. It's either firms laying off workers, just what tends to lead to a recession or not enough jobs are being added relative to the people who are entering the workforce.

How do people enter the workforce? Well, they can graduate high school, graduate college, start looking for jobs or they can be immigrants who come to the United States looking for opportunities. Right now, we are seeing that firms are not laying off workers, which means that the unemployment rate, which is slowly ticking up, which I showed previously, is not due to layoffs, but it's due to the supply of workers slowly increasing.

So people are entering the labor force, and there just aren't quite enough jobs for them to keep the unemployment rate from rising. What else is keeping the unemployment rate from rising? Well, I mentioned that one way that labor supply goes up might be college graduates or high school graduates. Another way is immigration.

And on the right here, you can start to see that the Trump administration's immigration crackdown is apparent in the government statistics now. This is the Foreign-Born Labor Force for the United States, and that's the pink line.

And I've plotted the 2022 to 2024 trend for what we would have expected prior to the Trump administration, the Foreign-Born Labor Force to look like. And right now, you can see we've been knocked off that trend pretty considerably.

There are about 2 million fewer workers in the U.S. that were born in other countries. And what that means is it's restricting labor supply. So even though workers are not being hired at a particularly high clip, they're also not entering the workforce at as high a clip as they were last year, in part because of immigration.

This is an ongoing story. I don't expect it to change materially next year. And so if we can think of the unemployment rate being pushed up by low hiring, we can also keep -- think of it as being pushed down a little bit because there are fewer immigrants entering the United States.

What does this mean from a monetary policy perspective? The unemployment rate is ticking up, inflation remains sticky and elevated. Well, it means that the Federal Reserve has to continue with this balancing act.

On this chart, I plotted the Fed funds rate, that's the Fed's policy rate in dark blue relative to a kind of estimated neutral rate. Now when the Fed has rates above this dotted blue line, we can think of it as putting the brakes on the economy.

The conductor is starting to conduct a little bit more slowly because things are overheating, it's creating price pressures. And what you saw during the pandemic was when inflation kind of jumped for the first time in 40 years, the Fed had to rapidly raise rates. And inflation came back down more in line with the Fed's 2% mandate and the Fed started to ease.

What's interesting is that the expectation for this year is the Fed wasn't going to be doing that much cutting. And you can see I've plotted the path for January 2, 2025. You can see that the Fed was expected to remain in restrictive territory.

But instead, the Fed actually cut 3 times this year and is expected to cut a few more times next year. And the question is, why? Well, it's because the labor market started to soften, in part because tariffs pushed up price pressures for firms and the business environment got a little bit squeezed. So while price pressures did remain elevated relative to the Fed's target, the labor market softened.

And Chair Powell had a pretty good quote a few months ago, and I'm paraphrasing here. But he basically said that when two sides of the mandate, that's price stability and full employment are in conflict with each other or if they're a little bit imbalanced, then policy should be near neutral. It's almost like the Fed is hedging its bets a little bit. It knows the labor market is softening. It also knows price stability isn't where it wants it.

And so it's reduced the Fed funds rate very close to neutral or some would say even at neutral today as a way of not restraining the economy, but not hitting the accelerator either. For those who are anticipating a lot more cuts from the Federal Reserve next year, I would say the only way that, that would happen is if things really unraveled quickly in the labor market.

That's not my base case. It's also not a desirable situation. When the Fed is cutting a lot very quickly, things tend to have gone very awry. So I view a cautious approach to monetary policy as my base case. It's also the most desirable thing for the economy.

Again, that doesn't mean that policy is going to become easy next year. It's not below this dotted blue line materially, but it's not going to be the headwind that it's been for the last few years.

Inflation is elevated, but it's not so elevated that the Fed needs to keep rates at 4% or 5%. But the labor market also hasn't unraveled so quickly that the Fed needs to cut to 1% or 2%.

So we're in this in-between phase where the Fed is in wait-and-see mode and by its own predictions, thinks that the economy will hang on next year. I'll talk a little bit more about that. momentarily.

What does this mean at CWAN? Well, at CWAN, we are constantly monitoring how our clients in our database are allocating both tactically and strategically in their portfolios. On the left, I plotted corporate cash allocations for -- this is for corporate treasurers and CFOs and the like.

And on the right, I've done it for insurers. And what you can see is that on the left, median cash allocations have fallen to the lowest in at least 7 years in 2025. I suspect this line will continue to drift lower next year.

Why are cash allocations falling? Well, the Fed is cutting and corporate clients are adding slightly more duration, call it, 6 months, call it, a year to their portfolios as a way to lock in yield because the Fed is not going to raise rates next year. They might as well kind of cash in on more duration.

And actually, we can see in our system that firms that performed the -- had the strongest returns this year also had the highest duration exposure, which is to say that they foresaw the Fed cutting before a lot of their peers did. They locked in yield. And when the Fed cut 3x at the end of this year, those that had locked in yields prior to that benefited from not holding as much cash.

On the other side of the page, we have insurers. Insurers hold far less in cash, but they're also holding more cash than they did, let's say, 2, 3 or 4 years ago. And I suspect that this will stay true next year, drifting down a little bit.

But if insurers want to hold cash and cash is offering 3%, 3.5% for those that are -- that want to maintain a small but potentially meaningful cash allocation, a cut of 25 to 50 basis points from the Federal Reserve is not going to be a deal breaker when you're only holding 3% or 4% of your portfolio in cash.

I talked a lot about why -- what is making the unemployment rate not surge and why the labor market is not unraveling quickly and why inflation might remain a little bit elevated. But I haven't really talked about actual sources of strength for the U.S. economy.

What is keeping the ship afloat. And the main thing that is keeping the ship afloat is the same thing that has been keeping the ship afloat for the past few years, and that's a strong U.S. consumer.

Now consumption comprises 2/3 of U.S. GDP. So what consumers spend, the homes they buy, the furniture they buy, going out to dinner, everything that we would consider consumption is of huge importance to the health of the U.S. economy.

And there are two principal ways that consumers in the U.S. can increase consumption. The first is if we add more jobs. If there are more jobs being added, there are more paychecks, those paychecks then gets spent at different source around the country. And as a result, consumption grows.

On the flip side, if we're not adding that many jobs, and we know right now, we're really not adding that many jobs. That's why the unemployment rate is slowly ticking up. The alternative is that the individual wage earner is gaining spending power.

So that is workers getting raises and those raises are ahead of inflation, and that's giving them increased purchasing power year-over-year. So on the left, I plotted wages and inflation. And on the right, I plotted the net of those 2 curves.

And as you can see, when things were particularly bad in 2022, 2023, when inflation was 8% or 9% and wage growth was only 5% or 6%, workers were particularly upset because they were actually seeing their individual purchasing power fall.

Right now, with the labor market that's been softening, we see that wage growth is easing down. Inflation is holding above the Fed's target, somewhere between 2.5% and 3%. What that means is that real wage growth has been slowly eroding, but it remains positive. And this is crucial.

To my mind, the thing that will keep the U.S. economy out of a recession next year is the fact that individual consumer spending, while not as strong as it was, let's say, a year ago, will continue to be a tailwind to the economy and keep things from unraveling. If inflation suddenly surged as the labor markets continue to soften, which was the expectation for a lot of people due to tariffs, we would have seen this line on the right plummet below 0.

But right now, we're seeing a gradual easing. And I do think that with somewhat strong individual purchasing power increases next year, the U.S. economy, while again, not particularly comfortable, not thriving by any means, but we will avoid tumbling into a recession, in part because of a very strong consumer.

I don't want to dwell too much on what's keeping inflation up, but the main story here is tariffs. You've got energy prices really low. You've got a labor market that's cooling. So what's pushing up on prices? It's tariffs at the border. The U.S. is now collecting a couple of hundred billion dollars per year in tariff revenues.

So firms really are paying these tariffs. The reason that the inflation statistics haven't surged as much as many thought is because this thing takes time. And I won't go into detail through every single step, but all you need to know really is that there is a food chain, if you will, of how prices get passed off to consumers. And 2025 was a lot about firms absorbing these costs and 2026 will be about consumers absorbing these costs.

So there was a margin hit for a lot of firms in 2025, and those costs are slowly going to be passed off to consumers. So we're not out of the woods yet with respect to consumer prices but it didn't happen as quickly as some foresaw, and this is excellent news.

We want a slow grind of prices because that's the way that the consumer can kind of muddle through with spending that's not gangbusters, but that hasn't collapsed because when the consumer loses purchasing power, the saying goes, as the consumer goes, so goes the U.S. economy.

But keep your eye out on consumer prices next year.

They're not going to fall as many -- they're not going to grow as slowly as some would like, but they're also not going to accelerate as the -- as doom sharers would like to have you think.

It's not just consumer spending that's a source of strength. Another source of strength, which is also a sign of strength, has been strong corporate profits. Why do strong corporate profits matter? Well, they keep the equity market a float, which is great, but firms that are doing well can also reinvest in human capital.

They can invest in physical capital. And on the left, I've plotted after-tax corporate profits as a share of GDP. Corporates are doing reasonably well right now despite the margin hit. And there are sector-specific differences here. I think I'm a macro economist, so I tend to think in terms of the aggregate, but there are absolutely individual sectors that are getting hammered, let's say, by tariffs or by weaker demand. And there are also obviously some sectors that are seeing boom times, be it tech firms and AI and cloud computing, what have you.

Another source of strength is -- I think I talked about the low hire, low fire situation. On the right here, this is a survey of CFOs and their hiring plans for the year ahead. You can see that CFOs are not anticipating that much hiring going into next year, but they're also not anticipating firing. And I think this is crucial.

There is a major difference between a labor market that is defined by layoffs and a labor market that is defined by not that much hiring. And we are really in this kind of low hire, low fire, cool but not cold labor market. And this chart of CFO sentiment for the year ahead kind of indicates that.

When you look at '07, '08, '09, when hiring plans turn negative, that's when you really worry about a recession. But by and large, CFOs, while they might not be planning -- firms might not be planning to do as much hiring next year as they have for the last few years, they're by no means planning a bunch of layoffs.

I think it's helpful to look at what policymakers are thinking because that can give us an indication of where the Fed's head is at and where -- how it might adjust policy accordingly. You'll note here, this is a screen grab of the summary of economic projections, which gets published a few times per year.

I've shown an up arrow here for GDP projections for 2026. You'll notice that in September, the Fed was anticipating 1.8% GDP growth next year. And as of last week, was now projecting 2.3%. These numbers will inevitably be wrong. I'm not saying that is the GDP growth that we're going to get. But it's important to understanding how Federal Reserve policymakers are thinking in terms of -- because that's going to influence how they set policy.

If they see 2% -- if they think there's going to be 2% plus growth next year, then they're not going to slash interest rates to 1% or 2% because they don't view the economy is on the precipice of falling apart. So I tend to think that we'll probably be on the lower side of this, but I'm hoping to be proven wrong, but I also have no belief that we're going to enter a situation where growth will turn negative this year or be even meaningfully low.

There are still a lot of good strains in the economy that we've talked about, and they're not necessarily going anywhere. So to shift gears a little bit from Fed policy and short rates, I'd like to discuss long rates a little bit because I know that a lot of people on this call are not simply allocating towards cash. They're also thinking about longer duration fixed income.

The question I get asked a lot is where is the 10-year going to be? How low can interest rates go? And I tend to view that there is a structural floor below the U.S. 10-year. One way that I think about it is to decompose the 10-year a few different ways and to see what would it take to change these different components to make the 10-year rise or to make the 10-year fall.

On the left, I've decomposed the U.S. 10-year to breakeven inflation and the real yield. breakeven inflation is just calculated using government tips yields, inflation-adjusted yields. You'll notice what's interesting is that breakeven inflation, the light blue hasn't really changed the last few years.

Despite the fact that the Federal Reserve has seen inflation stay above its 2% target for many years now. Investors, at least in the market, still think that inflation remains under control, and it's not going to rise meaningfully above 2%, 2.5%.

What has risen is the real yield. And I'll talk more about why the real yield is up. But essentially, you'll see that it was negative during the pandemic and only modestly positive prior to the pandemic, but has been strongly positive the last few years.

On the right, another way of thinking about the 10-year is -- the 10-year is, in essence, a lot of short rates combined plus a term premium. What I mean by that is you could buy a 10-year bond or you could kind of buy 10, 1-year bonds. And so when you're thinking about how a longer-term treasury should be priced, you can think in terms of the average short rate that shorter-dated U.S. treasuries will take over the next 10 years.

You'll notice that the short rate has surged over this time. Why? Because the Federal Reserve has raised rates to the highest since the -- since prior to the Great Recession. And as a result, there's kind of been a belief that rates are going to stay in this higher environment because inflationary pressures now point upward as opposed to pointing downward.

I'll talk more about that on the next slide. What I do want to draw your attention to here is the term premium. So as I mentioned, we can decompose the 10-year this way and think about the short rate. And then in addition to the short rate, investors want additional compensation for holding a longer-dated bond to term.

What's interesting is that prior to COVID, the term premium was actually negative for many years. What does that mean? It means that investors were actually paying to hold 10-year treasuries. They were not getting a positive term premium. On the contrary, the yield was actually being lowered relative to what the short rate was.

Why has the term premium gone up? There's a lot of reasons that people put forth. One of them is the fiscal outlook for the United States has gotten a little bit more dubious. And as a result, investors demand a little bit more compensation for holding an asset that is not as risk-free as it once was. I tend to view that with a little bit of skepticism. What I view as a more reasonable cause for the rise in the term premium is that bonds are just not quite the hedge that they used to be. They used to be reliably negatively correlated for a few decades.

And we saw over the last few years that sometimes equities and bonds will sell off together, and they're not always negatively correlated. And as such, you're not getting that portfolio hedge, that portfolio insurance that you once were.

So that's another reason why there's a bit of a structural floor underneath the 10-year treasury. Zooming in a little bit, what's creating that floor with short rates, what's pushing up the real yield? Well, it's because of Fed policy. Essentially, this is the long-run neutral estimate from policymakers. You'll notice that the median has gone up as has the lower estimate over the last few years.

So policymakers view that neutral rate, that dotted blue line that I showed earlier as going up slowly because the economy is getting stretched. There's high demand for capital. We're operating in a tighter pressure economy in part because of this AI CapEx boom, in part because of demographic changes.

But essentially, there's a little bit of a structural floor now below the 10-year because the Federal Reserve has to keep rates higher than it used to even when it's at neutral. And what that does is that eventually it translates into higher long rates.

How do we view these things at CWAN? Well, at CWAN, I'm happy to introduce the CWAN duration activity Index. On the left here, I'm showing how much duration is being added to corporate portfolios. And on the right, how much duration is being added to insurers portfolios.

And when it's above, the lines are above 0, firms are adding duration and the distance from 0 essentially tells you the magnitude. What's interesting is that right now, duration exposure for both corporates and insurers is heading water.

Corporates and insurers like their duration exposure right now. They're not going out and buying longer-dated bonds. They're also not holding on to more and more cash. So what this shows is that portfolios are reasonably imbalanced right now from a duration perspective.

This is really exciting to announce because I think there's always a lot of commentary on how institutional investors are positioning their portfolios, but we can actually show you at CWAN what we see in our anonymized and aggregated databases by institutional investor.

Here, I've happened to zoom in on corporates and insurers, but there'll be more to come next year with respect to other institutional investors like state and local governments, like family offices and the like. I'm cognizant of time, so I don't want to spend too much talking about credit, but I get asked about risk to the credit system a lot.

On the left, I've plotted credit spreads for IG and high-yield corporate bonds and notice that they are the lowest in almost 30 years. You also notice on the right that high-yield issuance is up. So a question I get asked a lot is, oh, like our spreads low, like is there a lot to be worried about? I would say that the reason things are low is because the economy is actually doing pretty well.

On the left here, I've shown business delinquencies, which remain really low. Business delinquencies, these are for small -- tend to be for smaller commercial industrial loans from banks. And I pair them here with high-yield corporate bond spreads. When things go wrong for the little guy, they tend to go wrong for the big guy. And right now, the little guy is paying his debts.

As a result, spreads are low right now, but it's because there's not that much risk in the system. Additionally, on the right, I plotted the MOVE index, which is a measurement of volatility in the treasury futures market, you'll notice that it's coming down quite a bit. Why? Because Federal Reserve policy is becoming much clearer, and we have a better sense of where bonds are heading in the year ahead.

As a result, spreads are low because the economy is doing pretty well and businesses are paying their debts and there's less volatility in markets. So bonds are not as risky as they were a few years ago.

I want to end on a bit of an analogy. There's -- this economy has been counted out kind of again and again. And one of the, I think, epitomes of that was this year when the Trump administration announced the tariffs on Liberation Day in April, you'll see that a lot of people -- you saw that a lot of people thought that this was -- there would be a massive divestment from Uncle Sam that people will be pulling their money out of U.S. markets and U.S. assets. And interestingly, at CWAN, we did see this for foreign investors in our insurance database.

You'll notice that the -- this is book value of investments, and I've broken it down by non-U.S. assets, all holdings and U.S. assets. I noticed that all holdings have been rising for close to 2 years now. But at the start of this year, there was a bit of divestment from foreign investors in our system for U.S. assets.

And it became particularly pronounced in April and May after Liberation Day. What happened, however, was that as the U.S. economy hung on, those outflows soon became inflows, and this trend reversed course. This is a story that we published over the summer and then again in the fall, it was covered by MarketWatch and Bloomberg.

But this is one of the benefits of the power of CWAN's databases is that we can see how investors are positioning themselves live. And this is one of the interesting stories from this year. But I think it's kind of a little bit of an analogy for what -- how the economy is going. People keep counting this economy out. They keep thinking that we're going to tumble in a recession. There will be short-term jitters. And then eventually, the economy continues to defy the odds.

So I said that this economy would hang on back in June. I am still convinced that it's going to. I hope I've presented some views here that would suggest that. But thank you so much for your time and looking forward to a little bit of Q&A.

That was great, Matthew. Thank you so much. Let's see. It looks like we have a question that came in. Is Fed independent something to worry about next year?

That's a great question. I would say the answer is no. And the reason is because we're already seeing a little bit of disagreement among policymakers this year. We've had descent for the last few meetings. And it shows that at least with the current Chair, there is a willingness for open debate and descent. And there's a lot of -- there are people who believe that once Chair Powell is replaced by Trumps appointee that independence will erode. I think that policymakers are going to continue to debate things.

I don't think that the Chair has some sway, but I don't think it has all the sway that people confer to him or her. And so I view it as a kind of tail macroeconomic risk that that independence gets hindered. But I think it's not as big a risk as some people say. I think I'll leave it at that.

Perfect.

I'm trying to think. It looks like there's one more question on -- it looks like there's a question on tariffs. So yes, I do have a chart that shows how much firms are paying. You'll see on the left here that relative to last year, firms are paying hundreds of billions of dollars more. One of the reasons -- the question was about if -- are firms paying tariffs and if they are paying tariffs, why haven't we seen in the inflation? And it's kind of what I mentioned about the margin hit earlier.

Firms are definitely paying these tariffs. And the reason we haven't seen it in consumer prices is because firms have been absorbing these costs themselves, which has been basically taking a margin hit and an earnings hit in this year and slowly passing on these prices to consumers. That story is going to continue to play out, but it's not going to be a jump discontinuity like a lot of people thought. It's just going to be a slow grind, which I think is a best case scenario given how high these tariffs are.

Great. I think that's all for today. Well, thank you so much, Matthew, for walking us through that. I think that was really helpful. Again, there will be an on-demand version that will go out after the session is done. So we will follow up with that.

And thank you so much, and hope everyone has a happy holidays. Thank you.

Ladies and gentlemen, thank you for standing by, and welcome to the CWAN Third Quarter 2025 Financial Results Conference Call. [Operator Instructions]

And now I would like to welcome Kamil Mielczarek, Head of Investor Relations to begin the conference. You may proceed.

Thank you, and welcome, everyone, to CWAN's Third Quarter 2025 Financial Results Conference Call. Joining me on the call today are Sandeep Sahai, Chief Executive Officer; and Jim Cox, Chief Financial Officer. After their remarks, we will open the call to a question-and-answer session.

I would like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Expressions of future goals, intentions and expectations, including in relation to business outlook, future financial and product performance, expectations for the acquisitions of Enfusion, Beacon and Bistro and their expected benefits and similar items, including, without limitation, expressions using the terminology may, will, can, expect and believe and expressions which reflect something other than historical facts, are intended to identify forward-looking statements.

Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our filings with the SEC. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement included in our earnings press release.

Lastly, all metrics discussed on this call are presented on a non-GAAP or adjusted basis, unless otherwise noted. A reconciliation to GAAP results can be found in the earnings press release that we have posted to our Investor Relations website.

And with that, I'll turn the call over to our Chief Executive Officer, Sandeep Sahai.

Thank you, Kamil. I'm pleased to report that Q3 was a very strong quarter for CWAN. The nearly unanimous attestation of our strategy from clients, partners, analysts and employees is very inspiring, and we look forward to continuing to build the investment management platform of the Clearwater future.

We delivered revenues of $205.1 million, a 77% year-on-year growth and ARR reached $807.5 million also up 77% year-over-year, demonstrating the durability and predictability of our business model.

I don't use the word stunning very often when it was hard to use another word for our adjusted quarterly EBITDA of $70.7 million, up sequentially from $58.3 million in Q2. This was exceptional for several reasons. Number one, adjusted EBITDA for Q3 was 34.5% versus 32.1% and in the second quarter.

It is helpful to remember that the lower-margin Enfusion business was a part of CWAN for only a portion of Q1 and therefore, the expectation was that the overall margin would decline in Q3. Instead, it improved by 240 basis points.

Number two, gross revenue retention, or GRR, for the combined company was 98%, an excellent metrics that can be attributed to the exceptional work done by the operations teams.

Number three, our gross margin performance felt an even more compelling story. We achieved 78.5% gross margins for the integrated business, hitting our targets meaningfully sooner than the 2-year time line we set with investors.

In another significant achievement, gross margin for the steady-state clients of the core business of Clearwater reached 82% in Q3. The use of GenAI is continuing to accelerate and is outpacing our own assessment of the margin improvement it can drive. We're working on several levels that allow us to continue identifying use cases for GenAI and improving the overall margin of the business.

Number four. Under the data point that was very impressive compared to the stand-alone Q3 margin in 2024, the integrated business delivered an additional 140 basis points of EBITDA in Q3 of this year. Think about that. We integrated 2 businesses with meaningfully lower profitability profiles and still expanded our margins very meaningfully. It's all about the team, relentless execution and the power of the platform.

I want to now spend some time discussing the incredible opportunity we have to grow our business into an industry powerhouse. There are several vectors of growth worth noting. Number one, our TAM has grown to roughly $23 billion and is balanced across geographies and markets. And this is not a passive opportunity. There is real need driving and yearning for next-generation technology. The move to alternative assets, globalization of portfolios, increased need for risk and performance, increasing complexity related to regulatory and compliance needs on result in the need for technology like ours.

Number two, our platform gives us a very deep technological moat. Our ability to build and deliver and open modular extensible front-to-back platform is, we believe, largely uncontested.

And finally, number three, a highly favorable competitive landscape leaves us with multiple avenues for growth. This TAM and our competitive position to provide it an extended run rate for us to continue growing.

Let me talk about our current achievements. Number one, while it is becoming harder to identify the revenue associated with each individual business. core Clearwater grew close to 21% year-to-date over last year. That resilience is what we expect.

Number two, we expect Enfusion to grow 12% for the year and are very energized by the continued booking execution in Q2 and Q3.

Number three, Beacon continues to perform very well. That was our #1 priority, ensuring that the core platforms and businesses continue to grow. It's reassuring to see the progress we have made in the last 2 quarters.

Growth in Q3 booking was very evenly spread across insurance, asset management, asset owners and hedge funds. For the first time, on a year-to-date basis, asset management accounted for the highest booking, matching the opportunity size as defined by available TAM for each market.

In new client acquisition, we signed a global multi-billion hedge fund with a record [ 3-1 ] sales cycle while also creating expansion opportunities across asset classes.

Our wins in the hedge fund market during the quarter was very balanced between launches and conversions and geographies. North America, Europe and Asia. Insurance continues to do very well, powered by our strength in alternatives. LPx MLx risk and Prism all had a strong quarter, reflecting the growing breadth of our solution.

We are establishing ourselves as the partner of choice for the asset order sector. We welcomed a leading global AI platform to CWAN, and our relationship with another global AI leader continues to flourish.

In the government market, Texas Treasury Safekeeping Trust chose us to account for $30 billion in state assets, winning against multiple providers. Our differentiated ability to address complex alternative assets with LPx and fund accounting was the differentiator.

Internationally, our expanding global capabilities continue to drive growth. Our global asset manager selected our premium close and income analytics solutions while expanding with us into the U.K. operations, leveraging our U.K. GAAP and Solvency II expertise. The Latin American Reserve Fund, a regional financial institutions supporting central banks through credit facilities and international reserve management chose CWAN.

Finally, I could not be more excited about our risk valuation and performance capabilities. In just the last week, we signed two 7-digit deals with leading financial institutions. Cross-selling has begun in earnest, and we entered Q4 with the best pipeline we have had in our history. We expect cross-selling to power growth in Q4 and in 2026 and beyond.

Overall, our growth plans for each platform remains the same, and we approached 2026 with renewed confidence. Specifically, the growth plans are for core Clearwater, number one, insurance, continue to win new logos and accelerate wins in Europe and Asia on the strength of our recent wins there. Beyond new logos, providing a more comprehensive solution with a back-to-base motion is a key driver, and we expect to provide solutions to alternative assets, comprehensive risk and valuation capabilities and a front middle office back solution.

Number two, combining the capabilities of the Enfusion and Clearwater platforms, we are seeing very high traction with asset managers. And we continue to invest and grow in that segment. We expect this platform to continue to mature and become the platform of choice for the industry. Helping global asset managers provide a comprehensive reporting solution to the clients under the avenue of continued growth.

Number three, asset owners continue to be a very important growth set. Corporate trust, foundations, state and local governments, REITs, pensions and retail banks are all significant opportunities for our platform.

Number four, executing against opportunities across geographies, markets and products will allow us to continue our current growth trajectory. Those were the vectors of growth for core Clearwater.

Now let's talk about growth of the Enfusion platform. Number one, we have a dedicated product and engineering focus, and we want to ensure client delight across the entire spectrum of clients.

Number two, there is significant time available, and we expect the core business to accelerate. With the addition of Beacon and Bistro, we now have an outstanding solution for various subsegments, including global macro hedge funds and funds that focus on risk of their investing.

Number three, we have begun work on the commercial model, and we expect that have impact in 2026.

And number four. Finally, we are building a strong back-to-base motion that includes providing risk, client reporting by appraisal and expanded reconciliation using our internal tool, Helios.

Each platform's growth is very important, but the driving force behind the combination of these businesses was our ability to build and deliver an integrated open modular and extensible front-to-back platform, one that has the capacity to disrupt our industry and dramatically alter the efficiency and operations of our clients. With that aim in sight, we have started to make progress on: number one, a single security master; number two, a single comprehensive data platform that incorporates all asset process; number three, a single interaction layer that allows clients to talk to the data; and number four, a single interchange layer that allows effective internal and external connectivity. This is incredibly exciting, and we expect to bring these to market in H2 2026 and early 2027.

Now let's talk about Generative AI. We believe that Generative AI represents the most important technological advancement of our lifetime. We embraced the technology early in 2023. We used to drive very meaningful gross margin improvements and have brought this technology to our clients.

We have built out a team of GenAI experts who are actively automating internal and client processes. We have partnered with global leaders like AWS to build our own agenetic platform. In fact, AWS recognized us as an early adopter of Amazon Bedrock Agent Core, which will make generally available last month.

Unlike experimental AI tools or Copilots, layed on legacy systems, CWAN GenAI is fully integrated and deployed into production on our front-to-back platform. Our platform hosts over 800 AI agents created by internal teams and clients and is available to act across more than $10 trillion in institutional assets.

We are, we believe, uniquely positioned to lead our industry in bringing the full potential of GenAI to our clients. And it is fair to ask why are we still uniquely positioned generally via our leadership rests on 3 foundational pillars, which are very difficult for our competitors to replicate without many years of investment.

First is the modern architecture of our platform. We have a single instance, multi-tenant architecture with all the data close into a single logical data store. All our clients are on this single platform. Our decades-long history of ingesting data aggregating it and reconciling it are all recorded on the platform. This makes it relatively easy for GenAI agents to learn. And the agents are only as powerful as an ability to learn. Without this foundation, you cannot properly leverage Generative AI and our competitors will need to rebuild the entire tech stack to reach parity.

Second, the breadth of data on our platform is extensive. We connect to approximately 4,000 data sources. This ecosystem of complex data permissions, websites scraping cleaning and you refine thousands of data sources and incorporating constantly changing accounting, tax and regulatory goals, this would be incredibly difficult to replicate without many years of investment.

The analytics linked to valuation, risk calculations, accounting values and performance are generated by our platform, providing valuable insights for the CWAN GenAI agents to learn from.

In addition to this, details about many alternative assets are not publicly available. But if any one of our clients wants us to track and account for it, we added to our security [indiscernible]. What we already have is a production-grade generative AI platform lies in the market, transforming how our clients operate.

While others are still talking about what GenAI may do, we're already executing at a global scale. Our clients have seen 90% reductions in manual reconciliation, 80% faster regulatory reporting and 50% faster financial close cycles. We believe that it is not a 6- or 12-month lead, but our multiyear competitive moat, positioning us to capture significant market share.

Before closing, let me review the strategic and financial merit of the acquisitions we did. Strategically, the expansion of our TAM, the ability to provide an open, modular and extensible platform has changed our position in the market and dramatically enhanced our ability to cross-sell and compete with all providers of legacy technology in our industry.

Financially, with an approximately 15% dilution on share count, the quarterly revenue has grown 77% year-on-year and EBITDA has grown 84% largely from our organic growth, but the majority effect from these acquisitions.

We have already improved the margin and profitability profile of these businesses to a level close to ours and expect to improve growth over the next 1.5 years. We see this as incredibly accretive to our shareholders and very valuable to our clients. We are very excited about the 2 recent Board appointment of Dr. Mukesh Aghi; and Bas NieuweWeme as well as several key leadership hires across multiple functions. We are very proud of the progress we have already made and the platform we are building for our clients.

With that, I'll hand the call to Jim to dive deeper into our financial details.

Thanks, Sandeep. Q3 2025 marks a milestone for us as we delivered solid results with the first full quarter contributions from Enfusion, Beacon and Bistro acquisitions. We achieved revenue of $205 million. That equates to year-over-year growth of 77% and exceeded the high end of our guidance by over $1 million. The hedge fund market was a key contributor to the revenue upside this quarter, reflecting the growing continence clients have in the breadth and depth of our combined offering.

Annualized recurring revenue, or ARR, at the end of Q3 was a record $807.5 million again, up 77% year-over-year. While our combined net new ARR growth plus several large wins, we are excited about our trajectory as organic ARR improved to a multi-quarter high. On an organic basis, ARR accelerated to $534.4 million, an increase of $22 million from June 2025.

Stepping back, I wanted to share that as we've gone through the process of integrating these businesses, I've become significantly more confident in our competitive positioning. The tide has turned and internal goals that we laid out are coming to fruition. Clients were saying this in words when we started. Now they're voting with their wallets. Our work is not yet done, but we feel we're firmly on the right path forward.

Let me provide some more details about our growth, starting with revenue retention. The gross revenue retention rate was 98% at September 30, 2025, for yet another quarter, as clients increasingly recognize the strategic benefits of consolidating their investment management software around the CWAN suite of offerings.

We have achieved 98% or better gross retention in 26 of the last 27 quarters. That is nearly 7 years of consistent 98% gross retention. That is the definition of durability.

Our net revenue retention rate was 108% in Q3, a slight decline from Q2's 110%, driven by a lower contribution from AUM growth and asset-based upsells as we lapped several large wins in September 2025. We remain confident in the path to 115% net revenue retention. supported by the drivers we laid out at our Investor Day.

Let me discuss the drivers of our NRR expansion and provide color on this quarter's performance. We have 4 drivers of NRR growth that we manage and measure. The first key to achieving NRR of 115 is maintaining gross retention of 98% and across the entire business. As we stated, we achieved 98% this quarter across the entirety of the business.

The second element is price increases and commercial model aligned. At scale, we expect 4% to 5% contribution in the long run. And in the third quarter, we achieved just under 3% net increase across the entirety of the business. As Sandeep mentioned in his remarks, we've begun the commercial model work for the new businesses and expect to see the impact of these changes in 2026.

The third element is the cross-sell of incremental products. In the long run, we aspire to have up to 8% of our growth derived from the cross-sell of solutions across our clients. The impact of cross-sell in the current quarter was just under 3%. We have obviously the most opportunity here, and we're excited to say that we are seeing good momentum in this area.

In this quarter, we saw a 70% increase in bookings for our core cross-sell modules, which include LPx MLx Prism and [indiscernible]. This growth doesn't yet factor in contributions from what I call our hero products, the accounting portfolio management system, OEMS and risk for which we're ramping up those cross-sell motions and see great opportunities for Q4.

The fourth element of NRR growth is upsell of existing products to existing clients. Many clients choose our solutions because they know we will invest, and we will enable them to grow their business and consequently, we grow with them. In the quarter, upsell was just under 3% on a consolidated basis compared to our longer-term target of 5%.

These trends in upsell were evident when looking at NRR within our target markets. NRR in insurance was the strongest, followed by strong performance in asset owners and asset managers. Our current NRR in the hedge fund market weighed on the company's combined net expansion rate, but we're excited about the potential for improvement as we evolve the commercial model to align with the growth in that market and offer our risk offerings to our hedge fund clients.

The final element to NRR expansion is other, which typically captures other movements in NRR that are not included in those 4 metrics. Historically, we've experienced a small uptick in growth from AUM expansion at our clients. In our September 2025 results, this improved NRR by less than 1% compared to nearly 3% in the June 2025 quarter.

Although a small contribution from AUM and other and the lower contribution from upsell led to a sequential decline in net revenue retention, we saw significant improvements in the strategically important drivers such as new product cross-sell, gross retention and uplift within our broader portfolio.

Now let's turn to profitability. Our Q3 gross margin reached 78.5%, flat year-over-year and in line with the 2027 targets, not Q3 2025, 2027 targets we set at our Investor Day. This showcases the incredible progress the team has made in integrating the businesses and the benefits we are seeing from utilizing GenAI.

Adjusted EBITDA was $70.7 million in the quarter, more than $5 million above our guidance.

EBITDA margin expanded meaningfully to 34.5%. That is 140 basis points better than the Q3 2024 EBITDA margins. This EBITDA achievement reflects the efficiency being generated within the business, which is important to all investors because it provides additional strategic optionality for all of us.

For example, this strong EBITDA enables us to both pay down $40 million in debt in the quarter and repurchased more than 800,000 shares of CWAN stock at the same time. This strong EBITDA evidences our confidence in rapidly deleveraging the business. If you annualize our Q3 EBITDA, our first full quarter as a consolidated basis, our net debt to annualized Q3 EBITDA leverage ratio is 2.7x, already comfortably below our targeted 3x leverage.

Now turning to guidance. For the fourth quarter of 2025, we expect total revenue to be $216 million to $217 million, representing a year-over-year growth rate of 71% to 72%. For the full year 2025, we expect total revenue to be between $730 million and $731 million, representing year-over-year growth rate of approximately 62%.

We expect fourth quarter EBITDA to be $73 million, representing an adjusted EBITDA margin of 34%. That results in expected EBITDA of $247 million for the full year 2025. That is a full year margin of 34% for 2025, and that is 180 basis points better than the 2024 margins even after including multiple businesses with significantly lower margins. I think we can all agree that any question about margin synergy can be put to bed. And now we are squarely focused on growth of the combined CWAN, and we are very optimistic about our opportunities.

In summary, we are truly better positioned than ever to capture this massive, growing total addressable market. Despite closing these acquisitions, just 1 quarter ago, our gross revenue retention and margins are again near all-time months. Meanwhile, our comprehensive product offering, compiled through both our organic build and inorganic investments puts us in the best position we have ever been to obtain market share.

I don't know if it's because the demand environment has improved overall or the fact that we have so many different entry points with our clients and prospects, but what I do know is that our client conversations our pipeline and the cross-selling we're seeing today is the richest I have seen, and this gives me incredible confidence and a clear path for accelerating growth.

With that, I'll pass it back to Sandeep for closing remarks.

Thank you, Jim. We have made incredible progress in integrating the businesses and are very excited about the opportunity to build the leading platform of our industry. We believe that we are well on our way to doing that.

Thank you, and we look forward to answering your questions.

[Operator Instructions] The first question comes from the line of Dylan Becker with William Blair.

Maybe it seemed like a key theme here, Sandeep and Jim was around kind of the quality of the pipeline and enthusiasm going into the fourth quarter. I know we signed a large deal last quarter. It sounds like there are several others that were signed here and maybe others that are progressing throughout the balance of the year. But can you just kind of give us a general sense or update on any particular segments of the market that you're seeing elevated strength? It feels a little bit more broad-based, but kind of receptivity into that unified platform vision and how maybe some of those early proof points that you guys are bringing to bear in the market are starting to resonate and drive conviction in that pipeline activity?

Yes. Thank you for the question, Dylan. I think booking across the quarter was very evenly spread. I think I said in my remarks, but if you were to ask for which areas do you see the most growth in one is alternatives. So the core alternatives of LPx and MLx and Risk and Prism, we found that grew like 70% year-on-year in terms of bookings. So and we continue to see a very expanded pipeline for that. So alternative continues to be a driver across the world.

The second thing we're most excited about is risk. When we went out and acquired Beacon, we were hopeful, but we also thought that these would have long sales cycles. And what we have been able to do is get 7-figure deals much quicker than we thought. So if you look at the pipeline and the opportunity for risk, I think it is tremendously higher than we had expected and pipeline for alternatives continues to be really high. So those are the two I will call out.

I think the expansion in insurance for Europe is another positive one. And I would be remiss if I did the last one, which is hedge funds did really well in Q2 and back that up by doing really well in Q3 and are forecasting a very good Q4 after Q1 was not good, and Q1 booking for hedge funds was much slower than we thought, but Q2, Q3 and our Q4, we expect really good numbers. Jim, do you want to say anything, would like to add?

No, that's it. You're right, Dylan, it's across every vertical and across geos.

Okay. Great. That's helpful. And then maybe, Jim, for you. I think kind of the implied performance and maybe some of the revised Enfusion guide would suggest that the core business continues to grow pretty steadily at that 20% clip. And I know that's been kind of an internal barometer for you guys. Can you just help us kind of reconcile that versus the 17% for ARR growth in the quarter?

Is there kind of any nuance to be aware of there? I know these are some large lumpy deals that are subjective to when they come online, but maybe reconcile what feels like a pretty healthy kind of sustained core business momentum here.

Yes, I think we feel great about the revenue and in the quarter, I think also the acceleration of the organic ARR within the quarter on the Clearwater business was strong and nice to see. You combine that with what we talked about at the recent bookings in the pipeline, and I think we feel very good about that.

Sandeep did mention that the Enfusion business in Q1 was slower but had great Q2 and Q3. It takes a while for that to flow in both through revenue and ARR in that side of the business. But I think if you look back at what we put up in our September Investor Day and how those pieces fit together, it was a very -- it was again, obviously, a strong and Q4 looks very similar to that. It looks very similar, the impression that we put to that.

The next question comes from the line of Alexei Gogolev with JPMorgan.

I wanted to double check a follow-up on Dylan's question just now. So how should we think about ARR growth of 17% for the core business? Obviously, it's coming off a high base. But looking into 2026, how does that dynamic compared to your comments about the strongest pipeline you're seeing?

Yes. Alex, this is Sandeep. Thank you for the question here. Look, I think that the business has trended towards doing larger deals, and that does create a lot of lumpiness in ARR when it comes online. We do expect this to match though over time. I think if you look at the overall business, we said revenue grew 77% year-on-year, but ARR also grew 77% year-on-year. So there can be a little bit of a difference and that can come from AUM growth and the lumpiness. But over time, and actually, you would expect that we continue to grow the core business at a certain rate, then the ARR would match. It just doesn't match quarter-to-quarter. And I think we obviously have [ 2 ] quarters of $18 million each of and growth I think Q3 had $22 million. And so you shouldn't expect to see a acceleration there in Q4 onwards.

And now that we're sort of already in November, is it possible to give an estimate of organic ARR for the full year?

I think we'll do that for -- you're saying for 2026? I think we'll do that in the February call [indiscernible].

The next question is from the line of Michael Infante with Morgan Stanley.

I just wanted to ask on Enfusion. Obviously, early days in terms of the actual conversations with customers on the pricing and contract structure revision. But how are you sort of thinking about the timing and the magnitude of the potential uplift in 2016? I mean, obviously, on a run rate basis, we all know the 4 points. I'm just curious like how quickly you expect to sort of act on these revisions. And obviously, you have your own sort of history in terms of executing on this, but I'm curious how you would frame that for us.

Yes. I think we're underway in the program, and the target of that program is to roll out the new pricing model for all new clients starting January 1, 2026. So all new clients at that point in time. And we'll go through that. And then we will roll through the existing client base following that program.

Yes. I would just add, Mike, that our intention isn't to raise prices. Our intention is to align value with the price that client pays. And this approach is very similar to what we did with Clearwater about 2.5 years back. So that's point number one.

Point number two is when you have devised a new commercial model, you simply try and implement that with all the new clients. So that's step 2. The step 3, you go back and see where it is most misaligned and you start to go back and talk to those clients and change contractually what the pricing model is. So I think like we said in our remarks, we expect that to take all of 2026. But by the end of 2026, we should be substantially done just like I think in the last time we had this program, we took 1 year to do it, and we expect sort of a similar pace, but it is a nuanced thing. I don't think it is everybody, you can follow the same process as you can different platform, different asset markets, different large head funds. And so again, we want to do this with care, and that's the process with Jim and the whole team sort of kicked off in this quarter.

Well, I think just the other thing to add, when I talked about the NRR, we talked about it being roughly 3% in September 2025 numbers, and our goal of that being 4% to 5%. That isn't about increasing the percent. It's about broadening the applicable base of ARR that is subject to those periodic [indiscernible]

Makes sense. And just as a quick follow-up. You obviously signed several deals of delivering some pretty material EBITDA upside. But maybe just in terms of the trade-off between that and sort of more aggressively allocating incremental implementation resources to sort of speed up some of the revenue go live? How are you thinking about that?

Yes. Thank you. So we were literally talking about that is, should we continue to make a harsher trade-off, but I do think like that the trade isn't between dollars. It is with the use of generative and accelerating onboarding using that. Eventually, we feel quite strongly that the benefits we have seen already in being able to use generative AI on more clients faster is what is going to deliver a result in a more sustained way. So more self-service, more agent-driven onboarding. I think that's sort of more of the future rather than should we go hire 20 more people to help onboard clients faster. So we do think it's about the tech we are focused on the tech. Could we spend some more money on marketing and things like that perhaps? And that is something which we time to think about for the rest of the quarter here as you look at 2026.

The next question comes from the line of Peter Heckmann with D.A. Davidson.

Just wanted to follow up. Reasonably difficult comparisons with the prior year in terms of ARR growth is the core Clearwater in the third and fourth quarters last year. Just in terms of thinking about the run rates for Enfusion. If we're looking for about 12% revenue growth this year over what they reported last year, you still feel like -- I know it's going to take some time, but do you still think that can accelerate by maybe a couple of hundred basis points for 2026?

Yes. So I would just say that Very little, very, very little of the thesis has changed. We believe that the Enfusion platform is robust. We feel it is scalable. We feel it is stable. And so we feel we can drive growth.

Now there are 2 ways we think about growth. One is dedicated engineering and product teams focusing on just hedge funds. So separating that out. That has been done. We now the leadership to guide that. Would that drive 12% or a little bit more, Yes, we expect that. We also think, like Jim said, a commercial model to be put in place over 2026, and that can drive growth in both in revenue.

The third thing which is perhaps the most exciting thing for the client base is to go take back risk to the hedge fund work to take back manage services and client reporting. We think all those 3 products can be sold or solutions can be sold, we've had good early success with that in Q3, so we feel really good about it. So we do believe that the core business can grow and perhaps accelerate from 12. We feel the commercial model can help, and we feel selling more products to our current client base in terms of risk made services and try and reporting, all can help contribute to growth.

Now what's the magnitude of all these 3 things were put together? And I think we'll have probably a better view of that in the February time frame when we guide for 2026. And I think we also said that this will take us about 1.5 years, so bias for reacceleration coming out speak in 2027 in the first half. So again, none of that has changed.

But I do want to say that yes, very pleasantly surprised and happy about the momentum of bookings in Q2 and Q3. Does all of that show up in ARR? No. It does take some time for it to go from a contract and a booking and to ARR revenue, but we are very, very happy with what they achieved in the last quarters.

Okay. Okay. That's helpful. And then just on Bistro, I guess you feel like the functionality of Bistro is applicable to all of your current insurance carrier customers? And I guess when would you expect secure contract with the first couple of customers on that solution?

Yes. Thank you. Look, I think it is all about the alternatives. And I said a little deliver slightly happen it, but I do think it's about alternatives and risk. Those 2 are huge. I think Bistro helps us provide sort of best-in-class rationalization reporting 4 alternatives. So I think it's strategically incredibly important, but we did have the work of taking it out from that environment to the Clearwater environment, and that has been largely completed, then integrating it with the rest of the core platform that's underway. So there's some work needed here. But is it the right thing to do, creating depth in our offerings around alternative assets? Without question. Is it driving growth already? No, it's not. But it is out of their that environment into the Clearwater environment. So I think we're going through these steps, and we do expect to see traction of that in 2026.

The next question comes from the line of Max Persico with RBC.

I've got two quick ones here. The first, on the international business, is there any way to quantify how that business performed in the quarter maybe relative to the overall business? Any metrics you're willing to share there?

And then second, the core Clearwater retention, I know last quarter, we disclosed that it was stable at 114%. Could you comment maybe just directionally on how retention is kind of trended in the quarter on the core business?

Yes. Let me do these too quickly. Number one, you can see in our investor deck, the split between ARR by geo, and you'll see that it's consistent in Q3 as it was in Q2.

As far as the core Clearwater, all of those metrics we've given are across the entirety of the business. But obviously, AUM and upsell are pieces that are mostly within the core Clearwater business. So that's the delta there. Do you want to go the next one? I'm just writing down.

The next question comes from the line of Brian Schwartz with Oppenheimer.

This is Idan Gutkind sitting in for Brian Schwartz. Sandeep, I'm curious in terms of adoption of the combined company assets. Is there a particular end market or geography that sticks out where customers are adopting the combined assets first?

Yes, I think that one, we were so surprised with it is asset managing now becoming the largest when you look at TD on a year-to-date basis, the largest booking industry. I mean that has never happened. And we have -- as you know, we've wanted that to happen for a long time, only because that is the largest TAM it had. So that is 1 thing we feel strongly about.

But I think the right way to think about it would be a lot more traction in risk-related offerings up and down the stack. So I think that is one big change. Alternatives is the other big one. So in terms of what's already happened and where we already see traction, I would say, asset management is meaningfully different. I would say risk is being equally different and alternatives are meaningfully different on the [indiscernible].

And then are you seeing any responses or changes to competitor behavior in the market given the company transformation at Clearwater?

Yes. I think we got a lot more phone calls. But look, I think that -- I think competitively, this puts us in a position to compete with absolutely anyone and up and down the stack up and down the size. Is it all together yet already? No, it's not. There is work to be done to bring all these things together and to sort of get the growth from it. But competitively, do people our clients more importantly and analysts sort of appreciate that we have a chance to build something very special. I think it's -- that's evident to most people. I think we talk about Generative AI quite a bit. And we feel very strongly that the fact that we have a single instrument multi-tenant model, a single security master, our ability to deploy and use generative AI is just meaningfully different. So look, we really like our competitive environment right now. I'm not sure that's the right thing to say, but we like it.

The next question comes from the line of Gabriela Borges with Goldman Sachs.

This is Laura on for Gabriela. I wanted to follow up on the 70% increase in bookings for the core cross-sell. I know that you've discussed in the past kind of the path to penetration for LPx specifically across all the Clearwater customers. Can you just level set us on where you are in the current penetration and adoption for modules and how you see the white space for more adoption?

Yes. I think we're making really strong progress. And over the next few years, we hope to have LPx across our entire insurance client base. I think we're a few years away from that, but making great progress on that. But right behind that, where we're quite nascent is what the product we call MLx, but it's really mortgages, private credit, private debt. And that is, again, we're seeing great momentum in there as well as within Prism and with some of our risk solutions. So I do see LPx kind of flowing through to the entirety of our insurance client base within the next few years, given the adoption that we're seeing there. The next thing will be, okay, what else can we do? What could we do for our asset owner segment or other folks around that?

Yes. If I could add one thing. When you just think of the overall market sort of level setting at the highest level. Anything of accounting as being of a certain size, what you would find is that risk is also of similar size. You'll find that alternative assets, which is what LPx and MLx and bank loans, all of them do is sort of from a similar size. And front to back, the middle back office, middle front office is also of a similar size. So the way to think about this contextually is if you have a certain ARR in accounting, you should be able to generate a similar ARR in alternative assets, a similar ARR in risk and similar ARR in front, middle office. And that's what we've always talked about this 1 to 4 bps.

Now the reason we sound excited is, yes, now we're seeing some numbers. We are seeing a 40% growth year-on-year, and we also see 2026 to have similar or even faster growth in booking in this segment. So we have talked about 1 to 4 bps for a period of time, but to see current Enfusion in terms of signed contracts is frankly what means , I guess, you detect the excitement about that.

Great. And on the KB deal that you discussed last quarter, bringing together components of Clearwater Enfusion and Beacon, can you talk a bit about how that integration is trending? And any takeaways as you compiled the more unified platform that you intend to go to market in 2026 and 2027?

So these are the two perfect questions. Yes, we are very also very laser-focused on bringing this to bear in front of a client. Obviously, we are we feel strongly that we have done it. Other clients have already integrated with these platforms. So our ability to integrate them should be high but obviously, it sounds like I think it's expected to go live until the middle of next year. And it's proceeding quite nicely, and we expect to deliver that in time with the functionality they expect. So yes, we have put it out there saying go deliver it publicly, and we expect to do that.

Next question comes from the line of Yun Kim with Loop Capital Markets.

Okay. Great. Sandeep, a lot of moving parts here, but if we focus on the core Clearwater business, alternative asset was a key driver for you guys a couple of years ago. I know that you mentioned alternative here and there in the call today. But if you can update us at least, how much of your new bookings is driven by alternative assets today versus a couple of years ago and how that has been trending?

Yes. I firstly, I would just say here that alternative assets is a big bet [indiscernible]. So that's just point number one. we think, like I was saying, over time, we expect that alternative asset booking to be or ARR to be similar to the accounting ARR.

I don't have a number of straight up for alternative assets and how much it is driving, but I don't know if I can say that, but we used to talk about 24%, 25% of our bookings coming from alternatives. And we know it is, at this point, north of 35%. So it's to give you a sense of context. We do expect that to continue to accelerate though. We do think more and more of our booking is going to come from alternatives and risk and so you should continue to expect that in 2026 and beyond.

Yes. This -- that number we talked about was year-to-date 70% increase year-over-year. That includes more than just alternatives, but that's kind of look, alternatives is a big piece of that if that helps contextualize it for.

And there's 70% was on Q-on-Q.

Yes, year-over-year growth in Q3.

Okay. Great. And then on the agentic AI front, it looks like there's a lot of progress there based on the separate press release today. If you can remind us what's the pricing model there. What's the go-to-market motion? Is that primarily focused on existing customers? And if you can just share any insights from some earlier adopters?

Yes. The best thing you can find is gross margin. Look at the gross margin and look at the movement. I think we had talked about 80% for a long time, and we changed that to 82% gross margin. And we also said today in our remarks in that the core Clearwater business, the steady-state clients are already at 82% versus an expectation to get there in 3 to 4 years. So we feel very excited about our ability to drive efficiency in our company using Generative AI, and that's one section.

The second area where you can have major impact is enhanced client reporting. So we think about client interaction with the data and what's going to happen and clients are already using it as such is clients' ability to talk to their data. That is an area which will show up, I think, in additional booking for products like Prism. So it's not like you're selling Generative AI as GenAI give me this wall of money for it. That's not how we're doing it. We are taking products clients can use and pay us for that. And so therefore, they're just the next generation of client interaction, which we are with clients are doing.

The only other one I would point out is because of the success we have had in our internal processes, we have taken this technology to clients, and they are building processes which automates the internal things. So we talked about 90% improvement in manual reconciliation, things like that. And at our user conference, I think in September, we had a client actually presented what they have done with our technology and continue to sort of use our platform for. So I don't think we're charging separately for generative AI as then, hey, payment is for generative AI. It's more about the products we are bringing us in generative AI, which we are charging transform.

And so we've been tracking engagement, and that and engagement since the Connect Conference has been just extremely impressive, the growth in engagement.

Due to the interest of time, that was our last question. I would now like to pass the conference back for any closing remarks.

Yes. Just wanted to thank you all for your continued interest in Clearwater. I think we had a very solid quarter integrated company for the first quarter, and we look forward to the quarter 4 and 2026 with a lot of confidence. So thank you.

That concludes today's call. Thank you for your participation, and enjoy the rest of your day.

[Audio Gap] bond, that data was used for all clients. And if they made any changes, all the clients saw it right away. So that was unique in those days, and it's not unique anymore. Where did they get an idea from, from Salesforce. If you remember, those are the days, Siebel was a very big deal. And you had to install Siebel everywhere, wherever you went. And they came up with the idea about want to have a single instance multi-tenant which everybody can use. And that's what they did.

And so investment accounting is a business we were in. We did that for many years when Jim and I got there 7 years back, 6 years back, that's all the company did. It was a great platform. And what we did well, I thought was we took that company and made it not just a regional player, but made it big in the United States. Then we took it to the larger customers and made this successful with the likes of JPMorgan and Morgan Stanley and all the large asset managers, large insurance companies, large corporates like Apple computers and Cisco and everybody else like that.

And so we haven't really changed the architecture, but we made it sort of ready for prime time, and we did that quite well. But once we got there, that is when this year we went out and bought 2 other companies. But they were still having to integrate with lots of front-office systems, which were still very, very old on trying to get all of it together. And why was that? Because of 2 big things that was happening. One was it was becoming more global.

So people were buying assets in China, in Japan and in India, in Europe and all of those countries, and they still wanted to get a view of all of their portfolio. They were also buying all kind of alternative assets. So they were buying private equity. They were buying private credit, private debt, derivatives and mortgage to do, but historically, it had been investment accounting compliance and reporting. And now we are -- we have solutions for the front office and for the risk to provide a more end-to-end...

That's helpful. Thank you, Sandeep. I guess the other thing I was going to just kind of quickly ask before we jump into it was yesterday, you guys talked about the TAM. You've now doubled the TAM of the business [Audio Gap] part of this question around your customers, right, asset managers, insurance, et cetera,...

Yes. So I think what we are really super proud of is 2.5 years back, we did an Investor Day. And at that time, we said, you know what, we do investment accounting. And typically, clients [Audio Gap] we said we have spent so much money getting these clients super happy with us. And so our NPS is literally above 60% for the last 5 years running. And we said, genius, if they're doing so well and they're so happy with you, why can't you do more?

And so 4 years back, we laid out a whole vision about improving our NRR from 108%, 109% to 115%. And we said in the space of 3 years, we're going to change it from 108% to 115%. Our GRR was always good. So our gross revenue retention has been [Audio Gap] was 97%. And for 3 quarters, it's been 99%. So it's always been really good, but the end [Audio Gap] and so as a merger sort of consolidated company is 110. And I feel like we're back on the road again. We got to go change the commercial model. We've got to go improve the cross-sell motion. We got to change how they sell and the focus they bring to the market. But again, this is a path [Audio Gap] is a lot faster than we thought. I don't know, Jim, would you add anything to that or...

Let me ask you a question. Just given the nature of the relationship you have with these customers, and I think it's 110 customers spend over $1 million a year today. How is the dialogue with your customers changed given the capabilities that you can bring to bear from one provider?

Yes. I think, look, it will change and continue to change quite a bit. When you think about what we sold, we sold middle back-office solutions. And the buyers for that are quite different from someone who's doing trading, portfolio management and portfolio construction, right? So those people are different. And frankly, you get access to that using something like an Enfusion. So they naturally go to that. They don't come to the middle office.

And then you've got the whole situation with risk and alternative assets. It's a completely different world because those are the people who are trying to provide guidelines on what you could do and can't do. And risk I would suspect today [Audio Gap] on the risk is really what matters. So I do think that the Chief Risk Officer is [Audio Gap] traders and the portfolio managers on the periphery. And now you've got all 3 of them.

But what it has done, which I'm surprised with is it got us into the C-suite [Audio Gap]. This was the Chief Executive wanting to meet with us and talk about what we're trying to build. And it was interesting, really good bottles of wine, by the way. And so -- but that has changed. I think who we deal with is we're talking about enterprise class solutions while continuing to sell in the short, medium term to the middle office and separately to the front office. So really both. But the company is changing.

Yes. I mean maybe also to think about it, but also our clients who are asset owners, insurers, asset managers, hedge funds, their business is fundamentally right? So everyone has to have -- and alternatives are not an alternative. They are fundamental, right? Everyone is going global. So they're struggling with those problems, right?

And so we've talked about it of [Audio Gap] how we've come from the back office and kind of thinking about it across. That sounds like it's a push. It's actually a pull, right? The fact is they've said, okay, we can rely on you. You do this. It's clean, reliable data. We can understand this, but we want to do more with it and how do we think about that. And so it's a confluence of us adding those capabilities across the whole life cycle and up leveling that. But it's also them saying, I have a fundamentally different view of how I need to operate my business. Who is a partner that I can trust and who is a partner that has a vision for the future that aligns to the vision...

[Audio Gap] It's not like we are going there, you got to buy this. It's a lot about how can you make them more responsive and more competitive.

Yes. Let me -- alternatives has come up a couple of times. It's not lost on anyone in this room when you think about transactions that have happened most recently, things like Preqin and others. This focus on alternatives has been immense. And you're seeing that in the case of Preqin with an asset manager. Your acquisition of Bistro gave you a footprint into alternatives. How do you see the convergence of alternatives and traditional asset management playing out?

Yes. I think if you just sort of think about, we all are worried about something a fad or something going to stick and endure. And you think about insurance companies, and I'm going to say this wrong, but I'll say it, they weren't the best adopters of technology. They just weren't. And then you've got all of these -- the Apollos of the world and people of that who came into the market, and they took that money and the returns they would produce was 200 bps better than what these insurance companies were producing on their own.

So once you start to produce 200 bps more, you can use that to go buy more or reduce the price and get market share, and they were doing both. So the insurance companies have been forced to continue to modernize and start to invest in alternative assets. And if they don't invest in alternative assets, I think they start to lose and have continued to lose to all the private equity sponsored, if you will. Look at Global Atlantic, look what they've built. Look at what Blackstone has built. Blackstone in the insurance market had, I think, close to -- they started 3 years back. I think they have in excess of $400 billion of assets of insurance.

And what did they build? They built Bistro on the back of or using Clearwater's position data and accounting data and Beacon's risk calculations. And that's what. So Bistro is really built on these 2, and we have had the CTO on conferences like this, where he's spoken about that. And that allows them to provide a very different level of visibility to their clients. So I feel alternatives is here to stay because [Audio Gap] I think banks like it also because the fees you get on bank loans and private credit and private debt is a whole lot better than ETFs and passive investments.

So I think the entire community is behind alternatives at this point, and I think continues and endures for a period of time. And I think all of our clients are moving in that direction of more and more alternatives and us being able to build -- who's the leader in alternative investments. It is Blackstone. And so they are the biggest ones in there. And so being able to bring that technology to bear for our clients, I think, is extraordinarily powerful. It's not easy. It takes time, but is that the right platform, I think without doubt. And we try to go to the market and say, it was good enough for Blackstone at that level of complexity, it should work for you. And I think most people will accept that.

Yes. That's great. Let me pivot. We should spend a few minutes on Enfusion. You guys spent a lot of time talking about the path back to 20%, et cetera. It's probably good to give a little bit similar to the Clearwater overview, a little bit of an overview of Enfusion because this was the modern SaaS native portfolio management, order management system out there. And outside of going public around the same time that you did, you guys did not overlap really in any way, shape or form. It'd be helpful to hear just kind of a quick overview on Enfusion, and then we'll come back to some of the things you talked about, Jim, around the growth, et cetera, yesterday.

Yes, I can tell you about Enfusion. So firstly, we almost take off the Enfusion ends. So Clearwater integrates with 26 different [Audio Gap] start after the trade is done. So the trades are done, we get all the feeds and that's when we start. And we will get 3,500 different sources of data every day. So that's where we start. So Enfusion was really in the front office.

And if you look at what they did, first was just hedge funds. But if you go to hedge fund today and you ask them, they really like the platform. It does a very good job, but they have only a limited market share there. I think if you see the new hedge funds, which come out, they get a very large proportion of that. No problem with that. But the conversions they've done has been a lot slower than we have been able to do, right, at Clearwater.

So I think the platform is really good. I think their ability to go out in the market and convert clients has been somewhat slower than would have been expected in the last 2 years. But I do want to say that 2 years. If you go back 3 years and 4 years and 5 years and 6 years and 7 years, they've always actually grown a lot faster than we have. So it isn't that the product has become weaker. It's not like the market has changed. I do think their execution over the last 2 years has been super spotty.

They brought in a new CEO, then they brought in an interim CEO who became a full-time CEO, and then they brought in another person who is going to become CEO in -- all in the space of 2.5, 3 years. And I've run companies in the past. Believe me, that's not the way to run a business. It will suffer. And I think they have suffered from lots and lots of changes and context switching. And I think we've gone back in and we haven't done a lot except to say, the team which is doing hedge funds is going to do just hedge funds. I want the growth back there.

And this team, which is doing asset management, we're going to bring in our team, put it together and go focus on that. Also brought a strong culture of accountability. I mean who owns it? You have to own it. And so I think it's -- there isn't the silver lining kind of thing, but I think they do become more powerful, Dan because they can bring in middle office when clients need it. They are [Audio Gap] but also half the hedge funds are risk-aware investing and multi-asset investing.

And Beacon will play a massive role in making them much more competitive there. So I feel like they should be able to do what they used to do, get a little bit from the hedge fund focus, but also much stronger because of Beacon and what Clearwater brings to them. So I feel like they have all the right ingredients to make it work. And our job is to make sure they get back growth rate they used to have.

Well I mean I know it's still quite early, but you guys already have tangible proof points where you're already cross-selling with the customer base. I think there were a few called out. There was a bank, there was an asset manager, et cetera.

Yes, yes. Yes. And as we thought about these things, one of the pleasant surprises was to think about for those large hedge fund opportunities that are out there, which was a natural progression for Enfusion. It becomes -- with Beacon, that becomes all the more compelling in those 2 pieces. We always thought, oh, how can Clearwater help Enfusion, but also to see how Beacon comes together and fits in that market. I think we're very excited about that opportunity.

We wouldn't have won this deal. The one we announced was VKB, which is our German insurer, right? So a large German insurer. And if you think about competition in Europe, they buy the whole stack. If you look at the providers of Europe and you sort of think about the large 2 providers, they buy front office, middle office, everything together. That's how they bought it. And Clearwater would go in and try and displace the accounting piece of it, which is super exciting, but it didn't make economic sense because the competitor would not say, I'm reducing my cost from 100 to 60 like they should.

I would just say I'm reducing 90, what are you going to do about it, right? And so our ability to go in and sell have all the pieces together is transforming how we go to the market in Europe and here. And so I do think this real proof point is we were surprised how quickly we got this first one very major deal [Audio gap] which made massive amount of sense because the number of people they would need to run this whole thing would fall to 1/3 of what they were using. Forget about just the software and the tech. So I don't think it should change...

Pretty meaningful footprint in APAC. How do you think about this expanding the opportunity for you more globally?

Yes. I think we spoke about that. Look, the largest deal we have got this year came out of Hong Kong, which was like shocking. Enfusion, Enfusion is 80 people. So they went from this little no named shop [Audio Gap] that, yes, you guys have presence, you have commitment to this market. And we were still winning some deals, but our largest deal for the entire year-to-date comes out of Hong Kong, which is such a surprise, but such a pleasant surprise. So I do think it brings us into the international markets with much greater strength we had.

I think you mentioned, hey, we've doubled the TAM, right? And obviously, a big vector of that is doing the full life cycle. But another very large vector of that is the international aspects to it. In insurance specifically, right, where I think in North America, we're very comfortable saying that we're a leader. It's basically the same size in Europe and the same size in Asia, the opportunity there in each of those. And we're just scratching the surface there. And this is an example of an opportunity where people understand us, they understand what we can provide, but having actual presence there, they understand the commitment. It just increases everyone's content.

Yes. Yes. That makes sense. [Audio Gap] hedge funds, some of the stuff around the go-to-market is in focus. What are some of the things that are -- that you're...

[Audio Gap] we had an entirely AUM-based pricing model. And we went to one of these conferences and all anyone wanted to talk to us about was what was happening in the markets and what the AUM was doing. And so we were able to go back to our clients and change to what we call a base plus model, pivot on that. When we look at both the Beacon and the Enfusion commercial models, they're slightly different from where they are.

So we had a very rigorous process where we would go through and we would really have a data-driven approach and understand it's all about aligning the value we're delivering to the client with what the client is paying. It's not about price increases. It's not about -- it's about packaging, it's about bundling and making sure that there's alignment to as businesses benefit and grow that we're aligned with those economic brands. And so that's the process that we're going through with -- to start with Enfusion.

And so when you think about things like that, you think about, well, what are the scalers of the business that help us drive revenue? How does that align with our clients? And so we start to think about those. So we're getting that work. And we think that when you look at that and you understand that level of detail when you kind of disaggregate the NRR that Enfusion has, that we think there's about 4% in that rate. Now that's not just 4% price increase. That's about all the upsells and downsells and mitigating all that and making sure that you're aligned and refining around that.

But that -- but we think there's 4% opportunity. That's actually what we're going to target to achieve 4% opportunity by evolving the commercial model. Now obviously, it first starts with kind of every new customer is on that new commercial model, and then we work back into the existing client base to kind of work them through that.

One of the other precursors of that is that clients have to be happy, delighted [Audio Gap] clients were already happy, very happy with Enfusion, but there are segments [Audio Gap] where you probably have a month-end process that you go through with your fund admin, which I'm sure is a ton of fun. Well, if we could solve that problem for you, would that be valuable for you? Almost universally, everyone says, yes. Guess what? That's a problem that you have that we can solve, and we can come together and do that as an example. So that's the commercial model.

Yes. The other thing is around cross-sell. So one thing we are very good at is data. And nobody likes to get data from 50 sources, put it together, reconcile it and bring it to bear. Could we get to go take it to all the current clients of Enfusion? Absolutely. So there's an opportunity to cross-sell. But I do think we think about 2 things. One is the current team, please sell what you were selling yesterday. We don't want you to change that very much.

And then do 2, 3 things on top of it. One is when clients want client reporting and the middle office, go set it along with that. When clients want risk, that's a big thing you can take back to that client base. Some clients want the entire modular structure and you can go sell that. And so our point is, can you cross-sell effectively? I think that's point number one.

Point number two, there's hedge funds focused on just one sector, let's say, commodities, okay? That will be very hard to sell if you don't have something like a Beacon. Think about energy, huge volatility. There's hedge funds which focus on just energy. And you can't really sell to them if you don't have really good capabilities around risk. And that's what we can bring. So it isn't Dan trying to change what they do because I think they win a lot of the deals already.

But whether it's a $2 billion market or $2.5 billion, who cares. They have literally $200 million of ARR in the hedge fund. So we feel the runway is there. It's a question of execution. They've done it forever. I think they've not executed well in the last [Audio Gap] that is there's a little bit of what enabling teams to win and letting them make decisions. And I think that we did really well in Q2 on the booking, not because we came up with any genius ideas, we enabled the sales team to go out and win and said, you have the authority and the ability to go out and sell. You have the guardrails, here's how much you can spend and not spend. And we laid out a [Audio Gap] we feel good about it. But it's a journey. I think we have said it will take us 2 years to get them back to the growth rates we are [Audio Gap] and then it should be much more stable as we hope.

Jim, I'm going to come back to just the broader financial profile for a second. The path to 40% margins as you guys continue to do it, and that's not at the expense of investment on the R&D side at all. So I guess, as you think about that...

[Audio Gap] and in fact, at the Investor Day, Analyst Day yesterday, been 80%. And we already have some clients who are at steady state who were at 83 a couple of years ago as we talked about that. And we've made more and said, hey, we'll do 50 bps a year. But that actually, we've gone much faster than that. And Gen AI has really enabled a lot of efficiency in -- so that's -- so you can see the gross margins kind of flowing through higher than [option] and the scale that we're at, you have a lot of optionality in how you want to invest.

And so we are able to actually invest more dollars every year, meaningfully more dollars every year, in fact, more than the totality of what we spent as an entire business in 2020, the year before we went public. So our growth just this year is more than that. So when you start thinking about those opportunities, there's lots of room there. And so we kind of pivoted and said, "Hey, will we continue on this path. We're committed to 200 basis points improvement every year. Could we do more than that?" Of course, we could. But we like the discipline of improving the EBITDA margins every year, but we also have lots of room to be able to make investments to make the bets and to -- frankly, we fund every great idea we have, and we fund some good ideas as well. And that's kind of where we're at these days. We're still able to produce those margin improvements while making all of those investments.

I guess last one for me. Capital allocation. You announced the share repurchase program, and you're well ahead on the deleveraging post Enfusion. So as you think about that, I guess, for the audience's benefit, target leverage levels for the company?

Yes. So when we announced the deal, the target leverage level was to get below 4x by the end of 2025 and below 3x. And if you kind of took 4x the fourth quarter EBITDA and our current debt, we'd be at 3x. So we're already a year ahead. Because we're deleveraging so much more quickly, we were able to faster deleveraging. Because of all of that work while still being on that path to deleveraging, and we're fully committed to that path to deleveraging for everyone, it just gave us optionality because we operated quickly, it gave us optionality next year. That's plenty to delever, and we have room to also be able to buy back shares. And that's kind of how we dropped to, okay, we'll do a $100 million share repurchase that we announced...

I think the financial profile at the time of acquisition was poorer because they were a 20% EBITDA company, right? So we wanted to do a $20 million of synergy because a $200 million revenue rate, if you take out $20 million, that would add 10 points, the bottom line. And they would go from 20% EBITDA to 30%. And we thought it would take us a year or something like that. And when we got into it, it took us like 2 months to see like there is a lot of things you should take out right away. And we execute on the $20 million right away.

So when you do the math in your head, it's already a 30% business before the gross margin kicks in, improvement kicks in. And we made a lot of progress on the gross margin also. So I feel like we bought theoretically a financially weaker profile. But the profile will be solved really quickly. And if you take 2 months to solve something instead of 1 year, all that excess cash, you can then go do things with delever faster, do stock repurchase, whatever that might be. So you defray some of the dilution you did to buy this. So look, I think it's about execution. We are very focused on you execute well and everything takes care of itself a little bit. Strategically, I feel like these were absolutely the right things to do, but it takes time. It takes time to show the full impact of it.

Yes. Well, before we wrap up, are there any questions in the audience?

[indiscernible].

Yes. I think that you will see -- so first, just go to back up. This is a little unexpected. We did not ever say that we would get a fully comprehensive deal day 1. We always try to lay out the expectation that this is going to take time because these are not easy decisions for someone to say, I'm going to change my entire tech stack. This don't happen. But I do think that what has been happening is we've been talking to all these clients all the time anyway.

I don't think there is a medium or large insurer who doesn't talk to us today on an ongoing basis. So it's not like this is suddenly a new sales cycle. I think if you can find some proof points, you'll be able to flip them pretty faster, if you will.

But one last point I'll make about it, nobody really wakes up and says, I want to change my investment accounting platform. Nobody does that. Something has to trigger it. And usually, the trigger is the front office, which says, I want to invest in this country or I want to invest in this new asset class or I can't trade effectively enough, I can't price my things. Something has got to give. Sometimes there's regulatory needs or compliance needs, something has got to change. I think someone was saying, if nothing changes, then it's hard for [Audio Gap] just saying, I'm an asset manager. I don't really care about these new alternative assets. I'm just going to keep investing in equities and bonds. Yes, people just don't do that. So I feel like these proof points really matter because it proves to the market that you can make a change. And by the way, you got to get them live. They have to be live. They have to be done really well.

Thank you and congrats on the continued success of the business to continue to scale it. It's an incredible story.

[Audio Gap] thanks, but I won't do that right now. I'll wait to the very end. But Diendra, Pedro, HJ, everybody, the whole team who's put all of this program together is phenomenal. And then yesterday, our new Head of IR, [indiscernible], if you want to stand up, started yesterday. So if it goes well, it's because everybody did a great job. And if it doesn't, it's all his fault. So listen, thanks, everyone. My colleague, not my partner in crime, but my [indiscernible], Alphonse Valbrune, our Chief Legal Officer, will very briefly go through these items.

So I have the easiest job in the house today. I just have to be sociable and listen to the great program and remind you that any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Expressions of future goals, intentions and expectations, including in relation to business outlook, future financial and product performance, expectations for the acquisitions of Enfusion, Beacon and Bistro and their expected benefits our future looking -- forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our filings with the SEC. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after today's presentations, except as required by law. For more information, please refer to the cautionary statement included at the beginning of our Investor Day deck, which you see here, which will be posted on our website. Lastly, all metrics discussed on this day are presented on a non-GAAP or adjusted basis unless otherwise noted.

Thanks, Alphonse. And so we'll walk through the agenda here. Clearwater in the market since we last met. We did this a couple of years ago in September 2023 and really proud of the results that have happened. Sandeep Sahai will cover that. Then powering growth, Subin Scott, we'll step through that. Our new capability is in the right to win as well as technology, Souvik Das and [indiscernible] will come up and speak about that, and then I'll finish with some information on financials [indiscernible].

With that and with the legend, the [indiscernible] for Sandeep Sahai.

Only Jim can do that. I've always found that maybe a CRO could do it, it'd be find. The CMO could do it, it'd be fine. We have the only CFO in the world, I think you can put it out like that. So look, thank you all for coming. I really appreciate it. I know that there are many companies out that you can choose to follow. And the fact that you choose to come and listen to us, invest in us, write reports about us, means a lot. So thank you.

Look, this is a super exciting time for all of us. We're trying to bring together Clearwater with Beacon with Blackstone's [indiscernible] Enfusion. I've always felt that you act when you are strong. And the Clearwater platform has done really well in the past few years as we will show you. And we really have strong expectations of what it will do next year, the year after that in 3 years. So when you have strength and belief in your core proposition, that's when you act. I don't think we -- you act when you're sort of weak. And so we are really excited to bring these companies together.

But what's also true is it was really easy for us to say, oh, Clearwater has acquired Enfusion, let's just roll it in. And Clearwater has acquired Beacon, let's just roll it in. And I think we would do disservice to those platforms if we did that. When it comes to hedge funds and asset managers, Enfusion was a leader in the market. When it comes to Beacon and the most sophisticated risk calculations, Beacon is a leader in the market. And so we thought that when you are bringing leadership platforms together, sort of come up with a new name, which sort of embodies the best of all of them instead of it all becoming Clearwater. So that's my pitch for this new logo. I hope you saw it outside, it was brilliant. When the banner goes up, it's a lot of fun.

[indiscernible] presenting today, obviously, you have me here, you're going to hear from Subi Sethi. she's Chief Operating Officer. Your're going to hear from Scott Erickson, who's the CRO. You're going to hear from Jim, as you already done, CFO; Souvik Das, who is our CTO; and Kirat Singh, who is the President of Risk and Alternatives. We also have from the executive team Alphonse [indiscernible] and we got Cindy Blendu. Cindy is right there.

The thing that this team hasn't changed a lot. I think someone was asking me, who are the new people in your executive? I'm like, oh, crap, we don't have any. We just have [indiscernible], which is great. So this is a team which has -- was here about 2 years back when we presented to you.

So what I thought we would start with is what have we done when we -- since the time we met you 2 years back. And I think it's very easy for chief executives or CROs and all of those roles to talk a big game about the future. I like to talk a lot about the past. What have we done? Did we do what we said we would do? And I think you should judge teams based on what they have done and then the vision they lay out. So we thought we'll spend a few minutes just talking about the past.

The last time we met, we forecast a 20% revenue growth. So really, what you should have expected was $364 million in 2023. You should have expected $437 million in 2024 and so on and so forth. What did we deliver? We delivered a 21% growth in that year, a 23% growth in 2024 and a 23% growth in the first half of the year. It's not about the future, what we will do. This is what we have done compared to what we talked about. I feel like there's $14 million of revenue extra last year, it becomes harder now because you've got the acquisition, so it becomes harder to track. And -- but yes, going back 2 years, you can look at this and say, they did what they expect -- what we were expecting from them.

And the next thing which matters a lot to me is unit economics. Why does that matter? It just shows you, are you selling at the right price? Or are you having to discount to sell it? And then are you efficient in how you deliver this? So it matters quite a lot when you think about unit economics, are you doing a better job there or not? And what you should have expected again was 76% in '24, 76.5% and 77%. What did we deliver? We delivered 170 bps versus the 50 bps people should have expected. And this is what happens chance. It just doesn't happen. It happens because we execute it. If you look at the 2 years, we delivered 240 bps on unit economics versus the 100 people should have expected.

Now granted, we didn't have generative AI as a big deal at that time. But the fact is this is solid execution, in my opinion. Then we talked about EBITDA. And a lot of you said 200 bps a year, that's a little too aggressive. A lot of you in this room here said, try and do 100. And we said, no, we think we can do 200 because of the efficiency we expect to get. And the point is what did we deliver. In the first year, we delivered 300 bps against that goal of 200 bps. What did we deliver 2 years? We delivered 650 bps versus the 400 [indiscernible] expected. So the point is that I do think that the core business has done a lot better than we said it would do, and that is very strong execution when you look at this chart.

Our gross revenue retention 98%, 25 out of the 26 quarters. I always felt that one quarter, we could have done something more it just won't have looked cool. This just looks better. Yes, there's a little bit of a variance. And there are some 99s in there, too. But this doesn't come easy. When you want to retain 98% or 99% of your client base every year, quarter after quarter, you got to have excellent client focus. You've got to have client delight. It cannot be client satisfaction.

So I feel like when you look backwards, the other thing we focused on, many of you talked about these things as concerns, and you talked about the TRA. Again, not easy to get extinguished. It's not like the shareholders are waiting for us to say why don't we just buy this and be done with it. It was a lot of work. But I understood as an investor, that yes, I would not want this hanging out there as it will change optionality.

A lot of you had questions about governance. We own 10 votes to 1, how does that work? How does that influence what the private equity companies do and don't do, and that has changed. A lot of you talked about overhang and that is a 2-sided story. Because the good news is, over the last several months, there have been 119 million shares. Let me just repeat that, 119 million shares that our sponsors have sold out. So I thought this is a great thing. It gets rid of the overhang.

Well, this dark thing called supply demand, which is really, I think, hurt us a little bit. But the point is, there's less than 2% shares held by the sponsors now. So from a shareholder point of view, I think it has made the environment a lot more stable as you look out. It made the governance a lot more stable as you look out. So I do think that this is something which you sort of take up on yourself. And I say that Clearwater, I think, has executed over the last 2.5, 3 years from the time of IPO, if you go back and look at what we said at the time of IPO, we have executed for the last 4 years. And I feel that gives us the right to try and do something bigger than where we started. And we started with investment accounting.

And so we believe we have some degree of right to go after the entire investment life cycle. It doesn't mean that the market for investment accounting is going away. Is that a $4.5 billion market TAM? Or is it $5 billion? How does it matter? We were at $500 million? So what does it matter? But many, many clients do want to see the entire investment life cycle in one spot and no one, no one can provide that today. I think Clearwater has a chance, and we'll talk about that.

So this -- after this, I'll switch into what our thinking is about the business and what we think the vision for our business is. I just think we've got to just level set first when you think about investment management, what is changing? As a point number one, all of us can quickly agree on. Alternatives is growing dramatically. And somebody may say, what's a big deal? It's massively opaque compared to equities and fixed income and bonds you think about bank loans, private credit, private debt, derivatives. These are much more opaque instruments to understand and trade in. And that is a change, which is occurring on a daily basis.

How do we know? Not by reading reports, it's on our platform. We have $10 trillion on our platform, and we can see what people are buying, what are they selling, what's the trend line. So this is a trend which is not going away.

The second one is global portfolios. And with all the fun we have on the political side, this changes every day. This country is good. This is bad. Guess what, you have to understand your portfolio and the risk on your portfolio if you're going to act with any degree of confidence.

Number three, I think, is the speed at which you have to make these changes, legacy stuff just cannot keep up. You really can't say, oh, these 3 countries are going to be doing well for the next 6 months. No, no, no. They could be good today, bad tomorrow. Crypto could be good today, bad tomorrow, really bad day after tomorrow and really good fourth day. People who have a full comprehensive view can act with confidence. And if you don't, you get slowed down.

And GenAI, how can you not talk about GenAI when you have a technology presentation. So I'm going to talk about GenAI. So I'll just go into this a little quickly and perhaps talk about it. Look, alternative assets should just change. We shouldn't call them alternative anymore. They are now making up 25%, 30%, 40% of people's portfolios. At that point, they're not alternative. They're just like fixed income or they like equities. The problem with this is if you process $1 billion worth of bonds, and you process $1 billion of private credit. It takes 7x the effort. So a business leader may say, my portfolio was $10 billion, it's still $10 billion. And the amount of work and the cost associated with that could be 7x depending on the mix of assets they invest in. So alternatives is something which is growing. There isn't like another way to look at that. If you look at people investing globally, U.S. investors now invest 40%, 39.2% of the assets abroad. And that is changing on a daily basis. So you have to be able to handle that.

So just to switch gears, I've been talking at a high level -- and you like [indiscernible]. Well, just think about one area, so fixed income. Fixed income, you've got to have portfolio construction, portfolio management, order execution, accounting and you have to do all of these steps through regulatory reporting, compliance reporting and you have different systems for each one. You can do this, but this is not the problem. The problem is you've got asset class after asset class after asset class. And then each one of these, you have to do exactly the same thing. You got to do portfolio construction, portfolio management, order execution, accounting, compliance, and that's why it gets so complicated. And people spend days and days trying to understand what they have, what the risk is. So really, this some on a $40 billion Europe and multi-asset managers give us this quote, every new asset or jurisdiction same asset, different jurisdiction. We enter brings new manual workarounds. We're juggling over a dozen systems, and I can tell you, dozen is low. We've had clients who've got 100 systems across the globe for investment accounting. And none are built for today's regulatory complexity.

I think you said it, [indiscernible] name on it, so we are not just as inefficient, we are exposed. We don't understand the risk. That is the problem our industry faces. And people may agree with it, disagree with it, doesn't matter. This is what they face. Alternatives are growing, globalization is growing, guess what, you have to understand it.

So from a technology side, let's talk about tech for a little bit. You have to do all these steps for, let's say, equities. You've got to do pre post-trade compliance. Can you do this trade or not? You got to do an auto management system and a portfolio management system, IBOR, you've got to look at your whole portfolio, you've got to look at risk and performance and you look at client boarding. The trouble is, if you look at any of the competitors today, there are different systems for each one of these things. So you could buy a software from them, which does pre-trade and OMS PMS. And then you would have a different system for accounting and a different system for risk and performance.

And if I can just sort of just stay with this one other second here. The trader only meets 7 things about a bond. That's what they need. And they'll trade. Then it comes to the middle office and they can't do with just 7. They need 21 more things. They redo those 7 because these 2 systems don't talk. When they come to the accounting people, we want 40 more fields with tax lot, which -- we've got 40 more things we need. And we built it ourselves. We create a brand-new security master, so to speak. And therefore, that gets to talk to this one and this one, every one of them are different when it's the same security, it is the same exact security.

But every one of these systems will model it differently. Everyone will get data differently. And this is on equities. As all of us know, it's not just what equities, is fixed income and alternatives. And the chart wasn't big enough to show you that it's not alternatives. It is derivatives, mortgages, private credit, private debt, yes, best of luck. Making sense of all of this together in one spot, how do you do it? And this is also not the story.

The story is actually this. The same asset in the U.S. is completely different from that asset out in Europe and then Asia, best of luck. Try trading in Japan and then Hong Kong and Taiwan and Malaysia. Everyone's got their own systems. And this is why people have dozens and dozens and dozens of systems. This just doesn't compute. It makes no sense.

And if we talk to technology executives, I think everybody we'll accept this, that this is a real core issue. It's not complicated to know this, that if it's the same security, why can't we have one model for it? And the trading people just use 7 of that model the next group uses 10 more, and the accounting use 14 but it's that same one singular model for a given security. You've got mortgages, it's one security. You got bank loans, one security. Some of the private equity sponsors are here. What about their reporting? This is whatever they want. Just send you a 15-page document, best of luck figuring that out.

And everybody looks at that and makes us big, their own summaries than their own data point. Why can't we come up with something which says private equity should report like this? When you're buying it, when you're investing in it, what is different? The fee may be different all that. Okay, that's simply configurable. But reporting on performance should not be this big an issue. Data system, all of us don't have to go in just the same damn data, reconcile the whole data. If it was all easy, I would have let it go, but we have hundreds, hundreds of people doing data reconciliation. Every customer does it separately. It makes no sense.

Accounting changes. It changes every day. Regulatory reporting, you could have 600 changes in a given year across the globe. Everyone has to make that change. Really? We look at Salesforce, you look at Workday, you look at all of these model SaaS platforms, they make a change one time, it ripples to everybody instantaneously. It's not like they're sending a damn patch could change it. It just as an arcade way our industry works, we think.

So that then I'm sort of winding down a little bit and talk about why we did this. And I want to talk about this concept of capability. I think you'll hear us say, oh, we do front office. We do some risk. We do some -- everybody. You go to the website. Everybody does everything. Really? So then there's a notion we have of no capability, limited capability at market and above market. But if we don't stress it like that, you're just going to get everybody saying they can do OMS, PMS, I have all of it.

The question is how good is it? And do you have 20 clients who will stand up and say, you're better than market or you're at market. And if you look at Clearwater, I think what we did well was, the middle back office, we are -- I think most people would quickly agree. By far, the next-generation disruptive platform there is. I mean nobody went to Boise looking for an accounting software, let's be really clear. People went there because that platform was disruptive and has solved a massive problem.

But did we do some OEMS? Yes, a little bit. Did we do some PMS? Yes, a little bit. So we asked us to put a checkmark we may have said, yes, we do all of these. But the capability of it was very limited when you look at somebody like an infusion, which is a leader in the front office systems. Are they the best at everything, they're not, but do they do accounting? Yes, but very little accounting, very little compliance and regulatory reporting. And both of were missing this massive issue around risk.

Why does risk matter? As you get more and more opaque, as then you increase the amount of derivatives you trade in the bank loans you trade and the commodities you trade, understanding risk becomes more and more important. Just think about it. If today, you wanted to take down your exposure to Germany, you first have to understand your exposure to Germany. Equity is not that hard. When you look at a derivative, you have to see what's underlying. If you have an LP, you have to see what's underlying. You've got a mortgage pool of mortgages, what's underlying. How do you know that? They are based in different systems around the world, and you can't pull it all together to get a comprehensive view.

What Clearwater, I think, can do is really build this architecture which I would like to suggest that many other companies can't even start to try. Enfusion is a single instance, multi-tenant modern platform. Clearwater is a single instance modern cloud platform. Beacon is on the cloud, single-instance platform. All 3 of us, were built like Salesforce is built or Workday's built. And I would challenge you to think about, in your own mind, just think about our competitors. How many of them actually have a single [indiscernible] item platform? Are they in the cloud, yes? It's like saying I'm taking a walk. Are you on the cloud? Is it single instance multi-tenant? We don't have it, what is the problem with it? You've got to continue to upgrade separately. You've got to do your own data injection. You've got to make your accounting changes differently. So people say cloud and they are sort of trying to associate that with single instance multi-tenancy is just not true.

If you have a single security master for all asset classes across every country, then you could put a single accounting engine around it, which Clearwater already has. Then we can put a layer of AI around it and put this around it. Clearwater already has this architecture. Infusion already has this architecture. Beacon already has this architecture. It doesn't mean that it's really easy to do this, bring all 3 companies together. It is really hard. I don't want to stand here and say, just because we bought these 3 pieces, guess what, we're all done. Not at all. Because between these 3, we represent the same asset in different security masters. And they've got to merge all 3 security masters, and make it one.

But if you can do that, I believe you will transform the entire industry. You make something a trade happen, it will immediately show up event-based in the middle office. It will immediately show up in the risk calculation and in the client reporting. There is no translation. The efficiency and speed, there's no reconciliation. It's the same system. We believe this has a chance to completely transform how the industry does work. And that's why we believe you had to do these deals. [indiscernible] is here, he's going to talk a little bit later. I've bought more lunches than I care to imagine, hey, why don't you come partner with us, why don't you do this and you'll be like, go away, go away. Finally, I think you got sick of me and he said, okay, fine, we'll do something.

But the point is, this is not easy to put together this intellectual property, and I think we have. Is it open -- we already connect to 25 other auto management systems today. Single Security master Clearwater has, you get the network effect and I'm sure you guys know the network effect. But by definition, my data is going to be better than all of my clients. And why is that? Because we manage the entire data ingestion and aggregation reconciliation process. So when a client find something wrong with the data, they can't fix it, they have to call me. When they call me though, as investigator, and I may fix it. But if I fix that data, it fixes it for all of our clients at that same time. So just by definition, when you think about it, anything our 1,400 clients find on the accounting side. We will fix and will fix it for everybody at that same time. It doesn't wait for end of month, [indiscernible], it's done every day. It's just fundamentally a superior way of thinking about the business.

I do think that many of you generate alpha because you think you have the right models better than the more generically applied risk models. Our platform allows -- the Beacon platform allows extensibility. You can bring your own models. You can test it against the model set already there, but it allows you, it stays open and an open architecture is really important. Eventually though, it becomes a marketplace, further regulatory changes, analytical engines. If someone has a great engine out in Switzerland, they can bring it in and sell it off our platform.

So I just wanted to -- I get excited about talking about this. But I do want to stress that it's not there yet. It's not like right away, we have everything working together, one security master, one accounting, it's not there. But one of the largest asset managers, this is a quote from him. And I think it sums it up really nicely. I called him to get permission to put this up. But what he has written, I think, completely encapsulates what I think, which is I'm intrigued to see what you guys can do to build a game-changing platform. It is the holy grail, but I haven't seen anyone bring this home yet. It says you have the intellectual firepower and some key capabilities, so you have earned the right to try. And that's all that is.

I do think you'll hear from my colleagues about we have the pieces of intellectual property to try and build what the industry has tried to build many, many years back. But a whole business model does not sit on that happening 2 years from now or one year from now. As Scott and Subi will come in and talk, we want to continue to do what we are doing, just a little bit better.

There was nothing wrong with the Clearwater story. We were growing at 20%. Our gross margin, we said 50 bps. It was improving much faster than that. We said EBITDA 200 bps, it was much faster than that. So if you can just go back to doing what we were doing, just incrementally better. Why better? Because we lost some deals because of risk. Now we have risk. We lost some deals because we didn't have the front office. Now we have that. So can we just do what we were doing just a little bit better and the same thing for the other parts of the business. If we can do this, it will alter how this industry operates.

I do think we could be the Salesforce. It took time. Now we think Salesforce has always been there for some of you who are older, far too many of you are very young. But for those of you who are older, you will remember, people used to say, well, Salesforce is only for 10% shops, small shops, but not for the large enterprise class company. That went on for 10 years. And today, I don't think you'll hear someone say, oh, why not go back to [indiscernible].

So I think this is the last few slides is technological -- just the architecture we just talk about. You're going to hear from our CTO too, I feel weird. But we just got to look at the bottom. It's cloud native, what does that really mean for you? It is the last upgrade you will ever need. And when is the last time you upgraded Salesforce? Every day. [indiscernible]. When is the last time you think about our competitors, every 6 months, every 1 year, every 2 years, 6-month, 1-year program to migrate to this new -- whatever it is version. And my question is, between that version and this version, who the [indiscernible] the shop here? What happened to the regulatory change? What would happen in the middle here? What happened to the accounting changes, what happened to the new asset classes, which have come up.

It is the last upgrade you will ever need any of these 3 platforms. It's a single security master, one integrated source of truth. The network effect, our data is always, by definition, going to be better than all of our clients put together. It will be future-proof regulation and compliance, we make these changes every day. We deploy literally thousands of times a year. There is no notion of [indiscernible] version behind or 2 versions behind or something [indiscernible]. That's when I was much, much younger that didn't happen anymore.

Just talk about architecture. I just wanted to say this, every other industry, just think about every other industry. They operate like that. They operate like single instance multi-tenancy where people make the changes, then you drag in and do your work. What's wrong with us? Everyone has their own security master. They don't talk to each other. Nothing [indiscernible]. Sorry, I didn't mean that. But it's not okay. This level of inefficiency is not okay.

I just think ours is one of the few industries where the transition is still in the early days, and I feel by far, [indiscernible] is leading that change here. I do think that talking about Generative AI, I think people talk about Generative AI. All of us have the same LLM. You have to know that. Obviously, you know that. Everybody uses the same LLM. But if I sold software to you and you and you and you and all of you had your own instance and you were doing your own data, how do I learn from all of you? I don't even have access to your instance. I don't have access to your instance.

Clearwater -- all of our clients, they operate on one platform. Every time we reconcile data, it's stored as to why? We have 10 years and 15 years of data on what happened, what you bought, what you sold, what we reconcile, why it worked, didn't work? Our ability to use LLM is off the charts, which is why you saw the gross margin numbers, which I'm ecstatic about of what we have achieved. But it's not because we just worked harder. Our architecture allows us to do that. So look, we can talk about growth here. This is the -- I think I've talked a lot about the strategy, and we have talked about the margin, and we talked about cash flow. I'm sorry, Jim is going to talk about cash flow.

But as an integrated company, the point is our TAM has doubled. [indiscernible] the $23.3 billion -- some people are debating with this $21 billion, what is the matter? There's $21 billion or $25 billion pig deal. We are talking about $730 million this year. I don't really [indiscernible] to me. But I do think it gives doubles insurance for us. Insurance was $2.8 billion, it becomes $6.3 billion market. We are -- I think most people would agree just sort of the absolute leader in that spot.

Hedge funds at $3.2 billion. When you do the math about their current ARR, they should have a really, really good runway here. And let's talk about Enfusion and Beacon, and then I will switch back to [indiscernible] went too fast. [indiscernible]. All right. So think about Enfusion, there's 2 things I wanted to say about the Enfusion. What you've heard is, it's not a good market. The growth is slowing down.

I have followed Enfusion for at least 8 years. Every year, not most years, every year, they grew faster than us. Every year, Enfusion grew faster than us. In 2020, 2021, '22, 40%, 34% it was always, always grew faster than us. Yes, in the last 2 years, they've just sort of fallen off cliff. And we think we have a good sense for why that occurred. I think we have made a lot of changes to our company over the last 3 years. I think they need to make the changes. But if you look at the amount of change that has gone on in Enfusion over the last 2.5 years, it's been huge at the senior most levels at the next level, I'm not surprised that the growth fell -- they took all of the R&D, much of the R&D and try to pivot away from hedge funds into asset management.

But when you pivot away and you give this up, growth is going to stall -- it doesn't come for free. And so I feel that our ability to change the trajectory of the business is really high. And then the question is, is the market good enough? Here, the hedge fund volatile, no. The smallest hedge funds are volatile, the ones which have less than $20 million and $50 million, big deal. That's not what the [indiscernible] we should be addressing anyway.

But the hedge fund industry by itself is pretty stable growth at 5% faster than us. Insurance assets don't grow at the same pace. So there is zero reasons, zero reasons, we should not be able to take this and transition this to a growth and a margin trajectory, which is sort of similar to ours. I feel there's been an issue around how to invest what you've invested in.

If we take all of your sales teams and you sort of have them do a little bit of this, a little bit of this, a little bit of this, it will fail, it will fail. You're going to have dedicated teams after hedge funds. And not just that, you've got to have dedicated teams for inception and for conversion. You've got a dedicated team for asset managers and what does asset managers mean? You have to have dedicated teams for less than $20 billion, dedicated team for mid-market asset managers and large strategic asset managers.

So we have this 5-point plan. We like these plans, as you guys know. One is we have already rechanged this to have a dedicated team going after head funds. They have their own product team. They have their own engineering team. They have their own sales team, their own marketing focus, and they wake up and they focus on hedge funds.

Second thing is they have to grow NRR. So we can be pretty proud about our own R. But 3 years back, we were quite depressing NRR. We led that whole movement and we got to do it again. Its a little bit of deja vu, but we feel like we have run the script before and we can do it again. We have commercial model change. We feel there's a way to change the commercial model just like we changed the Clearwater commercial model in 2022. We've done it in the public markets, a lot of people said it's going to be hard. It was hard, but we have done it, and we know how to do it. And the wrong way to do it is say, oh, it's going to take your price up 10%. You can do it 1 year, you can't repeat it. We have a good repeatable process, which is yielding results for Clearwater, and we'll do that.

GTM investments. I think we have a lot of room in our EBITDA, our ability to go make these investments as high. I think the last one is very important really is clear roles and responsibilities. Some of these are underway, some are partially underway. Some are going to launch in Q4. And just a question of timing. Why is that? Because we want everyone to just go back to do what you were doing. Just incrementally better, take care of the home court first.

Now we talk about all these new products, these new ideas. That's all great. Let's just go back and do what we were doing earlier. So this is a pictorial of where we think this is going to come from. I think the hedge fund focus might add 2%. I think the commercial model will add 4%, 4%, 4.5%, 3.5% in that region, and the cross-sell, we feel can add another 4% to it.

If you look at the [indiscernible] story, there's a lot more straightforward. What they have done and continue to do is they do risk for some of the most sophisticated clients on the planet. And so we feel that the first thing is continue to do what you are doing. We have taken some of the sales team and increased their sales teams and brought in, I think, a little bit more rigor in how they sell. I think [indiscernible] speak to you, I think he's very, very amazing at the business and the problem. And on the sales front, I feel like he doesn't feel the need to sell. It's like, it's a good product, you should buy it. But we know better. So we're going to put out a GTM team and that's doing well. They have access to the Clearwater client base and the Enfusion client base. Hedge fund risk, another big one, alternatives, and packaged products. So I think both of these businesses have a 5-point plan to get to do GTM.

But what also really, really matters is our core business. And the core business has to continue to do what it has done, and that was the thesis when we did these acquisitions, the core business has to continue to do what it was doing, just do it slightly and incrementally better. And then if we can build the platform in the next year or 2, disruptively better.

So to talk about that, I'll bring on stage Subi Sethi. She's the Chief Operating Officer. She's responsible for all client interaction from the time we sell something actually before we sell something. And so she manages clients through the life cycle and also Scott Erickson, who is the Chief Revenue Officer. Thank you.

Everybody is waiting for me. Thank you. Thanks, Sandeep. Good afternoon, everybody. This is on already. Okay. Clearly, I have to say this, this is a C1 moment, right, our new branding. What we want to share today is a Clearwater Growth Model. which is actually nothing new. We've been, as Sandeep alluded to, we've laid down the vision, we've laid down the framework, and we're going to continue to do incrementally better. Now for many years, we've actually earned the right in the enterprise boardrooms and many of our large institution clients actually trust us with their investment operations data. And that trust, that track record is the foundation of Clearwater's growth states.

Having said that, what I want to share with you is the forward levels, I'm supposed to click this -- our model has 4 dimensions. The good news, as I said, it's nothing new. We want to continue on our path as we know there's a decent long runway already in this. The first is how do we deepen with our clients. Last year, when I stood here, we challenged ourselves, how do we move from one basis point to 4. And that required a massive shift in the way we think, not only think about how we service our clients, but how do we deliver the expanding value to our clients. And that's something which we have made, and that's resonating very well with our clients.

The second is the vertical specialization. Every one of you is very, very familiar with insurance as a vertical. I remember in my early tenure at Clearwater, we used to serve very few large individual insurers. However, today, we have all kinds. We have large insurance, we have midsized and we have retail carriers. And what's remarkable is this, they all work on that same product and same instance, flex to their needs as how they would want to leverage it.

The third is geographical expansion. Europe and Asia are not future bets anymore. They're real revenue markets for us today. I remember a client in London, telling me, if I can bring all that experience of Clearwater to that market, we can actually lead it and happy to share that we already have.

Last but not the least, asset managers and asset owners. The TAM here is enormous asset managers and asset owners, they not only want data, but they want a technology partner who can work with them end-to-end and manage their workflows because of [indiscernible] in the workflows is unbelievable.

Let me take you deeper into the life cycle, 2 years back when we stood here we were wanting to move from 1 basis point to 4 basis points. And look, where we've come with some of our products, which we launched [indiscernible] on LPX, MLX and PRISM. I'm proud to say these products actually today carry 20,000 LP funds and 30,000 mortgage funds and they're operating at a scale.

While I was busy delighting those clients on LPX and MLX, as a part of my job as Chief Operating Officer and dealing with clients, my clients were forcing us to do more. They wanted to hear from me saying, now you have already reconciled data of MI. You've done one data connection. You have ingested my data. You've reconciled and it's very current every day. Can you give me risk? Can you give me performance? Can you give me front-end solutions? They were forcing my agenda.

And let me tell you, some of you are my clients here as well. Very impatient bunch. So they were forcing our agenda. We also, at the same time, took a step back and realized that developing these products organically will take time and thereby, we complemented our growth agenda from organic growth to inorganic moves. Enfusion and Beacon, as Sandeep talked about, both highly relevant, both critical in scaling up our entire life cycle and road map.

Now why does this strategy work with our clients? The reason why this strategy works with our clients because we've earned what I call is license to operate. These are some of my favorite charts. So I'm a little biased towards them. So please bear with me. Over the last 5 years, we've actually maintained a Net Promoter Score of 60 and above. And 16 above not in one vertical, but across all verticals for consecutive 5 years. And that gives -- that is what I call license to operate. That consistency only comes when every transaction, every reconciliation every namely fix is done with precision.

And the reason why we can do that with the precision is because that's one product, one instance working for all clients. And here is a critical piece. Every one of those transactions generate data. When those operational data are converted into insights, they actually govern our technology road map. And the combination of operations inside and product, that's our competitive edge, and that's our advantage.

And let me tell you, all of the enterprises actually struggle to implement AI on the top of it because they do not have a single source of data, but we do. Our 114% net retention rate is not just a metric. It is a litmus test of our clients having trusted us and growing with us.

Let's talk a little bit about our clients. The good news is there's no concentration on any segment over a year. Today, we have 130 clients -- over 130 when you have 2 more, you actually kind of rounded off, who actually pay $1 million more or an ARR on a regular basis. And with 98% gross retention, they've been with us forever. And that's grown both organically as well as inorganically.

We think about clients' experience and client delight at 2 dimensions. First, are they happy? For us, happiness in the light means both economic buyers as well as our power users are able to manage their workflow seamlessly on our system. The second being are they sticky. Some of our clients' data actually directly go in their board texts. Yesterday, one of the clients CIO actually told me, Clearwater is the only partner wherein his charts on investment operations get generated by one click on Clearwater system and he gets the deck. Now that's the kind of stickiness you actually cannot manufacture. And that deep integration really drives stickiness, which is why you could see a chart which Sandeep showed a straight consistent chart for 7 years of 98 gross retention rate.

So how do we grow with our existing clients, and that's a good -- that's a question which we have evolved and we're continuing to evolve. The good news is every day, our clients call us and say, we want to do more with us. And there are many irons in the fire, and that's a common phrase and Clearwater we actually use.

I lead operations globally for Asian clients, European clients, American clients. some of the Mexican clients as well. Having said that, while I make it sound very easy, it's actually not always working with precision every time. So we put many irons in the fire. And I'll talk a little bit about each one of them. The negative 2% is something which actually I'm very proud of, even if it's a negative 2%, which is managing churn. While I believe 2% churn is best-in-class, I still look at every reason why a client leave us. Some of it is small asset managers, which are folding. But some of -- some of it is also input to our product road map.

Second, being how do we get the full book of our clients on the system. The more asset classes we put on Clearwater, the better the product becomes, the better the insights become. So it's one book, one source of trust, one source of data for our clients, can't get leaner than that.

Third, cross-sell and upsell. Now with auto management system, portfolio management system, performance, front end -- all in our portfolio, our clients are asking me every day. Now since you have might reconcile data, can you give me a scenario analysis, can you give me shock analysis? Can you help me with the OCI strategy? Can you give me a performance report?

I have so many asset managers I want to make a performance dashboard for all my asset managers, and we -- and look at their portfolios and how they're investing in. The answer to all those questions is yes, yes and yes. And those are exactly the areas where clients want us to grow and have one partner wherein everything is consolidated.

Fourth, commercial model innovation. Sandeep briefly talked about that. We don't only protect our clients' investment. We also design structures and contracts which protect our revenue while keeping fully aligned with our client growth agenda.

And last but not the least, the AUM tailwind. Some of it is market-driven and some of it is not market driven. Some businesses are profitable than the others. At the end of it as our clients are growing, so are we.

This is definitely my favorite chart. Now margin mindset. This is a DNA we've built in the last 6 years and it's growing across the entire enterprise. Last year, when I stood on this stage, we've dealt and -- and I promised we could deliver 80% gross margins on our core accounting product. The 77 number you saw was a combined number. I'm proud to say that we did it. In fact, the steady-state clients are actually trailing at 83%, something which I'm really, really proud of.

But how are we able to do that? By putting AI at the center. When Sandeep last year came to me and asked for a 50 basis point improvement, I thought to myself, it's bold, but doable. Having said that, since he is my boss, I was cautiously optimistic. But at the end of it, my playbook at that time did not have an AI. I did not know what the art of possibility at that time when we put these models into place and implement them and make them AI native.

To help you understand this a little better, Clearwater processes millions of transactions every single day. That gives us data and signals that nobody else has because it's a single instance. So I'm able to see a security is bought at X or X plus [indiscernible] or X plus 2, buy A and B. I can see every -- the entire life cycle. And with that data over time, we build 1,000-plus AI domain-specific models, which are tuned to every business problem. So if somebody is wanting to compare a book yield, we have that problem. If somebody is wanting to know the compliance rule summarized, we have that as a model.

And these are not experiments. They're live and running in production, and that is what you are seeing as an uptick in the margin charts. That's the power of combining operational depth with AI expertise.

Suspense is another example. Suspense by the name itself is a suspense, only accountants understand that. This is a different problem. I've credited money, and I don't know where that is. We built a workflow, a suspense workflow, which is AI native. So not only it manages to clean the suspense every day, but it also tells you against which security is that suspense coming from. At the end of the day, my clients are able to close book on day 1 and day 2 because they have 0 suspense activity.

With that...

There's 2 clickers up here, but Subi said, I couldn't hold the clicker when she was going as I might get a little anxious and push them along. But in all seriousness, want to thank, Subi and her leadership. It is so much easier to grow when there's high confidence in your ability to deliver and to deliver for clients. And as we talk about 1 to 4 as being a key area of focus for growth. And just to continue on what we committed 2 years ago on this very stage, it only comes when you have happy clients, 60 NPS. Are you kidding me in every single market? The unit economics of being able to deliver at scale and do it profitably to not only price it right, but to deliver.

The ability to grow and our confidence in continuing to doing so is not just because we've executed in the past as Sandeep has described but because we consistently deliver for our clients. And from a revenue perspective and a sales perspective, what a luxury it is for us and our team, know that clients are satisfied, both from a new logo perspective, happy clients lead to new logos as well as growing and having that license to operate that Subi talks about. Subi talked a lot about 1 to 4 basis points and growing the existing wallet share with our existing clients. I'm going to talk about the 3 other pillars and then finish by talking about the additional opportunities we have since the acquisitions of Enfusion, Beacon and Bistro.

But the 4 pillars that we talked about, 1 to 4, grow insurance, grow globally and grow asset managers and asset owners. To start with insurance. This one is personal for me. I actually ran our product team when we brought on our first insurance client. And it's thrilling to be able to stand here today and Sandeep talked about earlier, is that the dominant position we have in insurance. We've truly gone in and disrupted industry in providing positive personal and business outcomes to our clients. We still have a ton of runway in insurance.

And as Subi mentioned, we have global recognition of the solution. But we also have large marquee clients in every single geography. Actually, our largest client, our largest insurance client is non-U.S., both in terms of AUM and revenue. And the current ARR of 2.79 against that TAM of 6.3 leaves tons of runway. Now that TAM has increased since we last met Sandeep talked a little bit about this because it's not just the one basis point of data management, accounting and reporting, but it's also now the entire investment life cycle around both front office capabilities as well as risk.

We also, last time, didn't include Asia in this number. We only include markets where we were going full bore into those markets, and we hadn't yet done that 2 years ago. And that leads us to the second point of growth. As we continue to focus on insurance and capture this huge runway is to continue to grow globally. The reality [Audio Gap]

And as Sandeep mentioned, we're executing to it incrementally better. Same with grow insurance, same with grow globally. And then last Subi pointed out huge TAM in asset management and in asset owners and continue to grow within those client bases. We've long worked with some of the largest and most sophisticated asset managers in the world.

Asset managers present a tremendous opportunity for that NRR of 115, not just to sell new product, but also help them grow as they grow, we grow with them. We brought on 41 new asset management clients in the last 12 months. This isn't counting Enfusion clients or Beacon clients. This is the core Clearwater business, 41 new asset manager clients. And then asset owners in similar fashion, all within the same product, the single instance multi-tenant solution, over 50 asset owners coming on to the platform in the last 12 months. So focus is continue to execute on the path that we laid fourth and discussed with you all 2 years ago, just do it incrementally better.

But it's also exciting, especially from a chief revenue perspective is the new capabilities that creates the additional right to win and being able to sell across that entire investment life cycle. As Subi mentioned earlier, when we presented NRR 115 and this expansion of 1 to 4 and the vision of doing it across the entire investment life cycle. We started to build. Traditionally, we've built everything. We have a great technology team. Souvik Das, our CTO, is going to come up here shortly and speak about what his team is doing.

And as we started, we addressed the one basis point already. So we started addressing another basis point with Alt and risk and modeling and doing LPX and MLX. We've seen a lot of adoption with our clients within that. But it just takes time.

So with the acquisition of Beacon and Bistro, we now have a world-class risk and alternatives insight engine to further expand in that time to market much shorter. I already talked about growing globally with the new geographies. Then you bring in Enfusion front office, you know how the entire investment life cycle.

With state-of-the-art technology with disruptive platforms where we're now able to meet the needs of the entire investment life cycle and all personas within that life cycle. And so a question naturally comes up, well, how long is it going to take to integrate? What Sandeep talks about is, earlier, the focus is first and foremost, do what we're already doing great. We have the right to win already. We have runway, just do it incrementally better. So these acquisitions, client-driven. Clients coming and saying, do more for us. That's what happens when you have a 60 NPS, clients come and say, we trust you, you deliver, solve more problems for us.

Well, Clearwater can now grow and incrementally sell better. Why? Because of Enfusion's front office capabilities, Bistros alternative insights, Beacon's risk and performance. Enfusion they sell incrementally better, stand-alone, Why? Because of the power of Clearwater's middle office and Beacon and Wilshire's risk analytics. The same goes for Beacon. [indiscernible] going to come up and talk the founder of Beacon, about Clearwater's data and how that empowers the Beacon platform as well as this huge client base coming from Clearwater and Enfusion that allows for us to go back and sell to them.

So when we think about go-to-market, it's just do what we're already doing. We have a history of delivering. Just do it incrementally better. And this is my favorite slide because this is the proof point. Since the acquisitions, proof points and new logos, clients coming on using multiple platforms. Talked about the large Asian bank already, [indiscernible] agile. Let me just talk briefly about the one on the right, [indiscernible] German insurer and asset manager that is using Enfusion in the front office. Beacon for pre and post trade risk and core Clearwater in the back office. This hits all the points. It hits on growing globally. It hits on expanding insurance and asset management, and that entire investment life cycle and a tremendous and very exciting early proof point.

Souvik will talk a little bit more is with the integration, yes, there is some tech. Sandeep talked about it. He said it's work will have to be done. But we think that work is additive to what's already going on. And so with the sales team, our focus is deliver incrementally better. Second is cross-sell, taking Beacon to our large insurance clients. Taking Clearwater to Beacon's large insurance. Doing the same with Enfusion and then ultimately, revolutionizing the role of investment analytics, accounting and reporting across the entire investment life cycle with a single security master, a unified UI.

Generative AI at the core. Why? Because we have the data and creating a clear water compliant world to solve the problems around unstructured data. So from a sales perspective, it's an honor to sell clear order. It really is. Why? Because we have such a competitive advantage today. But simultaneously, we have the right to continue to win in the future. And while this integration takes time, we already have clients who have done it, some of the largest, most sophisticated managers are in the world. They're already using multiple platforms where they've integrated. They've integrated Clearwater and Beacon or Enfusion and Beacon. And it makes it that much easier now that we're doing it for them. So anyway, it starts with satisfied clients in Subi. I'm going to hand it back to Subi to talk a little bit about how we execute here and really appreciate everyone coming out today. Thanks.

Why do you get to? You got your own and I didn't?

I know I didn't trust you. So just to kind of sum it up, how do we all take this to market? We mapped the entire life cycle investment life cycle. It was easy. We mapped all personas across the investment in lifecycle. Each personals have their own needs. Our go-to-market approach starts with markets and capabilities. So what we do is we take the right capability, we connect it to the right persona and we scale it to the right market segment.

And the last one, which is the Clearwater compliant. I will say this a little more dramatically, but I do have a dream. I do have a dream that my clients have a Clearwater ID. A Clearwater security ID, which some day tells, they're able to track that and it becomes an industry norm and trust you me that day is not very far off.

We've organized around 4 market segments: insurance, hedge funds, asset managers and asset owners. Now while underlying workflows are very similar, the way each client type leverages the system are very different. So hedge fund client would more be bothered about risk and performance where insurance probably might bother about compliance and accounting. Not that the others are not important, but that's their sweet spot. By going to market segment by segment, we can speak actually their language and build trust. Once we build that trust, the rest job becomes easier.

Behind the structure of market verticals, there are capability centers. Risk and performance, alternatives, accounting, funds and Prism. These centers actually drive our road map. Just to give you a very simple example, an insurance client came to us and said, we would like to look at derivatives risk in alternatives, not just see the numbers, but I want to model it, and I want to play with my variables. So our team of [indiscernible] and alternative experts developed exactly that. And that's the value of having deep domain expertise in-house.

So what have we done so far? We've defined a clear and an ambitious vision. Sandeep walked us through that. We make sure that we walk every market and client through the same. We've retained our start-up mentality. Our leaders actually roll up their sleeves and they stay hungry, and we act with speed and agility. While Sandeep says, it will take time, he only says it here. Internally, he says, when will that get done?

We reorganized our GTM and R&D structures. Scott walked us through that, Sandeep walked us through that. There are teams which are focused on hedge funds. There are teams who are focused on less than $20 billion asset managers. We've consolidated operations under one roof: onboarding, servicing, data ingestion. So my clients actually, irrespective of a product line, feel the consistency and intimacy. We want to retain that NPS. We do want to retain the license to operate.

We've consolidated G&A and realize our savings and given it back to R&D. The result is the strategy is focused. The momentum is real and innovation is happening at scale. And with that, let me leave you with this. I'm personally very, very and super excited to be at Clearwater today. We built trust, we have the proven operational excellence and we've embedded ourselves in customer workflows. Now with that combination of scale and technology, topping it up with AI, we're positioned to accelerate the revenue as well as the margins.

And with that, I'll hand it over to our Chief Technology Officer, whose budget is doubling. And he'll walk us through the product road map. Thank you.

Thank you, Subi. Thank you, Scott. Hi, everyone. Good afternoon. Thank you very much for being here with us. We appreciate your time and your patience to hearing us out. Thanks again. So as Subi mentioned, Souvik Das, CTO of Clearwater, been in the company a little over 4 years now.

At Clearwater, we have built a massively scalable technology platform that is truly cloud native. That is a single instance multi-tenant platform. And as Sandeep mentioned, our customers, just because of the architecture that we have in place, our customers never need to upgrade. We push code every day of the week several times a day, and all of this is transparent and differently from many of our competitors. So we do all of the heavy lifting on behalf of our customers. But the job of building product functionality, the job of scaling our platform is never done. Why is that? Because our customers always demand more from us. We always have to keep up to date with new regulations and changes globally.

And most importantly, in my job in the technology organization, we have to keep up with ongoing innovations like GenAI. So therefore, it's an exciting journey ahead of us. I'm incredibly excited to be the part of Clearwater. And frankly, it's an honor to be here standing in front of you.

So let's talk a little bit about what we are doing. We have one integrated platform that we want to build. That is open, that is modular. This is not going to be 3 distinct platforms. And as you heard, Scott and Sandeep and Subi said, look, it takes time. It's not there today, but we are well on our way.

Let me just talk a little bit about the different [indiscernible] elements of this platform. Obviously, we start with cloud native and all of that. But at the very base that the foundational layer is one single data ingestion plane. All of the data sources, all of the feeders that provide us data are coming in through this one single data ingestion plane that's live today and operational.

Many of our customers get data out of our systems through this data plane. On top of that, we are building a single security master, and I'll talk a little bit about that later. This is going to be a single house data source for all public and private data securities. All our computation engines, whether it's order management, portfolio management, risk, et cetera, et cetera, are going to be layered on top of the single security master. And each of these constituents -- each of these computation engines will have an API that will have Gen AI-enabled.

And then finally, to our customers, we will have a single, easy-to-use intuitive user experience. Sometimes, they're going to be point and click with drop-down menus, just like our customers are used to. Sometimes we are on a journey of having conversational workflows as and when customers need to use it or want to use it. No one else can do it. We can do it because we have a single instance, multi-tenant, cloud-native architecture that is built from the ground up that way.

Let's talk a little bit about the journey ahead, and this is super exciting for me. Scott talked a little bit about this. Phase 1, this interoperable system is already live today on our platform. Many of our customers, like Scott mentioned, are using this. So this is not something up in the air or we're working on it. This is live in production. Clients are exchanging data via files. This is not something that clients are exchanging data, sending into some off-line system and ingesting that's not how it is. It is in the platform happening today.

The next thing that we are working on right now is this event-driven connected platform across Enfusion, Beacon, Bistro and core Clearwater. And why is that important? That's important because let's imagine a front office portfolio manager wants to make a change. Through this event-driven pipe, that change becomes instantly available to the Beacon's risk management system. And then risk analytics can run on the fly real time, and that data, the computed data can go back to the portfolio manager in real time. There is no data offloading. It happens all in one system. We are building this right now. It's going to be ready in about 10 minutes.

Scott talked about one of the largest German insurers in the market. We are working with that client right now to build the system. And we have now an amazing group of technologists that we've hired from Silicon Valley companies like PayPal, eBay, Amazon, Robinhood, that are working on this problem right now.

The end state of this platform is a single unified platform that has, at the core of it, a single security master, public, private, all of it. And then GenAI infused workflows that is not side car that are not add-ons but core to what our clients deliver, clients need from the workflow perspective. And we'll talk a little bit more about that later in my session.

So let me talk a little bit about why it is so hard to get this thing done. Well, we have thousands of data sources that we're ingesting data from every day. Thousands and thousands of feeds coming into our system every day, millions of securities, hundreds of asset classes. All of these have to be modeled -- all of these have to be priced, valued, shocked. And all of this has to be done in every day for our customers.

Many of the data sources do not send us data in structured formats. They send us data in very complicated unstructured data services. We have to extract information meaningfully that is accurate from these unstructured data sources. It's extremely complicated to build, particularly when you think about international clients wanting to do this at scale every single time. And this is why we believe in continuing to invest in R&D and I want to thank Sandeep and Jim for that to be in that position.

Let's talk a little bit about the single security master and the compliance piece that Subi talked about. Look, we see an explosion of alternate assets on our system. And as all of you know, alternate assets do not have -- in our industry today, we do not have a single defined data format that manage and model different types of alternate assets, whether it's private funds, private credits, whether it's derivatives, there's nothing like that, that exists. We are working on that.

So as we get and work with several, several market services, we are actually seeing in real time right now, all of the different data formats that are coming into our platform. We are working on modeling it, pricing it, valuing it, et cetera, et cetera. And why can we do that? We can do that because we see $10 trillion of assets flowing through our system every single day, for about 2,300-plus customers every day. And that gives us the right to model it correctly makes sense of it correctly. Extremely proud of the work that we are doing out here. We believe we have the right technology and the right domain expertise to go and solve this problem.

And finally, I want to spend a little bit of time on Gen AI. This is one of my favorite things as part of being a technologist, of course. Look, everybody has access to LLMs today. And we all in our individual consumer lives are using Generative AI technologies in many different ways. The key differentiation for Clearwater is we have accurate, complete and up-to-date client-specific data in our system. So the models that we have built internally are always targeting that data and are learning from that data.

Every single day, they are accurate and they're predicting accurately with 0 hallucinations. That is our secret sauce because all of that data is in one central logical place. That's the power of single instance multi-tenant platform. Subi we talked a lot about margin expansion. Over the past couple of years, we have built a massively scaled out Generative AI infrastructure on our platform that is a layer above the LLMs. We have deployed several hundred Gen AI agents that are operating on that infrastructure right now.

Our operations team members, our client services team members are using those Gen AI agents every day, and that's what's getting us the margin expansion and operating leverage.

The next step in our evolution of Gen AI in our platform is the ability to use the same infrastructure. We are not going to rebuild it, same infrastructure and use it to build agentic workflows that solve meaningfully relevant and deep contact sensitive workflows for our clients that would provide additional value to our customers. And we are working on that. We are in design partners with several different hedge funds and asset management customers right now.

Now the most exciting piece. So we will show you a couple of product demos. This is admittedly a little bit futuristic, but very aligned to where we want to go, and we are working on each of these. We will show you 2 vignettes. One is from a Chief Risk Officer of an asset manager who looks at his entire portfolio and uses Gen AI to understand the risks of his entire portfolio, perhaps an exposure risk of a particular company and then sends a message to a technology analyst to see what can be done.

The second vignette is about a portfolio manager who looks at his particular portfolio and uses Gen AI to run an X anti-risk model in real time and then uses the information out of that risk model and communicates with his trading counterpart to see what can be done to his portfolio, all in real time.

Let's play the demo, please.

[Presentation]

So as you could see, in our conception of using Gen AI, it is core to our clients' workflows. We don't want to build something that is a side car or that's an add-on that is not necessary. It is seamless. It is going to be integrated to our platform and meaningfully provide value to our customers on their daily lives. Thank you.

With that, I'd like to invite Kirat Singh, my friend and colleague, who is our President of Alts and Risk.

Thanks, folks. It's an honor to be here as well, and thank you for making the time. Just a quick intro. As Sandeep said, just you can judge teams based on historical performance and then the future is a vision. So I started at Goldman, just down the street here, working in [indiscernible] which is FX and commodities trading. And I think Goldman actually had the first front-to-back derivatives platform for the entire bank across all trading desks. And so I was lucky enough to be a part of building that.

I think the key component there really was if you're sitting in a trading desk and you're making markets, prices are moving around. What you really need to do is calibrate your models to be able to match the market. And then you have your own -- sorry, X. And that gives you the relative value to say, this is what I'm trading, and this is what I think my edge is and you would need to be able to do that in real time.

And that -- I think all the systems that you want to define in risk, you want to be able to change them at market speed. So there's always been a sort of impedance mismatch between the front office, the middle office and the back office and that's what we aim to take away.

And so for example, after that, I went to JPMorgan and built Athena, which is their risk and trading system and then at Bank of America, I built [indiscernible]. So just another point to make, too, we've mentioned -- Sandeep mentioned earlier, our clients said they had dozens of systems. In 2010, Bank of America had 150 upstream trading systems. So we replace them with one. And after that, we started Beacon, and I think some -- one of the premises there was if you looked at this, even in 2010, there was no open derivatives platform where you could say, actually, I want to just change, for example, how I model recovery rates or prepayment speeds. You had -- if you wanted to do that, you have to rebuild the risk platform from scratch all by ourselves.

So we started Beacon with a view to create an open and transparent platform that's completely extensible. That's cloud native and that can define sort of risk-neutral term structure for all markets. So what you can do with that is to say, if I have my edge, I can define what model [indiscernible] I care about match the market and as a specific trader or PM, I'm trading just that view. But at the end of the day, if I'm a Chief Risk Officer or a CIO, I can see exposure across all my different trading desks in one place. And so that's what Beacon lets you do. It's a unified platform across derivatives, private credit, and of course, public fixed income, like cash, cash equivalent, securities, et cetera. We cover banks, asset managers, hedge funds, insurance and energy. [indiscernible] super interesting market now. And if you think about carbon transition that's being enabled through renewable NGO that makes it extremely volatile to trade.

In the past, people would just trade the [indiscernible] between oil and gas because that our coal. But now solar and wind is super volatile. So if you want to think about how you want to manage that, you have to have good risk management.

So just moving towards on the insurance side, after -- as you folks all know, after the great financial crisis, banks stop lending, right? Like cost of capital became too high. And like there's all the big reinsurance desks at banks spun out [indiscernible] all these other folks put out as separate insurance companies. And they really try to run their books as like giant derivative portfolios because on the insurance side, you have liabilities which gives you some lost distribution. You want to match those 2 assets. And then you need to recover some spread on top of that to match liquidity and duration. And the better you can do that, the more return on equity you have to your clients.

And if insurance, and I think, [indiscernible] said this the best, insurance actually was a leader in this. Usually, the insurance industry's laggards in financial engineering. But here, public fixed income and equities have to low duration now, right? They're too liquid. So if you want to match duration for insurance companies, which is longer, you end up having to invest in private. And then how do you manage risk across both of your publicly and privates, whether you use something called Beacon.

So we can model both the risk for both public and private, and Blackstone is a client of ours and we run the entire fixed income and credit portfolio and using that plus Clearwater, they built [indiscernible] on top of that to give themselves a whole portfolio view. And we've talked a lot about integration here, too.

And I think one reason I'm very excited about this year is that our clients have already integrated, so Blackstone, Global Atlantic, prosperity. These are insurance companies who had already integrated. Its actually when Sandeep and I was chatting about 1.5 years ago. I think for the record, it was one lunch and 2 dinners. So it wasn't that hard. But it's very exciting for us because as a small company with 10, 11 years old, we would get 5 or 10 clients a year. But now we have access to 600 clients on the insurance side and like 900 hedge funds for whom single data mapping. We do it once. We can then offer out-of-the-box risk. And uniquely, we can allow people to customize it. And I think that's really the edge.

And if you think about the insurance side, if we talk about the market and trends like that, insurance wants duration, duration, for example, is battery storage. There are 8 or 9-year assets that can treat as a bond or solar farms. So even insurance companies have exposure to energy. The fact that we can model all of these together, I think is a huge enabler for us. And this has been this general secular trend across markets to say alternatives have doubled in the last 10 years, $20 trillion. Multi-asset strategies across global macro hedge funds and asset managers, that's a space that we play in our clients some of them are in the audience, global macro, multi-strategy, multi-PM hedge funds and asset managers. That's sort of our bread and butter. So it's very exciting for us to be able to enable risk across these different pods because I think previously, people were investing in a specific strategy, but that doesn't work in the market nowadays, right?

So any hedge fund or asset manager that has multiple strategies, multi-PM funds, investors are happy to give them money and allow them to allocate it, but then the hedge fund needs a CIO view across all of their strategies. And some of our hedge funds are exposed to crypto even. That's easy for us. Crypto is basically just a currency which is super volatile, so we can model that. We actually have a bunch of clients for whom we set up as a swap dealer for like crypto trading as well on the auction side.

And of course, everyone is global, as we just talked about as well. Sorry, I think I'm over time. So I will try to speed up a little bit here. And I think the thing about -- for example, what Bistro allows folks to do is have the CIOs and the CROs at an insurance company have the same exact view as the PMs. So if you can say, for example, in California, there were wildfires Blackstone has CLOs, direct lending, ABS and other things. And we want to say, well, what's my exposure to California? You can immediately find which direct lending, which asset-backed securities those are related to and then go discuss with the PM who's managing that desk to say, well, actually, how do I mitigate this exposure, right? I might want to hedge it or figure out what my rotations are, et cetera.

And if you think about also private and public, looking at risk and liquidity is becoming increasingly important as private markets become more liquid, people are setting up evergreen funds, which are basically a mixture of public fixed income and private credit on the long end. And again, to see why this is important. If you look at the endowments, for example, Yale had to deleverage $2.8 billion. And you think about Harvard having $50 billion endowment, they -- why are they worried about changes in regulation is because the draw is something like 4% a year. So if you think about changes in regulation that are like -- sorry, I don't know a better way to put it. So I will just say regulation that could increase that drag to 10%. They have like $9 billion of unfunded private equity investments, 50% private credit. So they're super illiquid. They've never had to manage liquidity risk before.

So I think the more private exposure you have, you just need better risk management across that with public. And so I think we can enable a lot of this liquidity and risk management for them.

Finally, tech stack. So we've talked a lot about cloud native. When we started Beacon, we started cloud native. I think there's no reason for people to buy data centers now. And I think what's really interesting about the cloud is it's elastic. It allows your compute needs to grow with your business. So for example, one of our clients during the COVID -- bank client, actually one of our largest clients is in APAC -- in the APAC region. So again, super global, they want to run COVID scenarios with a bunch of stress scenarios using Beacon, they could literally spin up 2,000 cores. I think they paid something like $70 using the spot market on AWS and run a scenario in 30 minutes.

So things like that are really why you want a cloud-native system where you can put your own models, bring your own models in and run it. And what Beacon allow clients to do is unlike a bunch of our competitors, too, who give you either out-of-the-box systems or completely customizable systems, we can give you something that's risk on your trades and your positions and market data, but you can spin up a development environment next to it, which is now AI-enabled.

So actually, we were just working with a big Malaysian oil company where we enable LLMs for them. And all development environments always have steep learning curves. The fact that they could use it to say, write me a Monte-Carlo pricer to capture seasonality in [indiscernible] and we can actually spit out a little bit of code for them to do that, and that gets them started. So it returns people who are not programmers into programmers, and that's very exciting to me. I've been writing code since I was 10. When -- I think my first computer had 2 kilobytes of ram.

And so just talk a little bit about our competitive edge here. And if you think about it, we -- again, what's exciting here is we have data, a single tenant for 600 asset managers, 900 hedge fund clients. A onetime mapping across that allows us to deliver our clients' risk without them having to deal with the hassle of integrating it, making sure the data is right, and if you are trying to trade or manage risk in volatile markets, the last thing you want to do is figure out, do I have the right trades? Have I missed a trade? [indiscernible] positions in accurate? Have I got an incorrect mapping? Or if I'm using risk metrics for something or bar off or something else? Can I add those numbers up?

And I think the fact that with Beacon, we have both the cross-asset derivative risk models, and with Wilshire, we have factor models and equity models, we can integrate those together and allow clients to customize them across a single data plane and give them risk and liquidity capital reporting on one set of data, that's super exciting to us.

The other thing I think that's really interesting is Clearwater is [indiscernible], T+1. Both Enfusion and Beacon are start of day in today real time. So the fact that we can take our positions from [indiscernible] to start of day and give PMs the same view so that they can actually manage risk and trade on data that's reconciled with their accounting in the middle office, and that's actually what we're enabling for [indiscernible], but also our clients have already done this. So I think that enables us to create like a game-changing platform here. So excited about that. And thank you, folks.

I think I'm handing back to you, Jim.

Clearly, it's a privilege to work with those folks, right? And so if you just hear how Souvik and [indiscernible] talk about how those technologies can come together and fit together, you can get really excited about that opportunity, and you can hear all of the use cases that flow behind that. And then when you hear how Subi and Scott speak about how our clients are bought into this how they're driving that, how the interconnectivity of that -- of as brilliant as that vision is that everyone has put up here, it's actually grounded in what our clients are saying to us.

So I think it's an incredibly exciting vision for the future, and it's just a privilege to, hey, I'm just an accountant. So it's a privilege to hear about coding on a 2 kilobyte computer, whatever that was. But I did play video games.

But let's be a little more pedestrian for a moment, right? I think coming out of this whole event is about talking about the vision. It's once every couple of years where we're doing this, and we're trying to project that growth and kind of the long-term vision. And so I think that's been the meat of this conversation with all of you. Hopefully, you understand that. Hopefully, it resonates, and it's consistent with what you've heard in the past.

Coming out of Q2, though, a few people asked me some questions about 2025. So I thought I might just take a minute to talk about that, if that's okay, with folks. And then we'll get back to more of our long-term view [indiscernible].

So let's just cover for folks kind of our illustrative framework. We tried to articulate this, but I think when you see it in numbers and the pictures, I think it's helpful for folks to understand. On the left-hand side, you can see that Clearwater revenue in 2024 and Enfusion revenue as a public company in 2024. And then just walking across Clearwater at the top, our expected revenue growth was 20% for the whole year. Clearwater was Clearwater for the entirety of the year. That's why it's 100%. And so that kind of comes to the in-year revenue expectation under that framework.

Within Enfusion, we spoke about a 13% growth and how that fits. It was only here for a part of the year. And so that layers into kind of what that in your expectation is. And then for Beacon, we talked about $44 million of ARR, and that's kind of flowing in at the time of acquisition, and that's flowing into those numbers. And that comes to kind of the midpoint of the guidance framework. So hopefully, that helps people understand what the pieces are.

I think folks also had a lot of questions about [indiscernible] it fit with the quarters and how does all that fit. So here's what we've laid out for you. You can see that we're growing. So let's just talk about Q1, $126.4 million was Clearwater, and that's what we grew and we grew to $130.6 million in Q2 the organic business as we disclosed. And the acquired businesses were $51 million between the 2 in Q2. 3% sequential growth in Clearwater. Remember, Q4 of 2024 was a 27% growth. And we had talked about at that time, we brought forward a few million dollars of growth at that time. So you can see how that played into Q1.

And so as you walk through and you see these quarter-over-quarter growth throughout the year between Enfusion, Beacon and Clearwater. And so as you think about this quarter-over-quarter and as we're kind of starting fresh, all of these businesses as we acquired them in April, we talked about all of the plans and all of the innovations that we're working on. To drive these, this takes time. We said some are partially underway. Some are starting in the fourth quarter and some are well underway now.

As you look at this, you see acceleration within the business on a quarter-over-quarter basis. And that's how -- as we're putting the teams in place as we're driving to this level of detail and granularity with folks and really thinking about when Sandeep talks about, let's just do it incrementally better. That's at the investor level. The granularity that we go through when we think about market segments and driving that and what our right to win is at each of those levels has come through, and the plans are now in place, and we're excited to see that growth. So that's 2025.

Let's now talk about our continued operational improvement. Here is our current operating model. And as Sandeep mentioned earlier at the beginning, right? We delivered 200 basis points margin improvement in 2023, more than we promised in 2024, again, 350 basis points margin improvement. And in Q2, the model looks relatively similar. Yes, you like that. I may not be able to code, but I can do graphics.

So now let's talk about what Q2 looks like. Remember, we had kind of 3 different models that were coming together partially in Q2 and you look at the full year. So 7%, 7.5% for our gross margin, 22.5% in R&D and 10% in G&A for the whole year. Basically, where we were living in Q2. We're driving and doing all of this integration work and keeping this for the rest of 2025.

But now what are we committing to going forward? So we step through yet again, we will talk about, it's a little bit of the same message, and we're delivering it again. In the past 2 years ago, we committed to 50 basis point gross margin improvement per year stepping forward. We continue to do that going forward. But what's different than 2 years ago? 2 years ago, we said 80% gross margins. Subi already talked about how steady state was 83% for a subset of our clients. Our long-term target has increased to 82% generally because when we set those targets, we didn't understand the benefits that we were going to see from Gen AI, and we're absolutely seeing that. And we're living in that.

R&D, we're going to decrease R&D by 50 basis points and drive that to that 20% long-term target. And we're going to be more aggressive in G&A, pushing it down 100 basis, resulting in us having a long-term EBITDA target of 42%.

So this was really interesting to me. As we sat down, when we built our mental model about how we were going to do this and we did the acquisition Enfusion, remember, we talked about gross margin within the Enfusion business growing 800 basis points. We've already yielded through the actions that we did into that in Q2, half of that, $400 million of those $800 million and so you would have expected had you just done the math of kind of gross margin and what the 2024 gross margins are and blend the businesses together, you would have expected 75% in Q2, and we did 77%. And we're very happy with that 77%, but we're not satisfied. We have all of these options for additional margin expansion.

Now you might say, hey, wait a second, are these 5 items absent number one, which was Gen AI, which we didn't really talk about because we didn't know what it would do 2 years ago? These others are exactly what we said we would do with our business. It's the same road. We're traveling it down again. We have loads of opportunity in automating these operational workflows from talking about the commercial model and building across that.

R&D, you might say, wait a second, everyone was saying that our R&D spend was doubling. This is -- we have a lead. We're a leader in this marketplace. We want to change the whole industry, and we're leaning into this investment. So you might say, hey, wait a second, how are you getting that incremental margin improvement by reducing R&D as a percentage of revenue. And -- but when you start thinking about this, our growth in R&D spend from 2024 to 2025 is more than our total R&D spend in 2020, which were the numbers we talked about when we went public in 2021.

Our growth is greater than the entire accumulation of what we spent in building up the business to go public, we're adding that much this year. And although we'll get margin improvement, we will double again the R&D spend that we're doing. And when you hear these ideas and you hear the connectivity to our clients, you can understand how that's really exciting.

G&A, you can see that we had made some progress and then stepped backwards in 2024 as we step through this. We're highly focused on bending the cost curve in G&A. I think we understand this. We have incredible scale. We are implementing best-in-class processes across all of the firms and taking a global approach, a singular approach. And over time, we will see significant improvement in that.

So I think coming out of this, 82% gross margin in the long term, 42% margins in the long term, and that same commitment to margin expansion over time. I think everyone understands, believes and appreciates the margin expansion story that we have. Sometimes, we get questions about stock-based compensation. In 2023, we were getting a lot of those questions. And we said we're going to stay flat. What did we do from 2023 to 2024, essentially flat, 108% to 111%. Maybe it's up a little bit. We'll call that flat. But as a percentage of revenue, down almost 5%. This year, with the acquisitions, we did have a step up. We have a variety of different things. It's a much larger business. And so in total dollar terms, it's up to 135 this year, another step up. We're committing to keeping this flat. As you look to next year, we're saying 135 to 140. But as a percentage of revenue, lower than 15%. Since 2023 to 2026, we have halved our stock-based compensation as a percentage of revenue.

So all of the operating pieces are working very well -- all of the EBITDA and to GAAP operating income. So then that allows you to say, okay, let's talk about leverage and capital allocation. What do we want to think about? When we announced the acquisitions, when we borrowed the money, we talked about what were our targets. We targeted debt-to-EBITDA at less than 4x by the end of 2025 and less than 3x by the end of 2026. That's the commitment we made to you as investors and to our bondholders or debt holders, excuse me.

Our forecast debt to trailing 12 months EBITDA as of the end of this year, if you just take what our net debt is and what are target EBITDA -- our guided EBITDA for the year, just the trailing 12 months, 3.5x. We're already half a turn earlier. But I think if you were more representative about that, that excludes all of the synergy for the full 12 months that excludes all of the acquired businesses. A more representative view might be to say, take your Q4 expected EBITDA and multiply it by 4 because we're kind of through the process.

And let's just take -- let's just assume that our debt -- our net debt was about $800 million at Q2. Let's just assume that that's the same number, probably be better than that, but let's just assume that's the same number. We're essentially at 3x. So we have delevered a full one year earlier than we had articulated to investors. So there's a massive deleveraging story here.

How can we do that? We've talked about EBITDA a lot and we see how that grow. A CAGR of 26% on EBITDA, 26% growth in EBITDA and even much faster free cash flow growth, 67%. And you start looking to 2025 for the full year, you can see how much free cash flow and how much opportunity there is.

But let's just speculate a little. Let's look at 2026. To -- the Street, this isn't -- we're not talking about 2026. This is just what the Street has, $317 million for EBITDA. But if you look back at our history, our CapEx, it's a very light CapEx business. It's 1% to 2%. And our change in working capital, maybe it's 2% to 4%. And yes, we have debt now so we have interest. But we have excess free cash flow of somewhere between $210 million to $238 million of excess free cash flow next year. This enables us to not only do our debt repayment, but also makes it available for us to perhaps consider and think about offsetting some of the share dilution that occurred as part of the acquisitions.

So let me start with this. We remain fully [indiscernible] committed to bringing leverage below 3x by December 31, 2026. But even with that reduced leverage, we're going to be at 3.5x this year using the trailing 12 months. And that enables us to start to think, could we do a share buyback? And so in 2026, so we're announcing today, and there will be a press release about it right now, announcing $100 million share repurchase authorization. In 2026, based on the over $200 million of excess free cash flow we have, we have the capacity to both do this share repurchase and pay down debt, far exceeding those commitment levels that we had. And we can even start with the 3.5x we have this year. We could even start now.

So with that, that's kind of the financial numbers that we were going through. I don't know if Sandeep would like to come up and say some summary remarks or if we want to turn the lights on and allow for Q&A for a few minutes when we have time available. Thanks, everybody.

Yes. Give it up. Yes, share buyback. Yes. Just quickly, I'd say thank you to all of you for your patience here. We last time spoke for 3 hours, and this time, we try to bring it down to 2. Next time we meet, hopefully, it's just about numbers. It can be one hour. But Q&A, I thought we'd give a little time to answer any questions people may have. We also have members of the management team here. So if someone's got a question for Head of administration or revenue, whatever.

And thank you all for doing this. Obviously, very, very helpful. I guess Sandeep, a couple of things, and I think we need to applaud you for the execution, right? So if you think about relative to the initial expectations in terms of as opposed to 2 years ago, where was the real upside in terms of where you're modeling in the business you meaningfully overperformed relative to your expectations, what was it that came in that much better in an environment that was less than optimal?

Yes, I think that if you think about it, what we laid out, I think we started to execute in [indiscernible] what our company does very, very well. We know our roles and responsibilities really well. We do a really good job of designing who does what and how, how it works together, having clear scorecards and accountability at each level, and we do that really, really well. So I think that if you just think back, the first thing is our net revenue retention was sky high. I know it doesn't sound like 98% is a big deal. It's a massive deal.

When you have that much net revenue retention, gross retention part [indiscernible] on the back of NPS, we thought we'd have more trouble with NPS. It's been 60%. We say 60 because we're a little bit concerned about giving you the actual numbers, and that's the truth. We just simply don't want to come up with a number, which is much higher and then have to explain 2-point movements up and down. So we say 60 because it is consistently above 60.

I think the booking and client acceptance has been really, really good. So I just think the market is really wanting a platform like this. I really don't think we have the genesis in the room. I really believe in my heart, I think we're very good, by the way. But I really believe that architecturally, a single instance, multi-tenant platform just makes sense. And when you go to clients and talk about our model, I don't think one person would say, no, no, no. I think we should have the [indiscernible] workflow. Not one person will say, let's do the people solve workflow. Everybody will accept. Clearwater has the right model for the future. How quickly they move, hard to tell. That's our job to go and instigate that movement.

But I don't think people will doubt is this the right way to think about the business. Didn't have the front office, [indiscernible] the risk. I think of those pieces. But when I look back, it's also the same team. I think what really also helps us is nothing good about [indiscernible], we got -- still got Scott here. We got Subi. We got Souvik and Jim and myself and we love to work with each other. All of us have our [indiscernible] believe me. We all look -- we enjoy working with each other at this point, but it gives you confidence that we can execute. And it's all about execution.

I think the strategic piece, I don't think you can do that this is the right way to do it. You really cannot convince yourself on me that there's another way to think about it. So then what is it? It's the execution. I think we're good at it. We're really good at executing. Even this deleverage Jim talked about, it was 3 months back -- we were talking about 4.4%. We're going to take it down to 4. We're going to take it down 3 people gave us grief. So something easy. It's going to take a long time. integration's hard. Yes, we executed in Q2 itself or less than 2 months. We got the synergies that give us the extra cash to try and bring it down to less than 3.5%. We execute, we know how to execute. So I give a lot of our leadership team, a lot of credit for just hardcore execution.

Brian Schwartz from Oppenheimer. Thank you very much for the presentation. It was very informative. We certainly made a lot of news this afternoon. My question is on the monetization path Gen AI. It sounds like your presentation, you're going to infuse Gen AI throughout the platform. So if we think about it over a multiyear period, how do you monetize on it? You already have price inflators and your contracts, you have best-in-class retention. So how do you see, again, that monetization payout over a multiyear period with Gen AI?

Yes. So I Generative AI [indiscernible] I'll do that quickly. We have invested a lot of money 2 years back. We continue to invest. At a high level, the savings in gross margin, which you saw, the 300 basis point different that more than pays for what we invest annually. And the savings you get from efficiency is higher than that number. So it comes for free. There really is -- when I think about Generative AI investment, it pays its support itself every year and from that point on forever. It's not like the margin is going to go down from 77.5% back to 76% if we don't make that investment. That's already occurred.

But I do think that there is a whole section of driving gross margin to 82%. And I think that, as Subi said, [indiscernible] steady state clients are already at 83%. So I think that, that is very achievable as long as you continue to use Gen AI at Enfusion, at Beacon across the platform. That's one.

But I think you missed the point there. I do think what will happen is the business will change. And the example I'd like to use is about taxi companies. The idea isn't to make your taxi company more efficient in sending a taxi for you. You've got to think about Uber. How do you change the game using Generative AI? And so half our effort today goes into efficiency and a super important brand because you get payment now, you get the reverse today. But a lot of it goes to what Souvik was showing in this demos. How do you change how hedge funds think? How do you change how asset managers work? Do they become more powerful because they can get and understand risk and make a market faster? Can they grow revenue and profitability? Nobody minds paying you if you can do that for them.

We talk about asset management, we do client reporting. Why do people buy because they can get more flow of assets on their platform. So they generate more revenue because they use Clearwater than they pay for it. So I do think there are 2 separate sections. One is about efficiency and how we can do things better. I think we do that really well already. I think that path of getting to [indiscernible] debate it even. We said we're going to get to 80%, 82% don't worry about it. And frankly, you should not worry about it. That's what we can do. It's going to happen. It takes time. It takes a year. It takes 2 years. We'll try and do it faster than the 50 bps [indiscernible] puts out. But yes, that will happen.

Can we change how the industry works? Can we make those demos a reality for every asset manager? That will be fun. I don't think it will change the world. But it comes off a single data platform. It comes off being able to learn every minute in near real time. It's not going to happen if you don't have a single platform. So I think we have it. And I think no one else has it. Forget no one else has it. No one is building it. They can't bloody build it. If we've got 50 platforms, some for the front office, some for this, 50 platforms you're going to bring together yes, best of luck. Have at it. Sorry. We also have 3. We have 3. [Audio Gap]

That's it. We have a lot more. We just have a lot, a lot more. I don't know what it can do. I still think it's early innings. And I really want the team to be focused on what they were doing before. These trades happen. But should we be able to cross-sell effectively, I think so. I'm not quite sure about the magnitude of it. But should the magnitude be on an earlier goal? I think so. But there just isn't a trade. I don't think -- I think we talked about hedge fund doubling. Yes. But we took all the asset management people who are working on Clearwater and jump all those pieces and put it under one. So everybody's budget, so to speak, [indiscernible] has gone up dramatically.

And we don't want to deliver more EBITDA, frankly. The 200 bps is good enough, and we haven't done a good job of managing that. We've -- I don't know it sounds better to deliver a lot of EBITDA. We don't get any bloody credit for it, just to be very frank, except cash flow generation, so you can delever. So we just feel like we have to go back and invest in every one of these elements, and that's how we think about it.

Yun Kim, Loop Capital. Sandeep, so you made those acquisitions and you have a plan to grow your products across the board pretty aggressive plan to integrate all the products into one single platform and obviously try to increase your bps from the customers from 1 to 4. What in your sales organization go-to-market needs to evolve to accommodate that and support that strategy?

Yes. I think, look, I think I cannot stress this enough. The integrated platform, which comes about is super interesting. It's not for today. There is a separate group led by a separate team, which is building that. I want really the teams to focus on current growth, just incrementally better. That's it. If you were growing at 13%, I want you to get to 15%. That's it. In Phase 2, 6 months out, we'll be talking about growth from high degree of cross-sell, which will be interesting. In 12 months from now, we will be talking about, can I disrupt the whole bloody industry, which will be a lot of fun to talk about, not today. I want to talk about it. I don't want the operating teams to focus on it. And so I feel like we have to break it up into these 3 phases. Otherwise, everyone wants to talk about the new shiny toy. And I'm just uninterested. I think we have to do -- we have to perform in Q3. We have to proform in Q4, Q1 of next year, Q2 of next year, and then we will see beyond that. But I feel like execution is super important not to get carried away with what the future might be. Though when we talk all the excitement is about what we might build, and it's super interesting. I'm not going to deny that. But it's about execution.

Michael Infante, Morgan Stanley. Thanks for all the detail here. I appreciate the disaggregation on the various business lines in the back half of the year are quite helpful. If we sort of look at the business on a 2-year stack basis, sort of still growing in excess of that 20% level, Sandeep, you obviously mentioned having a lot more product to sell this year with the incremental acquisitions. Like can you maybe just speak to your relative confidence level in maintaining that 20% medium-term revenue growth outlook?

Yes. I think I just want to be careful that I hope I didn't say this wrong. There are 3 different pieces here, right? I think the Clearwater business is growing at a certain trajectory, we expect to maintain that. But I don't think Enfusion gets to 20% right away in 2026. I don't expect that. I do expect Enfusion to deliver $20 million of synergy savings, which you have got. I think we've got 400 bps improvement, and we'll get another 400 in the next 12 months. So I feel like those are simple. Not simple. We'll execute to it. But we do expect us to take 2 years to get to Enfusion growing at 20% and we still believe that.

And what are the elements of it? I think we have tried to lay out, should they be able to cross-sell faster and all that, those are difficult. I think integration, look, it's not the easiest thing. What I don't want to pretend here like you acquire companies and you bring them together and is real simple. It's not. It's pretty complicated stuff. So I don't want to sort of commit to something and not meet it. And so we are looking at us 2 years back what we said we met and exceeded by quite a bit. We want to be the same way right now.

And I do think acquisitions bring -- it's not the easiest thing to do. And so I've done this before in my life. And -- you always find things you don't expect. Till now it has been really good. The synergy was great. The margin expansion, I'm super happy about is that we've got there. I think client satisfaction has been really good. I think the churn actually has been lower year-on-year. So that's the part. You've got to keep churn down. I don't think we've been effective in that. So I think, look, it's all good right now, but I don't have the proof points. I don't want to spend a lot of time on it. We've got to go deliver it and then we'll talk.

This is Bela on for Lexi from JPMorgan. And thank you for your layout of your strategy for your recently acquired assets. I think it would be really helpful for us to understand how successful your prior M&A integration has gone. Could we ask you acquired JUMP and later added Wilshire software, are you still in the process of integrating JUMP and Wilshire into your platform? And what has the product strategy and road map in there?

Yes. I think this is all a little bit different, and this incredibly small, [indiscernible], but I think it's a good question. Look, Wilshire -- what Wilshire does, it does really, really well. And we had said that when we acquired it, it was a very small company. They had great math, but the technology was not good at all. It just had not been invested in a long time. So what they do with factor and all that is just sort of superior to anything out there in the market.

So I think when [indiscernible], you spoke about that, some clients need that. And for some small hedge funds, that's enough. But if you trade derivatives and things like that, it doesn't do a good job at all. And so can you take what we can has, pull that together with what Wilshire has and give a comprehensive view across asset class and countries, yes, and so I feel it is a fantastic deal for the business, not because we like it, clients really, really like the ability to get all of it together. So I think the wilted was really, very good.

I think the JUMP thing -- when we got into it, I think I put up a slide that said at market, better than market and limited capability. I do think when we bought it, we said, look, this is a French asset, which all of its clients in France. And can we go immediately and make it global. It's not going to happen that quickly. It was a small business. So am I going to sit here and say, oh, we solve right -- we didn't. We grew France, okay, and then we started to go into the U.K. and we built it. But it became clear to us, it would take a long time before it was a scale business like infusion was.

Now do they both do order management systems? Yes. Do they both do portfolio management? Yes. Do they both -- the point is it just sounds easy to check boxes until you put it at scale and operating at scale. And so I think they were exactly the right acquisition for the reason we said -- one last one, I'll say, we have got 100 people or something like that in France. France is an insurance market is bigger than every other country in Europe with the sole exception of Germany. And our revenue right now comes mostly out of the U.K. But we now have clients in Germany. We have clients in France. And so therefore, our ability to grow insurance there should be really, really high. And we've had success in France. We've had a really big success in Germany. But beyond that, it is execution. You've got the clients, you've got the names, you got to go execute.

Pete Heckmann with D.A. Davidson. Can you talk a little bit about the role that the fund administrators and prime brokers play in Enfusion business and how you expect to perhaps change those relationships or broaden those relationships? And then second question would be, we've talked a little bit about the inability because of the lack of single instance multi-tenant software platform. But what competitive response have you seen? You're just getting started with infusion. But in terms of how the competitors are positioning, I guess, what have you seen so far? And what do you expect to see?

Yes. So let's talk about Enfusion first as the prime brokers. So they are 2 different businesses. I think we have to say that to ourselves. When you think about growth, it's growing at 5%, and you want to grow 20%. So you have to have a different model for inception when hedge funds are formed and are different for replacement. Those are 2 different businesses. In the first business, I think prime brokers play a very big role. But I think Enfusion because of its brand new sees all of those deals, just who they are. It will be pretty -- it's like if you have something going on with asset owners and the endowment wants to look at an investment accounting platform that they have to at least include Clearwater. They got not. So I think that part is quite solved of being getting the exposure to all of these opportunities as they arise.

And then you got the second part, which is about driving a motion to convert clients from old software to new software. So I think that is the second motion with the -- where we have to focus on. And right now, everyone does everything. And I've always found that when I want something done, I call up Subi and I we all say, Subi, I'd like you to do this? Can you get this done? And when I don't want it done, I give it to 2 people. It doesn't happen. And if I really don't want it done, but I don't want to say no, I go to 3 people, one in Hong Kong, one in London, one in the U.S., they never come back.

So the logic is if you want something done, have a person responsible, wake up and just do that. And so I feel like the infusions business can sort of grow with those 2.

Second part of your question, I forgot? I didn't answer

[indiscernible]

Yes, competitive response. Look, firstly, we've got to be paranoid and you'll see us very paranoid and you'll see us continue to insist that we will invest 21%, 22% of all revenue in R&D, right? But I'm still waiting for [indiscernible] response to Salesforce. I'm still waiting for [indiscernible] response to Workday. I don't think it's that easy. I just think it's easy to say, I'll re-architect my whole platform. Well, why haven't they? I think it's very hard -- Sorry, I shouldn't have said that. It's not a good thing to say. But that's true. I think technology change at scale is incredibly hard because of something called installed base.

You have a whole bunch of clients who are your clients and you're going to say, I'm going to desert you and go and build this new platform. And all of you spend the next few years moving, yes, it's not an easy sell. It's not an easy sell. And so I feel -- have you seen some responses. Yes. I think all of them talk about a cloud software, which is wonderful. But does it talk about a single security master lever? Do they talk about a single data ingestion system? Do they talk about rolling out 2,000 changes every year? It's just technologically not there.

But today, just to push on this a little bit, if you wanted to do Japanese GAAP of our portfolio, you want to see a Japanese GAAP view, it's a click, one bloody click, try doing it with any of the competitors' platform. They'll say, hey, guess what, you go install something for front office to install something [indiscernible] in Japan and Japan regulatory reporting best a lot. It is different architecture. It is different technology, I think. That was too aggressive. Now very good competition, and they're thinking about what we do, and they're trying to do something different.

Jim, you got to answer some question -- finance questions.

Richard Poland from Wells Fargo. So I think with the 2-year path to 20% Enfusion growth, you've kind of laid out the 3 stages of just kind of the integration there. You've given a lot of just around the 5 different pillars behind what drives that growth. I guess if we could just kind of think about like if any one of those maybe falls off path, I know with M&A, oftentimes, it's not always perfect, right? But I guess if something like that happens, like do you need all 5 of those pillars to go right to get that to 20% growth?

So I think we showed it in one of the charts where we said, how do you get from 13% to 20%. Just like all of our other charts, it adds up to more than 20%. And I think that's because we understand not everything goes perfectly. We're frequently surprised, right? And so the idea is we understand [indiscernible] and we have the full expectation that we will be surprised.

In fact, here's one positive surprise. The connectivity and the stickiness of combining a Beacon and Enfusion together for those multi-pad, large hedge funds. That's really interesting. We didn't expect that. And so that's something, well, that's maybe something to [indiscernible]. Are there other things to the bad that may not work out the way we expect? Sure. And so I would say that, that's -- Subi mentioned it, she talks about many irons in the fire. We all talk about that, and that's the idea. There's 5 paths to get to that, and we expect to be able to do that through any variation in this.

Yes. We have one of our board members here, [indiscernible] all of our board decks all and with this picture of irons in the fire. Because I think you can't predict. Things are not going to work. If you're going to execute well, guess what, some stuff is not going to work. And if you're aiming for precision and everything to go out and execute to your model, you're going to fail. And so our model has always been try and aim for higher, commit to a slightly lower thing. Sometimes it does well, look, the margin all did well because Gen AI just had a big impact, it's just that.

Just to give you a data point, last year, June of last year and June of this year, if you look at employee count, in core Clearwater, it went up 1%. Revenue went up whatever it did. 1% growth. Yes, all that flows into the market is good news, just somewhat unanticipated 2 years back. And so I think you were talking about Gen AI's -- Brian was talking about Gen AI's impact, yes, it's -- forget everything else, not tally 1% growth in employee head count in the last 12 months.

I think we're -- any last questions. We have time for one last question.

Thank you. Look, I really appreciate it. Thank you very much. Thank you for coming.

Thanks so much.

Ladies and gentlemen, thank you for standing by, and welcome to the Clearwater Analytics Second Quarter 2025 Financial Results Call. [Operator Instructions].

And now I'd like to welcome Michael Chen, Senior Vice President, Head of Corporate Development, to begin the conference.

Thank you, and welcome, everyone, to Clearwater Analytics Second Quarter 2025 Financial Results Conference Call. Joining me on the call today are Sandeep Sahai, Chief Executive Officer; and Jim Cox, Chief Financial Officer. After their remarks, we will open the call to a question-and-answer session.

I would like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Expressions of future goals, intentions and expectations, including in relation to business outlook, future financial and product performance, expectations for the acquisitions of Enfusion, Beacon and Bistro and their expected benefits and similar items, including, without limitation, expressions using the terminology may, will, can, expect and believe and expressions which reflect something other than historical facts, are intended to identify forward-looking statements.

Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our filings with the SEC. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement included in our earnings press release.

Lastly, all metrics discussed on this call are presented on a non-GAAP or adjusted basis, unless otherwise noted. A reconciliation to GAAP results can be found in the earnings press release that we have posted to our Investor Relations website.

With that, I'll turn the call over to our Chief Executive Officer, Sandeep Sahai.

Thank you, Mike. We had a very strong second quarter. Firstly, the core business continues to perform very well, meeting and exceeding our expectations. Secondly, we are very pleased that the strategic rationale behind the acquisitions has been enthusiastically validated by clients, partners, industry analysts and employees. Thirdly, we have acted purposefully and decisively to integrate the companies and set ourselves up for the next phase of growth. And finally, our due diligence was comprehensive and there were very few surprises, resulting in us delivering very solid financial results for the integrated company.

Our total revenue grew 70% year-on-year to $181.9 million, with our core business contributing $130.6 million, representing a solid 22% year-over-year organic growth. ARR was $783.5 million, up 83.4% year-on-year. Core NRR stands at 114%, with consolidated NRR at 110%, showing that our existing clients continue to expand the use of Clearwater. Our adjusted EBITDA of $58.3 million was 32.1% of revenue and up 74.3% year-on-year. What makes this truly remarkable is that 32.1% is 70 basis points higher than our stand-alone profitability in quarter 2 of 2024.

Think about that for a moment. We integrated Enfusion, which had meaningfully lower levels of profitability and yet we grew profitability 70 basis points compared to last year. What makes all this possible is the inherent disruptive nature of our platform, and it's nice to see it continue to assert itself. The single-instance multi-tenant architecture with a single security master and a single data plane is disruptively better for both business functionality and efficiency. The network effect simply makes operations more efficient and each new client is inherently more profitable.

And where does it show up in gross margin. Let me walk you through what we have achieved on gross margin this quarter, because it simply tells the story. When we announced these acquisitions, analysts rightfully expected significant margin compression because we were integrating Enfusion whose gross margin was approximately 10% lower than us. And the math was really straightforward. If you assumed approximately 69% gross margin for Enfusion, and close to 79% for the rest of the business, all consistent with analyst expectations, we should have delivered a blended gross margin of roughly 76.5% as an integrated company.

We had committed a 400 bps improvement in the Enfusion business at the end of the first 12 months, at which point we will then expect it to deliver a gross margin of approximately 77.8%. We delivered a gross margin of 77.4% in Q2 itself. That's remarkable. This was achieved in large part because gross margin of the core accounting and analytics business exceeded 80% for the quarter. A big shout out to both the operations and technology teams on achieving this long-term goal we had set for ourselves. And this was delivered in just 2.5 years.

What I find exciting is that we still have several impactful levers we can pull to improve our margins in the coming quarters. Looking ahead, we see a clear path to continued margin expansion as we realize additional operational efficiencies and perhaps more importantly, as generative AI initiatives continue to scale the platform. Helios, our proprietary data reconciliation platform and the generative AI version of Helios should both have significant impact on our business.

Financially, this is already a very compelling proposition, and we have already delivered the synergies and margin improvement goals we had laid out for the entire first year. But as we have said before, these acquisitions were primarily driven by a vision for an integrated platform that would alter the investment management technology landscape for our clients. And while Clearwater, Enfusion and Beacon, we're already market leaders in the industries they're focused on, our ability to jointly deliver this vision expeditiously is meaningfully higher.

We began by working jointly across all 3 organizations. Clearwater, Enfusion and Beacon to develop a detailed and joint vision for the combined business. To validate this vision, several members of our leadership team and I travel to 14 cities across the world, engaging over 450 clients in intimate settings to discuss what we were building and seek their feedback. The response was near unanimous enthusiasm for our vision and direction. And clients immediately grasped the industrial logic of bringing these companies together.

Equally important was ensuring that our entire organization was aligned. We met over 2,600 employees in person across our centers. Close to 85% of our workforce to share our plans and build a shared vision for the integrated business. With this foundation in place, we move decisively to reorganize the business around what's best for our clients. We integrated the GTM teams and restructured the business to serve 4 markets; insurance, asset managers, hedge funds and asset owners. We then took the product and engineering teams from all 3 organizations and combine them to build integrated capabilities that can be taken to these vertical markets. And finally, the enabling functions were integrated on day 1.

These actions were done to serve our clients better, and not to reach any specific synergy goal. But these actions allowed us to realize $20 million in synergies. Our full year one target within the first few days as an integrated company. But back to our vision for the platform we are building. We have the components to build a true front-to-back platform that will have exciting implications for our clients and the industry.

The core tenets of the platform will be, number one, it will have a single-instance multi-tenant architecture. This is the last upgrade our clients will ever need. Number two, the platform will share a security master across the entire investment life cycle. When an event happens anywhere in the trade life cycle, a trade, a corporate action or a regulatory change, it will be reflected everywhere in the platform in near real time. Number three, managing cross-asset class risk, risk across geographies, understanding cash flows at a comprehensive level, will all be possible in near real time, vastly enhancing decision-making capability. And finally, number four, integrating data ingestion, aggregation and reconciliation to work the way it should be, doing it once and using it for all clients across all functions.

Data quality will also be vastly enhanced. When we solve the problem for one client, every client will benefit. This integrated architecture eliminates the complexity and inefficiencies that plague organizations using multiple disconnected systems. While this will be truly disruptive, the availability of an integrated data set already powers and will continue to power our push into infusing generative AI into all aspects of the business. We will deliver next-generation reporting, deeper portfolio insights and operational efficiency, applying Agentic AI and other capabilities that legacy systems simply cannot match.

A good proof point of our joint offering was our recent signing of VKB. Germany's largest public insurer. We are replacing a leading legacy provider and delivering a disruptive solution for them. VKB will be able to modernize its operations while significantly enhancing the accuracy and timeliness of data across all asset classes. Our solution brings together components of Clearwater, Beacon and Enfusion to deliver an integrated front-to-back platform.

Since the announcement of this combination, we have received numerous client requests and RFPs for a front-to-back solution. Something none of the stand-alone companies would have been able to deliver on their own. We also made progress on our partnership strategy and are very excited about the recently announced partnership with Bloomberg. When it comes to large asset managers, we expect to partner with them to deliver a full front-to-back solution. The collaboration creates a bidirectional integration between Bloomer Game and Clearwater that eliminates manual workflows and delivers a seamless front-to-back experience.

While we have long support [indiscernible] other point-to-point connections, the Bloomberg collaboration offers true interoperability, greater automation and a differentiated client experience. We're already working on over a dozen active deals where the joint solution is the key differentiator.

In closing, we're not trying to build an incrementally superior platform. We have the intellectual property, client support and engagement from our team to build the next-generation investment management platform. In fact, we hope to build the nervous system of the future investment management industry.

With that, I'll hand the call to Jim to dive deeper into our financial results.

Thanks, Sandeep. I am excited to report another outstanding set of quarterly results as the momentum in our business continues and the strategic transformation of the acquired businesses is progressing faster than expected. We achieved record revenue of $181.9 million, up 70% year-over-year, which comfortably beat our guidance of $174 million. Our core Clearwater revenue continued to grow at 22%.

What is impressive is how this growth came from both our traditional drivers, for example, our steady net revenue retention rate of $114 for the core business, as well as from newer drivers, including international insurance and global asset management. We've been investing in those areas, and it is gratifying to see those successes. As it relates to the acquired businesses, I'm happy to state that those businesses performed very consistently with their forecasts for the second quarter.

The outperformance in revenue relative to our guidance was a function of conservatism applied to the forecast process of the 2 newly acquired businesses. Given that both businesses were quite new to us, for our guidance, we have kept the 9 days of April revenue of the Enfusion business as a hedge against any unanticipated surprises. [ Unfortunately ], the hedge proved entirely unnecessary.

Annualized recurring revenue, or ARR, at the end of Q2 was a record $783.5 million, up 83.4% year-over-year. On an organic basis, ARR was $513 million, an increase of 20% year-over-year. As for the progress on the acquisitions, we've been particularly pleased with the progress we've made with Enfusion. This past quarter, Enfusion delivered the highest bookings achieved in any quarter in their history. And we welcomed 49 new clients with strong performance across all global regions of that business. And I look forward to seeing the momentum continue in the second half of this year.

We also have seen incredible customer interest in Beacon. As their risk capabilities cut across all of our client segments.

Now let's turn to unit economics and profitability. We achieved non-GAAP gross margins of 77.4%, which is impressive since Enfusion historically had a materially lower gross margin profile than Clearwater's. We previously communicated we expect around 400 basis points of gross margin improvement from the Enfusion business. And we are pleased to report that we have delivered on almost all of this faster than we had expected, demonstrating the power of our integrated platform approach.

In terms of EBITDA, we generated $58 million of EBITDA, representing a margin of 32%, and 74% year-over-year growth, which again comfortably beat our guidance of $53 million by $5 million. This beat resulted primarily from the achievement of the $20 million in expense synergies within this quarter. With the expense synergies achieved, we are now focused entirely on growth across all of our lines of business.

In terms of retention metrics, our gross revenue retention rate at June 30, 2025 remains solid at 98%, and the net revenue retention rate was 110. As these are point-in-time metrics, these results fully reflect the impact of both acquired businesses. Therefore, maintaining a 98% gross retention rate, while including all acquired businesses, is meaningful.

Our NRR for our historical business for the quarter remained consistent with the first quarter at 114%. And as discussed in a prior call, we remain confident that the measures we are currently undertaking to improve retention metrics for infusion will enable us to achieve our company target of 115% on a consolidated basis over time.

Turning to GAAP results. We recorded a GAAP loss in the quarter, largely due to increased intangible amortization expenses and costs related to the acquisitions as well as increased interest expense. Even with these transaction expenses in Q2, operating cash flow was $47.1 million from strong non-GAAP earnings and effective working capital management. That strong cash flow enabled us to repay $50 million of our revolver within the quarter, and we ended the quarter with total debt of $872 million. We continue to be committed to repaying our debt quickly and fully expect our leverage ratio to be very comfortably below 4x by the end of this year.

Now let's talk about guidance. We exceeded our guidance by $7.9 million in the second quarter with $1.6 million coming from our core business outperformance and $6.3 million from our guidance for the businesses acquired in April. For the third quarter of 2025, we expect total revenue to be $203 million to $204 million, representing a year-over-year growth rate of 75% to 76%. For the full year 2025, we expect total revenue to be between $726 million and $732 million, representing a year-over-year growth rate of approximately 61% to 62%.

In terms of EBITDA guidance, we expect third quarter EBITDA to be $65 million, representing an adjusted EBITDA margin of 32%. We also expect EBITDA to be $232 million to $237 million for the full year 2025, representing an adjusted EBITDA margin of approximately 32% for the entire year.

Now that the acquisitions have been completed, we can provide some additional guidance for those items below EBITDA. We expect interest expense to be about $16 million per quarter in both Q3 and Q4. We expect depreciation and intangible amortization to be approximately $29 million per quarter in both Q3 and Q4. And lastly, we expect equity-based compensation expense to be between $34 million and $35 million per quarter in both Q3 and Q4. We look forward to providing a more detailed update at our second Investor Day on September 3 at the New York Stock Exchange.

With that, I will pass it back to Sandeep for some closing remarks.

Thank you, Jim. The response from our clients, partners and employees has been incredibly exciting, and I could not be more pleased with our quarter. We remain committed to executing in the 3 phases we had defined. In Phase 1, we want every team to execute as well as they did before the combination, just incrementally better. In Phase 2, we should start in earnest shortly, we will increase our focus on cross-sell and launch products and offerings to fuel that. We will also start a review of the commercial model, both for individual components and platforms and for the integrated companies. In Phase 3, we will bring the integrated platform to market as the key offering. Work has already begun, but as we have said earlier, this will be a multiyear effort. Meanwhile, clients will benefit from a natively integrated, but componentized front-to-back solution.

We have accomplished a lot in a relatively short period of time. And I want to thank our team for the hard work and dedication they have shown. None of this would have been possible without the unwavering commitment of the leadership team. Thank you.

People across the industry are excited about what we are building and we have been successful in attracting several senior leaders to Clearwater. I'm confident they will help our growth in the years to come. Thank you, and we look forward to answering any questions you may have.

[Operator Instructions] Our first question today comes from Michael Infante with Morgan Stanley.

Jim, I just wanted to start on the organic ARR and maybe how you're thinking about the full year core ARR growth and maybe how that informs your confidence level of your ability to grow above 20% into next year. I think by my math, that [ 513 ] figure is effectively in line with the last couple of quarters. So you need to see some acceleration in the back half of the year? Just any commentary there in terms of the drivers would be helpful.

Yes. Thanks, Michael. This is Jim. So I agree with you that we expect to see that acceleration in the second half of the year. I think when you look at kind of -- not to talk about ARR, but to talk about revenue, kind of the sequential revenue growth in Q1 was pretty de minimis. We had an incredible Q4 2024, and it stepped up to 3% when you look at kind of our expectations for the organic business to be roughly around 20%, you would expect that revenue -- that sequential revenue growth in Q3 and Q4 obviously be faster than the 3% in this quarter. So feeling good about that.

As you recall, ARR is a point-in-time metric, and it's influenced by not only the booking of business, but also the timing of the onboarding of business. And so you can have some variability in that, but we feel really confident about what was a stellar Q2, a very busy, but a very successful Q2.

Helpful. Maybe Sandeep, just on the Bloomberg partnership. I know you guys are obviously really excited about the Enfusion asset and the cross-sell capabilities inherent there. But can you just talk about your thoughts on having additional optionality with Bloomberg, particularly for your strategic asset management clients? Like how will it look functionally in relation to the integration of the Enfusion platform from a technology perspective? And I guess I was just a little bit surprised to hear that you already have like several active deals in the pipeline. So maybe whether or not you think it could be an acceleration driver late this year and into 2026?

Yes, absolutely, Michael. So first thing, I think we talk about asset management is a really broad field. So you obviously have hedge funds and you have small asset managers and you have medium-sized asset managers, and you have these really large asset managers. So I think that segmentation matters. So, JUMP could do really well with a certain size of asset managers in Europe. Likewise, Enfusion can do really well with small and medium-sized and some larger asset managers.

The second thing, Michael, is that we are an open platform. So we do interact with upwards of 20 different front office systems. But when it comes to the large asset managers, I think it's hard to argue that Bloomberg has a very, very strong position in that market. And so our expectation is when we get to these large global complicated asset managers, we would partner with Bloomberg and provide the middle office and the back office and provide a front-to-back solution. Now we have had those opportunities in the past and it simply wasn't going to be able to provide the full front to back. And therefore, there was a whole string of opportunities we could get after pretty quickly. And I suspect the same thing was true on the Bloomberg side is that if clients wanted a full front to back, they would have had to go find a partner to do the rest of it.

So again, I think it's a really strong partnership. It addresses a specific portion of the market. We are still very enthusiastic about what Enfusion can do and build. But when it comes to these very large multi-country asset managers, which are huge, I think that is still a long time coming, I think.

Our next question comes from Peter Heckmann with D.A. Davidson.

I just wanted to follow up on the ARR. I think you said [ 513 ] for Clearwater. And so just kind of disaggregating the remainder, what would you say, approximately maybe [ $2.20 to $2.25 ] for Enfusion and then the [ 45 ] for Beacon. Is that directionally correct?

That's directionally correct.

Okay. And in terms of the, I guess, investments that you're thinking about making -- I guess, which parts of the Enfusion business you expect to focus your investments as you tackle the market on a combined basis?

Yes. Peter, it's Sandeep here. So look, we are obviously very focused on reaccelerating the business set in future. I just want to start by saying the platform is outstanding. We need to talk to clients who use Enfusion, mean they consider it to be a disruptive and outstanding platform. So really what are we doing to help improve that? One is hedge funds and asset managers are similar, but they are different markets. And so the first thing we did was we took the product team and the engineering team and set up dedicated teams for hedge funds and dedicated teams for asset managers. So to step on. We took all the effort Clearwater was making in those markets and merged it with these teams. So they obviously have a much higher capacity. So that was the step 1.

Step 2 was setting up a sales team in much the same way. We want individual salespeople focused entirely on hedge funds and others focused on asset managers. Also, we empowered this team and we enabled this thing. And I think that has already made a difference. I think like Jim said, they had an outstanding Q2. I do think the third thing is that we are able to introduce significantly enhanced capabilities, which can be used by hedge funds like risk, capability to deliver in Europe, client reporting. So just being able to bring those additional pieces makes their offering more comprehensive.

So I do think there are some short-term things, which I just talked about. Then there are somewhat longer things, which is how do you get the back-to-base motion more efficient? How do you get the commercial model to be more efficient. But those are still more to the coming. But I do feel that our first job was -- is, over the next 2 years, get their revenue growth back to 20%. And we think we have a really good, clear line of sight. But what we're not trying to do is do something jerky. We want to do it the right thing, build the product have a dedicated engineering organization, have a dedicated sales team and get growth which is sustainable for the years to come. [indiscernible]?

That's great.

The next question comes from Yun Kim with Loop Capital Markets.

Sandeep, I know you talked about the cross-selling opportunity [indiscernible] multiyear journey, but is there any deal term opportunity to cross-sell into the -- each other's customer base. I mean does that -- before you even start -- does that require an integrated platform to be delivered first?

Yes. So I think that the largest and most immediate cross-sell opportunity comes from risk. I think Jim spoke about it just so immediately applicable to all the hedge fund clients our company has, all the asset managers our company has or the insurance clients our company has. So I feel like that is sort of very immediate. But the more exciting ones are the ones which are more front to back. So when you look at -- I think we put out a press release on VKB, which is Germany's largest public insurer, and they have chosen us to replace an integrated front-to-back platform. Now that is nothing Clearwater could have delivered, or Enfusion could have delivered or Beacon could have delivered. But our ability to bring all 3 platforms and get that very significant win, I think is sort of a proof point and a testimony to what the joint company can do.

So I feel really good about our ability to cross-sell, but I also feel good about this front-to-back capability, which is both very incremental to what we were doing earlier.

Okay. Great. And Jim, obviously, you will be a conference -- earnings conference call on Clearwater without talking about NRR. How should we think about the combined NRR trend acquisition, do you expect the incision NRR to be somewhat variable in the near term? How much visibility do you have in that? And I mean, how should we expect that vision NRR to trend, especially off of commentary that you had a record booking there?

Yes. So we had, obviously, the core NRR stayed very consistent. But as a consolidated business, we've described it as that we calculated it at 110. So if you recall, a couple of years ago, when we started on this journey of talking about NRR [indiscernible], we were about at that same spot. And so I think we're on a similar journey with all of -- across all of the businesses.

What are the elements of that journey? One is really considering the commercial structures that we have in place and thinking about the durability and reliability of those commercial arrangements. And we've done that at Clearwater, and we plan to do that across the entire portfolio. The second big element that we talked about with NRR 115 a couple of years ago, was doing more for our clients, and adding additional products to drive more growth. Obviously, today, across the combined business that we are today, we have a lot more irons in the fire than we did 2 years ago, when we were able to make this journey to 115. And so we feel a lot of confidence about the cross-sell that you just talked about, being able to drive to that growth. It's frankly -- the music is the same music. The lyrics are a little different, but I think it's going to be a great song.

Our next question comes from Alexei Gogolev with JPMorgan.

Congrats with great results. Jim, maybe it would be helpful for everyone if you were to provide some more guidance that you did during previous quarter organic versus nonorganic for both 3Q and maybe for full year?

Yes. I think we're looking at it as a consolidated number, but let me take you through -- we're not going to give you the specific details for that, but let me give you kind of how we thought about the guide, if that's all right, Alexei. So really, we've always consistently said, we think Clearwater grows about 20% year-over-year, and that's what we've focused on historically and consistently. So we think about those pieces. Secondly, when you think about Enfusion, it was at about a 13% growth rate, time of acquisition. So if you think about that, you think about that as kind of a 3% sequential quarter-over-quarter growth rate. And then Beacon, it's -- look, it's an incredible business. It's a large deal business, and so it can be a little bit lumpy, but we also think of that as a 20% growing business, and you kind of put those pieces together and that gets you into that kind of range for the kind of the full year view, Alexei.

I think I'll remind you, right, as a core business, we had a 25% growth in the second half of 2024. So that's a little bit of a tough comp on that. But we're really focused on core Clearwater growing around that 20% for the full year.

And Jim, in light of that last comment about the high base of last year. Can you repeat what you said just earlier today answering the question about the acceleration of growth that you anticipate in the second half of the year. Was that in relation to ARR or revenue growth?

Yes. As we look at revenue and you just look at sequential revenue growth throughout the year Alexei, you can see our sequential revenue growth from Q4 of 2024 to Q1, it was de minimis, right? And we accelerated that to, I believe, sequentially, it's about 3%. And obviously, as you -- from Q1 to Q2. As you look to Q3, and then from Q3 -- from Q2 to Q3 and then Q3 to Q4, you see that, that sequential revenue growth rate continues to reaccelerate. Otherwise, right, you couldn't get to a 20% year-over-year growth rate. If you -- it's just mathematics, like you do accelerate sequentially on a quarter-over-quarter basis. [indiscernible]

Yes, I was just going to add one thing that when you talk about revenue that already -- you have to consider the booking that's already happened, the ARR growth that's already happened because the bookings in Q3 and Q4 have impact on ARR, but not really that much impact on the revenue. So we obviously have confidence that there is acceleration on a Q-on-Q basis.

Thank you, Sandeep. And just a quick question for you. I think you've highlighted that no negative surprises now that you had time to look over the assets that you acquired, integration is going well. I think one of the comments that was made by Jim just now that with the synergies announced, the focus will now be on growth. Can you maybe elaborate a bit more like what sort of investments may be required? How will that impact margin expansion opportunity near term?

Yes. So I just wanted to stress that. I don't think there is any change to the margin expansion opportunity. I think we talked about R&D investments and what we feel happens is that we take all of the people who are working on asset management and move them over to this other team, which is building products for those 2 markets. So I don't think there's necessarily a massive increase in R&D. I don't think there's a massive increase in sales. I do think operations will continue to drive gross margin expansion. And so I feel that at the company level, we will obviously have more details at the Investor Day. But at a company level, the opportunity to expand margin in the second half or really into next year, I think, don't change very much.

Now Alexei, as you know, you've seen enough companies like ours, we have a really strong leadership team, which has operated such a song before just to borrow from Jim, which I found super interesting, is that 3.5 years back when we met and we talked about this company going public, we were in this situation. And so we know what to do with the commercial model. We know what to drive -- how to drive the margin expansion. We know how to drive efficiency in R&D. So we feel like we've seen this movie before. It's a little bit different, but not that different at all. And going into these acquisition that was a hypothesis and when we went into the detail, we found, yes, this is almost true. So we feel really good and confident.

I do want to make one last point is we did not want to find $20 million of synergy on quarter 1. We wanted to find it over the first year. But we did what was right for the business, what is right for the clients. It just so happened that in doing the right things, we were able to get $20 million in synergy. And so that's how we think about it. We think the market opportunity is there. We have done like Jim said, we have found a synergy, found margin expansion. So it's all about the growth, and that's where we are fully focused on.

Our next question comes from Michael Turrin with Wells Fargo.

I'll just ask a bit of a multi-parter upfront. If I'm hearing what you're saying correctly, Jim, it sounds like the inorganic portion of the business came in a bit better than you're expecting. I'm curious from a guidance mentality, if you still kind of hold the same pattern given it's early and just observing those businesses? Or if that causes you to nudge any assumptions forward a bit. And from a higher level, I'm just curious if there are any lessons you've learned from the prior pricing model transition that the company went through that you may be able to apply to bringing infusion to market and maybe adjusting the pricing model or some of the strategy there as well. So first is kind of more in the near what's happening question, and the second is just kind of high level how you're thinking about the strategy of the pricing model going forward? .

Thanks. So really, the overperformance in the acquired business is -- recall, let me just go back, right? We last announced earnings on April 30. We closed the Beacon transaction on April 30, and we had closed the Enfusion transaction on April 21. And so they were both very new. So what we did vis-a-vis Q2 was we just kept those 9 days of Enfusion revenue from April 22 to the 30, we kind of just kept them to the side, just in case, there was a surprise, and there wasn't. And so that's what that overperformance. And you see that then flow into the increase in the full year guide. And so that's that element.

The other piece is, has there been a change in the philosophy about the guidance? I think we continue to feel more confident about it, but it is still very early days. And I'm pretty old, and so I still get surprised. And so I think we've used a consistent methodology that we used this year that we've used -- sorry, this quarter that we've used in prior quarters in trying to think through that.

On the pricing model and the changes around that, I think that -- so patterns that I think we've seen in the past that we will continue to see is -- that I think there is alignment across the entire organization about evaluating this and thinking about what are the right scalers? How do we think about aligning best? So I think there's a lot of alignment within the organization that remains consistent.

And the second thing -- there's really 3 things. One is within the organization, there's a line. The second thing is that we learned last time is we try things, and it's interesting what I think is a good idea. What clients like is really what matters and aligning around clients to that. And third, I would say that our early conversations with clients is -- there is an alignment around delivering more value for them. Sandeep, anything to add?

Yes. I would just add that you have to think of it as a commercial model change and not as a pricing model change. It isn't just about price. If it was price, you could go ahead and say, okay, we are increasing price 5%, whatever. But it is about how do you create solutions, how do you create packages with customers value? Then how do you think about annual price increase. So I think the one thing we did learn last time was do it deliberately, do it right, then it's very easy to execute and clients will buy it. But if you go in randomly with a sledge hammer, I don't think that's the right way to do it. If you want sustained improvement in the commercial model.

So we're approaching it the same way. Is there any of the commercial model changes already? None. We don't even expect that in Q3. So we'll do it deliberately, we'll do it well and then really have impact on it next year, and another 6 months after that into '27, and you would see the full impact of it.

The next question comes from Dylan Becker with William Blair.

Maybe Sandeep kind of sticking on that thread around the commercial model angle. Obviously, you guys did something similar a handful of years back now and you did it fairly swiftly as well. I know we're kind of just talking in the ideation phase here, but I'm sure you guys have done some thorough diligence on the matter. Wondering, yes, it sounds like customers are receptive to it, but kind of the early feedback you're seeing in hearing and maybe some of the learnings of that prior swift change that gives you kind of conviction in the success of that potential shift over time?

Yes. Thank you for the question. Look, last time we took 4, 5 months to design it correctly. And then we went and implemented it. But because it was designed well, I think we could execute very quickly. And we expect to do the same thing. But before we get there, we want to make client servicing excellent, so that's sort of a pillar of this. We want to make the platform performance excellent, and that's a pillar of it and use that time, the same 5, 6 months, while you're trying to make these 2 excellent to design the entire commercial model, take it to market on the back of meaningfully better client servicing, meaningfully better performance of the platform, and then everything becomes a little bit easier. So again, we want to do this deliberately, do it right, [indiscernible] do it very quickly. I don't know, Jim, will you add?

Very accurate. That's -- when we talk about commercial alignment, what we've learned is people are very -- they love the solution. People are interested in doing more. And -- and so aligning around those proof points and doing that is obviously, it's a win-win.

Perfect. Okay. That's very helpful. And maybe Sandeep as well sticking with you on the VKB opportunity, encouraged to see kind of that buy-in around this unified vision, given how early we are kind of in the implementation phase. I wonder if you could give us some additional color on kind of how that agreement came to be? It sounds like that's helping fuel already incremental kind of pipeline activity as well, but how you're thinking about that as potentially kind of being a lighthouse example, not just in the German insurer market, which I think is fairly large, but also more broadly across the rest of the business here?

Yes. I would just start by noting that the German insurance market is massive, someone says half the side of the U.S., just the [indiscernible] world itself. So it is significant in that sense, number one. Number two, it's hard to just replace accounting. Just given the competitive posture in not just Germany, but across Europe. If you're going to do it, you've got to replace the entire solution front to back. And I think once we went back to clients with hey, we can bring all 3 of these, and that can deliver a next-generation cloud software, which you never have to upgrade again. Yes, I think it's struck a nerve. And we could not be [indiscernible]. I got to tell you, that's why we did a press release. We were very pleased. It's a lot of work. I don't want to pretend like these 3 products will just automatically work together. But is it -- will it be a massive proof point in that market? I absolutely believe that. So very enthusiastic and very, very happy with this early win, if you will.

Next, we have [ Patrick Morley ] with Piper Sandler.

A lot of detailed questions asked, so I'll ask maybe a bigger picture question, but there's been a lot of talk recently about tokenization of real-world assets. You have the Chairman of the SEC talking about wanting to push this country towards moving more assets -- real-world assets onto the blockchain. So just curious how you think about tokenization and the impact that it could have on your business? And then maybe what it could mean for the moat that your single security master gives you in the event that we do see real-world assets being put on the very publicly available blockchain?

So look, firstly, I think this trend will continue, right? So that is number one. Number two, just the investment in all kinds of alternative assets is simply going to continue. Third, the investments around the world is going to continue. Fourth, the volatility, just given where we are in the world today is going to continue to increase. So I absolutely believe that, that plays into our hand of being able to give you a comprehensive global view of your portfolio.

Now will this happen very quickly? Do we expect 20% of real estate assets via our tokenization, I think that takes time. Are we going to try and lead that? Absolutely. Because if you're trying to create a token-based solution, who has it in one place is what you're going to ask. Which provider today has the highest number of AUM on a single instance platform. Where would you go to try and set this up. And I think we have an inside view on not just tokenization there, but across private credit and private debt. And so we feel we're in a really good position for exactly the same reason we integrate position on generative AI because all of our data, all is in one logical database. Everything we have done in terms of reconciliation for the last 15 years is all on that same logical database. And therefore, our ability to learn from it I think is sky high versus other platforms where every client has their own database and their own security master.

So I do think that all of these trends should help the modern technology players, and we believe we are disruptively the most modern player.

Our next question comes from Brian Schwartz with Oppenheimer.

This is [indiscernible] sitting in for Brian Schwartz. Sandeep, one for you. You've already seen success achieving productivity savings via generative AI. But are you working on prioritizing AI for revenue monetization to give the business another growth driver? And then I have a follow-up for Jim.

Yes. So we are very passionate about generative AI. We think it changes everything about our business, of our clients' business and how they do business, how they do research, how they execute trades, how to find new ideas of investments, we think it changes all of that. I do think the easiest place for people like ourselves is in driving meaningful efficiency improvement, which is what you've seen. You've seen us really be better at efficiency when it comes to generative AI.

The transformation into revenue production or generating real growth on the revenue side is slower I think many, many clients are talking and discussing and seeing POCs, but I think the movement to actual revenue growth is a little bit lighter. Now if we go to our sales team, they will tell you, if we can do operations much faster that helps the sales process and therefore, the pipeline moves faster. So in that sense, is it accelerating revenue growth? Maybe yes, but I think real generative AI-led products, I still think are in the coming.

Now do we feel you'll see something in '26? I think so. Do you think you'll see something in '25 in the second half? We have very much hope you will start to see clients adopt generative AI as a core technology. So look, we are very bullish on it. We feel whatever we invest, we get the money back in the current year and then end yours because you are getting margin improvement, guess what? The margin improvement then comes for every year out in the future. So we are big, big believers in it. We feel we have a massive competitive advantage because of single security master. So yes, we're going to continue to push. But I just got to tell you, we think it will change the world.

Perfect. And then just one question for Jim. Last quarter, lower customer AUMs was a headwind on the comparable. Did that headwind reverse and turn into a tailwind for NRR on the core business in the quarter? And then how are you thinking about that moving forward? Is that layered into your expectations and guidance for the rest of the year?

Yes, sure. It's very quickly. It was neutral quarter-over-quarter, and we expect it to be neutral.

Our next question comes from Maura Hager with Goldman Sachs.

This is Maura on for Gabriela. Just one from me. With alternatives now making up a larger portion of customers' portfolios. Do you feel you're where you need to be post the Beacon and Bistro acquisition -- and just given the strategic partnership with Blackstone, how are you thinking about the development in this asset class for customers? .

Yes, thank you for the question. Look, I was hoping somebody would ask the question. It is our largest area of investment by far. I think that you can do accounting for it, but having the partnership with Blackstone and being able to bring Bistro to our client base I think it's a little bit game changing. But I do think being able to visualize it is not enough. I think what really turns the dial here is Beacon. Being able to give you near real-time cross-asset class risk exposure on the trade your thinking of doing, I think it's game changing. I mean people go look at risk for equity separately from fixed income and separately for every individual alternative asset class. And then they try [indiscernible] to figure out what's really happening and the ability to combine what Clearwater does with the best visualization, but also the beacon real-time, near real-time risk, cash flow generation, I think, is -- will really help the industry as it invests more and more into these opaque asset classes.

So very excited about it, a lot of investment going in it and huge interest from a client base just across the client base on this offering here.

We have no further questions. So I'll hand back to management for closing comments.

Thanks, everyone, for your interest in [indiscernible]. Look, we're really excited about our prospects and excited to share more about our longer-term strategy, our targets and lay out some of these milestones related to these acquisitions at our Investor Day on September 3, at 1 p.m. Eastern at the New York Stock Exchange. If you'd like to register to attend in person, reach out to the good folks at investors clearwateranalytics.com. And note, the [indiscernible] has already been ordered if you're looking for a new T-shirt or sweatshirt. Cheers. Thanks, everybody.

Thank you all. Thank you.

Good afternoon, and welcome to the Clearwater Analytics 2025 Annual Meeting. As the company's CEO and a Director, I'm honored today to introduce Eric Lee, the Chairman of our Board of Directors, Compensation Committee and Nominating and Corporate Governance Committee. Eric will preside over the meeting.

Thank you, Sandeep, and welcome to all participants. The meeting is hereby called to order.

An agenda that outlines the order of business for this meeting has been made available on the meeting portal. We will strictly adhere to the agenda for this meeting. As noted in the company's previously distributed proxy statement, at this meeting, the stockholders are being asked to vote to: one, elect three directors; and two, ratify the appointment of KPMG LLP as the company's independent registered public accounting firm for the year ending December 31, 2025. The polls are open. And if you are a record holder, you may vote your shares online at any time during this meeting prior to the closing of the polls. If you have previously voted your shares and don't wish to change your vote, then no additional action is necessary.

Let me take the opportunity to introduce Jacques Aigrain, Cary Davis and Kathleen Corbet, who are the members of the company's Board of Directors in addition to Sandeep and me in attendance at today's meeting. We also have several company officers here with us. In addition to Sandeep, the company's CEO, joining me today are Jim Cox, the company's Chief Financial Officer; and Alphonse Valbrune, the company's Chief Legal Officer and Secretary. I also note the presence of Aaron Fraser, who is a partner at KPMG LLP, the company's independent registered public accounting firm. Alphonse Valbrune, the company's Chief Legal Officer and Corporate Secretary, will serve as Secretary of this meeting and record the proceedings. Alphonse will now discuss the procedures for transacting the business of the meeting and certain administrative matters.

Good afternoon. The agenda for the meeting appears as a slide on the meeting portal. The rules of conduct for the meeting have been posted on the portal for the meeting under documents. We haven't received any valid proposals for additional business to be conducted at the annual meeting. Therefore, the only business matters to be conducted at the annual meeting will be the matters set forth in the agenda.

While the meeting is virtual only, we still welcome questions from our stockholders. You can submit your live questions through the text box located on your screen. We will take questions related to the proposals to be considered at the meeting prior to voting on the proposals. Other general questions regarding the company or of individual concern can be sent via e-mail to our Head of Investor Relations at [email protected].

As in years past, the company has hired Mediant to facilitate distribution of the proxy and to act as Inspector of Election for the annual meeting. Mediant has delivered to the company an affidavit as to the mailing of the notice of the meeting. The affidavit confirms that on May 8, 2025, notice of the meeting and of Internet availability of proxy materials was mailed to all stockholders of record as of the close of business on April 25, 2025, the record date for the meeting. This affidavit is available if any stockholder wishes to examine it and will be filed with the minutes of the meeting.

Ms. Wood from Mediant is with us today and has signed an oath to act as Inspector of Election. This oath will be filed with the minutes of this meeting. After voting at today's meeting is complete, we will have a preliminary report of the Inspector of Election announcing the results. The inspector has the stockholder list of the company as of the close of business on the record date for determining stockholders eligible to vote at the meeting. The list shows the stockholders and their respective number of shares entitled to vote at the meeting. This list is available if any stockholder wishes to examine it and will be filed with the minutes of the meeting. The Inspector of Election reports that a quorum is present and the meeting may proceed.

Thank you, Alphonse. Now we can turn to the business of the meeting. The first item of business on the agenda is the election of Mr. Mukesh Aghi, Mr. Jacques Aigrain and Ms. Lisa Jones to serve as Class I directors for a 3-year term expiring at the 2028 Annual Meeting.

The second item of business on the agenda is to ratify the appointment of KPMG LLP as the company's independent registered public accounting firm for the year ending December 31, 2025.

Now if you've already voted, please do -- if you've not already voted, please do so at this time. We will now -- or comments regarding the proposals. Please note that any questions or comments other than in relation to the proposals will not be taken at this time.

I will close the polls after questions or comments are addressed.

Alphonse, do we have any questions or comments?

Eric, there are no questions or comments regarding the proposals.

Thank you, Alphonse. I will provide for a brief pause to allow any final votes to be cast.

[Voting]

I hereby declare the polls closed. I understand that we have a preliminary report of the Inspector of Election.

Alphonse, will you please announce the results of the stockholders' vote?

Eric, the preliminary report of the inspectors of election based on the voting of shares represented by valid proxies on file indicates that in relation to the first item of business, Mukesh Aghi, Jacques Aigrain, and Lisa Jones have been elected as Class I directors by the stockholders. Each candidate received more than 80% of the votes cast in relation to the election of directors, representing more than a plurality of the votes cast in the election.

In relation to the second item of business, ratification of the appointment of KPMG LLP as the company's independent registered public accounting firm for the year ending December 31, 2025, has been approved by the stockholders by more than 95% of the votes cast, representing a majority of the votes cast in the election.

Eric, that concludes the report of preliminary voting. Details of the results will be available for all stockholders in a filing with the SEC within four business days. Stockholders may also obtain the voting results by calling or writing our Investor Relations team via e-mail at [email protected].

Thank you, Alphonse. I hereby request that the final report of the inspectors of election be filed with the minutes of this meeting. This completes the business scheduled to be conducted at this meeting.

Once again, general questions regarding the company or of individual concern can be sent via e-mail to our Head of Investor Relations at [email protected].

Since there are no other matters to come before the meeting, we are now adjourned.

We wish all who joined today the best, and thank you for your continued support of Clearwater Analytics.

All right. Thank you, everybody, for joining us. Very pleased to have Clearwater Analytics CEO, Sandeep Sahai, here with us. And thank you again, everyone, for joining. Before we get started, I just have a quick disclosure to read. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures.

The taking of photographs and use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative.

So Sandeep, with that out of the way, thanks again for being here. We're obviously going to cover a lot of topics across the acquisitions that you've done, NRR, competition, et cetera.

But before we do that, maybe for those that are not as familiar with your business, just give us the high-level story on Clearwater, the arc over the last several years as you've come public and how the business has evolved?

Okay. I could go on with that for 35 minutes [indiscernible] all be done. But most seriously. Basically, what Clearwater does is it does investment accounting. And what that really means is if you're an asset owner, so an insurance company or somebody like that, people trade on your behalf and they report back to you at the end of the day.

So we sit in the middle. We'll actually get all of these reports from your managers and then we'll go to your custodians to also check what you have. And then we'll go to your market sources to also figure out what the price is. And we'll take all of those feeds, consolidate it and give you a comprehensive view of your platform across asset classes across the world on a daily basis.

And that's what the core platform does. As you invest more and more into alternative assets and other asset classes, that's where it becomes more and more important. It's how do you get a comprehensive view. Why do you need a comprehensive view? Very simple, for investment decisions, that's number one. Risk management, compliance, regulatory reporting, accounting, taxation, all of them demand a comprehensive view of your global portfolio, and that's what Clearwater does.

Just in terms of financial profile in the last 5 years, we have grown about 20%, between 20% and 25% each year organically.

And we've had small acquisitions, but if you strip that out, you will see that the growth was about 20%, 21% in that region. So we've grown consistently each of those years. Our gross margin used to be 75% in 2022. In the last quarter, it was 78.9%. So we've been able to grow that pretty dramatically. Our EBITDA used to be 26%, and we've been able to grow that pretty dramatically. In the last quarter, it was 35.5%.

EBITDA converts to cash quite nicely at 70% rate. And so it's a really solid business. But the foundation of it is this 98% gross revenue retention. So once a client's on our platform, we have a 98% revenue retention rate. And you could go back '24 quarters, and you will see it's the same number with the exception of 3 or 4 quarters. One quarter, it was 97%, 2, 3 quarters, it was 99%. So it's a good solid business because it is mission-critical. People can't wake up and say I don't want to do accounting anymore. We can't wake up and say, I don't want to do regulatory reporting. I mean that's not quite how it works. So it's a nice business. I've been CEO for 7, 8 years. So it's not like I founded the business. But yes, it's -- I have had the privilege of leading it for 7, 8 years now.

Awesome. Maybe just on the core Clearwater stand-alone piece of the business. I think, again, at the time at which you came public, everyone was focused on whether or not you could grow 20% consistently. We're now having the same debate 5 years later.

So maybe just on that piece specifically, just walk us through like the various tranches of the business within asset management and insurance and how, in particular, you're feeling about Clearwater's net new momentum in both of those verticals specifically and sort of pairing that with your ability to continue to achieve 115% NRR?

Yes. I've got to admit I was a little surprised by the reaction. I think when we went public, people said, can you grow. And we also said we will grow, but we will improve gross margin 50 bps a year. That's the number we had, and we publicly stated that. And we also said we will grow EBITDA at 200 bps a year, and we publicly stated that also. And it's our history, so you can go back and look. And then the last year, our gross margin improved 170 bps instead of 50. Our EBITDA grew 340 bps instead of 200.

So I thought we would have earned a little credit that if we say something it gets done, and we have done it not 1 year and 2 years and 3 years, but 5 years.

But yes, so when I look at these acquisitions, I was telling some people earlier, it was a fun story about Tiger Woods. You're #1 in the world. And when he was doing really well, he completely changed his swing. And the point was he felt he was strong enough then to make the switch and still be #1, but getting the thing to endure. I think Clearwater is at a very strong -- the core Clearwater is at a very strong execution momentum right now. And so now is the time for us to try and reach out to other portions of our clients' business.

And so that's why you see us pushing today. And I -- a little surprised to see the same questions emerge again. And that's fine. I think we will deliver, and that's all we can do is execute to the plan we have laid out to the market and execute on it. I think we laid out to the market 3 things that we will find in the first year, $20 million of synergy. That was number one. We said we will find 400 bps of gross margin improvement in year 1 and another 400 in year 2. And we said we'll get growth back from 13% to 20% in 2 years. I think we've already found the $20 million, and we have acted upon the $20 million already.

Now you won't see it in Q2 because we have onetime costs related to. But I think by the time we see Q3 and Q4, you'll see the entire $20 million flow through super high confidence in getting margins of 400 and 400 probably a lot sooner than we thought.

So then the question is about growth. Can we get 13% over 2 years and get back to 20% while continue to grow ourselves at that pace. So look, I think it's a good story. I think it's something clients want. They want this modern technology for investment management.

Super helpful. Maybe just on those acquisitions. Before we sort of dig into the rationale for each of them, it'd be helpful, I think, if you just level set in terms of what the platform looks like today, obviously, being a single instance platform for the majority of the company's history.

You've done a lot of internal R&D work to sort of introduce more modules to the market over time, but now there's even more product to sell. So just level set with us on what the platform looks like today and what the road map is for getting the platform to sort of look and feel like one platform, call it, 6 to 12 months out?

Yes. We can just chat about this for a little bit. So firstly, we have a platform which does investment accounting. So let's talk about that. It never stops being developed though. And why is that? Because there are so many new asset classes which get generated by the industry.

Do you want a regulation that change is pretty dramatic. The amount of compliance that change is pretty dramatic. So our need to continue to invest is pretty strong when you think about the platform. But everything I spoke about until now has been after the trade. And that's what was Clearwater's strength. What we did not do was what happened before the trade. And that is where Enfusion is way, very, very powerful as a platform, right?

The other thing is that the investment in alternatives is growing literally day by day.

And what stands out about alternatives is that it is massively opaque. It's very hard to figure out the constituent elements of a CLO or MBS or private credit or private debt. There's just so many tranches after tranches of it. And so to understand risk effectively you need something like a Beacon to go out and model derivatives, to go out and model all these private assets. And so that is what I think it looks like 6 and 12 months from now is you have one platform which starts with order management and execution to investment accounting and regulatory reporting and compliance and in near real-time risk.

And that is necessitated, I think, by this movement towards global portfolios and this movement towards alternative assets. And that's nothing we control. It's what the industry controls, people like ourselves. But it is just a bigger and bigger portion of our platform today.

Got it. Maybe just on your goal of creating a single data layer across the front, middle and the back office. Just talk us through like some of the actual technical challenges associated with that.

We tuned into the webinar a couple of weeks ago just in terms of your views on the integrated platform. I know there's obviously work being done to accelerate that momentum. But talk us through those guideposts and how you're thinking about time line associated with it?

Yes. So look, I'll just try to explain the problem a little bit because I think the jargon doesn't sort of help too much when you say a single security master. I think -- think about a municipal bond, just something simple like a municipal bond. Traders care about just 5 fields about it. They don't know the price. They want to know some terms and conditions, blah, blah, blah. There's 5, 10 things, that's all they need. So the build platforms and systems, we define the municipal bond at those 10 fields. And then it comes to the middle office for accounting, which cares about tax lot, when it got sold, first in, first out, many other things, the middle office wants to know.

And then the risk people want to know 15 other things, is a repayment allowed, what happens if it gets cut by the municipal bond. And everybody redefines what these people will define. So the same security is defined with just 10 fields here, and these people in the middle will have some of the 20 fields and these people have 50 other fields. And that's why it gets complicated because for the same asset class, same security, there are 3 different systems, which have to be reconciled. Now that is the simplest example.

Now when you take it across asset classes, everybody's got their own systems for each of these items. And then you take it across countries, and you can see how it becomes a ridiculous mass very quickly. What Clearwater tries to do is we have a single security master for investment accounting. All our clients, all, use the same security master. So if there's a change because of anyone, it triples to everybody. Nobody else does that. We did it because that's how it was set up, so the data plane. We manage all the data for our clients. If you bought software from somebody and installed the software in the cloud, you are responsible for bringing in data from Bloomberg and Refinitiv and everybody else, reconciling it, making it correct, it's your problem. In Clearwater's model, we do that.

And that's why it has this massive network effect, which is why you get the gross margin improvement from 70% to 78.9% because of that reason. So I do think it's technologically challenging because we have our own security master and Enfusion has its own. But every other system if they've got 600 clients, there's 600 security masters. In our situation, there's one. So the technological challenge is how do you merge all these security masters, the two of these into one. So it's not short term, but do we think we'll have a version of it out in '26? Yes.

Do we think we have a full flowing system in '27? Absolutely. But our game isn't about you have to get to that final situation today. Can we cross-sell effectively? That can start now. And can we start to work more effectively with between Beacon and Bistro that can start now.

So I do think we have to get to this holy grail in 12 months even if it was possible.

Got it. Maybe just on the Enfusion acquisition itself. I think one of the areas that I've been particularly focused on is just the capacity of that platform to scale, right? Just the nature of their customer base historically skewing, call it, small and midsized hedge funds, have had a concerted effort over the last couple of years to move into the asset management category.

But just the allocation requirements associated with some of your larger customers relative to what the Enfusion platform historically had to handle. How do you think about the time associated to scale the Enfusion platform such that it could be in a position to be adopted by some of your largest customers?

Yes. There is a lot of things I think Enfusion can teach the core Clearwater team and the other way around. Clearwater has $8.8 trillion of assets on our platform, and we process it every day. So we think we can bring the knowledge of scaling systems in [ droves ] to that platform. That team has already been moved. We have the leader who drove much of this for Clearwater. He's working on the Enfusion platform right now. So we think we can bring that capability to them right off the bat. I also want to say that we do know how to work with Morgan Stanley and JPMorgan and Goldman Sachs and Blackstone.

And we know how to work with very large sophisticated clients, and we can bring that expertise to them very quickly. And so we feel that Together, we have a much better shot at addressing the entire asset management industry instead of them doing it by themselves or us doing about ourselves because there is something to be said about the front office systems they've built.

And if you can ask customers of theirs, I think they are across the board, really happy about it. So that's the strength of Enfusion. As the platform is used by 900 clients, super high satisfaction ratings and -- so we feel it is something you can work off from, if you want.

Maybe on the topic of pricing. You've obviously been successful at Clearwater to sort of transition from a pure AUM model towards, call it, a fixed plus variable component on the AUM side. I know there's debate internally just in terms of how you think about pricing that Enfusion solution just with some of the head count dynamics within the hedge fund space broadly.

How do you think about those conversations with customers just given the fact that historically, the majority of those, call it, CIOs or CTOs within the hedge fund space are accustomed to a seat-based model. So how do you think about just the strategy from a go-to-market perspective to execute on some of those potential changes?

Yes. I'm sure all of you use 20 pieces of software. I don't think there's one software where you don't have a 3%, 4%, 5%, 6% increase in price on a yearly basis. It's just not -- it's not how the word it is. Three years back, Clearwater was exactly in that spot. We had zero commercial model changes. There was no price increase. But we did it systematically, and we did it with a big eye towards our customers seeing more value from our platform on a daily basis.

So I think it's simplistic to think about, I'm just going to increase the price. It's not sustainable, I think. So I do think it's a bit of a mechanism. And in 2021, when we talked to you, we said, look, it's going to take us 2 years to get this price increase fully in our system. In the first year, it was 1% then 2% and settled at 3.5%, 4%. We don't want 5%. I think 6% and 7% price increase every year is unsustainable because it does compound.

And so we think this 4%, 3%, those are things you would pay if someone came to you and said, "I'm going to increase your rent 3% or 4%. I think you would take it. Would you increase 7%, 8%, I don't think people take it. But I do think it's a longer-term thing about how they sell, how do clients derive value, but I do want to say, if you're a client and I do seat pricing, what am I incenting you to do? Have less and less people use my platform. So it's a little bit counterintuitive. I want more and more people to use the platform while watching what value they get for the dollar.

So I do think last time we ran a 4-month process with an external vendor about how to change the commercial model, but not focus on price. Price is one component. The other one is the value. Are we investing more in R&D, which brings more performance or more functionality. So I think it's a whole piece. And that's why we have not said that we will do this in 6 months. We said we're going to take 2 years to bring growth back from 13% to 20%. But it will be stable growth. It's not like 21% a year, 16% in the next year, we want it to be consistent growth.

Okay. before we transition to some of the drivers of getting back to 20%, maybe just on that pricing point, in particular, I think one of the dynamics we've picked up just in conversations with customers in this space is generally if you look at some of the ACV dynamics of some of the incumbents, right, they're paying a pretty penny for some of the software. Enfusion generally tends to be a lower ACV price point.

So how do you think about your ability to have some level of pricing leverage in these conversations where you're now going to market with a much more robust and front-to-back platform?

Yes, my personal view is that our platform is pretty disruptive, the Clearwater platform. I think Enfusion is also very disruptive. But I do believe that where the industry is going, does need more R&D. I think Enfusion spends about 13% of revenue in R&D. I've always felt that it should be much closer to 20% even in the long-term model. And so I feel like you've got to go back to the product and the platform and the functionality and the value and the money will come.

But you can't approach it the other way. I think it's a little bit of a fallacy to believe that I just want to increase price. And I think you go back to value to client. And simply put, that comes from either the platform or for client servicing and what you do.

And so we are going to sort of try and change this holistically, which is why we said that margin will improve by only 400 bps in year 1. It's not only quite a big number, but just 400 bps in year 1 and another 400 in year 2. So I tend to view this holistically rather than get superbly focused on price. I don't think it's the right strategy. Our client, by the way, we made this change. It was a dramatic change. We rewrote hundreds and hundreds of contracts and client satisfaction has not changed because we did it methodically.

We did it with a lot of eye towards what do clients want, what value they look for. We changed our R&D model. We changed our client servicing model. So I think when you do it comprehensively and clients see more value and you want 4%, that is very, very, very palatable, and that's what we hope to build.

Got it. on the drivers of getting back to 20%, obviously, working through some of the pricing changes, we might be able to see some uplift there. But just in terms of the bridge of going from 13% to 20%, obviously, there's a lot of internal cross-sell initiatives to really plug that gap. But how do you think about just your general conviction level in getting that Enfusion business to reaccelerate back to that level?

Yes. Look, firstly, if we did not have conviction, we wouldn't have done the deal. There was nothing wrong with our story. And sometimes the Board give us a hard time, but hey, you're growing this 20%, your margin is improving, just shut up and keep doing that. And so if we didn't have conviction. I don't think we would have done the deal. So I'll give you a few things we think about.

Number one, Enfusion had -- 3 years back, they used to sell only to hedge funds, not only, but almost entirely. And the growth was superior to Clearwater every year. They took all of that R&D money and they pushed it towards asset management. It takes time. And the asset management didn't grow as quickly. Hedge fund growth stalled and the growth rates now came down.

So really, the first thing we're doing is taking the R&D team, which is focused on hedge funds and bringing them back into one thing, hedge funds. An entire sales team focused on hedge funds, a product team focused on just hedge funds, GTM team focused on purely hedge funds. Everyone is not going to be selling everything. So I think just the refocusing on hedge funds, I think, will transform the growth rate very meaningfully because they are the bulk [indiscernible] the bulk of the business was hedge funds. And if you don't innovate there, then you're going to die, not die too strong a term. But you will get the flattening of the curve in terms of growth.

So that felt like number one. Number two is on asset management itself, we took all of Clearwater's R&D and GTM, and they have now merged it with their efforts around asset management. And so that should accelerate a whole lot faster going back to your scaling points and things like that. Once you can show that because Clearwater does it, you should be able to scale in asset management much faster. And the third thing is this focus on NRR. Again, this is something we did from 2, 3 years back. What does NRR mean?

Well, it means much smarter commercial model, which yields about 3.5%, 4% year-on-year. So that is going to happen. Second thing is setting up an R&D team, which focuses on just current clients. So for example, client reporting. We should be able to sell client reporting to all 900 clients. Why aren't we doing that? Managed services, why aren't we doing that effectively? Risk, why aren't we selling risk to all of these people. So really product, which you can go back to the current clients with is the other source of growth.

Then comes cross-sell. So I feel like there are 4 different things you could do all in an effort to drive growth. And we would need 2 of these to work to be able to get back to 20%. And so that's how we think about it. Now luckily, we have a lot of room in our P&L to be able to make all of these investments simultaneously while growing EBITDA 200 bps. I mean last year was too hot. We grew 340 bps. But I think our commitment to the market has always been it's going to be 200 bps improvement year-on-year. And so we feel there's enough room to invest in all of these initiatives while growing EBITDA 200 bps.

On Enfusion margins, obviously, those who sort of peel back the onion and look at GAAP EBIT of that business is actually quite profitable and has the capacity to really drive margins higher even on a stand-alone basis. But you mentioned the visibility and the confidence in generating $20 million of those cost synergies.

How do you feel about Enfusion margin expansion targets? You communicated the 400 and 400. But if I just, again, take a step back and look about -- look at what you've communicated to the market in the past and how quickly you've executed on that. Just talk us through some of those puts and takes on Enfusion margin specifically?

Yes. So firstly, it's just going to happen. So there's no question of am I confident, not confident. It will just happen. We will do it. And I think we said we'll take a year to get $20 million in synergy costs.

We already have the $20 million. And so -- and the revenue is $201.5 million. So $20 million is not a small amount. It's like 10%, right? So that's been executed and done already. I think it doesn't show up for a few months. There's onetime costs of shutting things down, that's okay. But that $20 million is already done. I think on the 400 and 400 bps, I think we have said 2 years. I'd be quite disappointed if it was 2 years. Do I think it could be a year that would be aggressive? Is it somewhere in the middle? I think so.

But it isn't -- I don't think it's a question of are we going to do it? It's going to happen. We have the tooling to automate a lot of the work. A lot of the work they do is manual, and it's just not how you should do it. And so we have built all the software, which is how our margin went from 70% 5 years back to 78.9%. We just going to do the same tooling. And so we just expect it to happen.

Got it. Okay. I've been monopolizing time. Anyone in the audience have any questions for Sandeep? If not, I can keep going. Okay. Great.

Maybe just on Beacon. I know that's a platform that if you just look at the number of clients and then the ARR of that business, it's actually pretty chunky just in terms of how those deals tend to look on the risk side. I'd be curious like how you think about pairing some of that Beacon functionality with what you already have with Wilshire. What is that -- what is the pairing of the 2 mean? And what does that sort of [ unlock ] in the client base?

Yes. So if you just think about it simply, what Wilshire does is basically performance and risk for equities and fixed income. But when you get to derivatives and alternative assets like private credit, private debt, CLOs, that is something a Wilshire can't do. So Beacon was built ground up to deal with complicated assets. And as you might know, it was funded by Blackstone and PIMCO and people like that who all trade in these alternative assets, which are high complexity.

And so it was built from the ground up to allow 2 things. One is deal with all these complicated assets, but make it a very open system, which allows Blackstone to build its own models, which creates alpha and integrate it into Beacon to do these calculations, right? Now that is unlike every other risk system in the market today, which are basically closed systems. You just do it the feed and will give you the result, but you can't bring your own models to the house to the party here. And just by the nature, Blackstone and PIMCO and people like that were we know better, and so we're going to bring our own models to the party.

And so between these 2, you would get a view of all privates and publics. And that is the holy grail is if you want to shock something with 25 bps interest rate movement, you want to shock your whole global portfolio. And you don't want to shock equities differently and go into the system and do every asset class separately. But by bringing these 2 things together under a common leadership, we hope to provide an ability to shock your entire system up and down, GFC, whatever that might be, you'll be able to do that.

Now why wasn't it important earlier? Because alternative assets were 5% of people's portfolios. Now it's 25%. super important, super relevant. So that's why we felt that you had to do a Beacon. Yes, that's [ fun ].

It is. On that point, do you think like you obviously have the incremental TAM associated with Enfusion. I guess do the incremental Beacon capabilities actually give you an incremental leg up with things like quant hedge funds just in terms of the capability you can deliver there?

Yes, without question. If you look at their standing with -- by the way, what is Blackstone? It's quants. And you go to the biggest customers, the more the quants, the more -- the bigger the need for something like -- if you don't have quants actually, then the Black Box system works quite well because you don't have the quants to do your own models and bring it to the party. But if you have quants, then by definition, they want to build their own models and they want to bring it to the party, which means you have to have a system which is open and allows it.

And so yes, the moment you have quants, almost definitely Beacon would do really, really well in that. But if you don't have quants, Wilshire we will do well and be able to bring that to the party. So we think that this allows us to build a comprehensive platform, but it doesn't mean it's available today. All it means is we have all the intellectual property inside the house under one tent with one leader. And what we hope to build in the next 6, 12 months is that.

Even if you think about hedge funds and you think about Enfusion, [indiscernible] global macro or risk-aware investing, those will become very natural to Enfusion when it is not that natural. If somebody is doing multi-asset class reporting near real time, yes, without Beacon, I think it's hard. So I do think Beacon makes Clearwater stronger. I think it makes Enfusion stronger. And I think we bring 2,300 clients to the Beacon platform to cross-sell. And so we do think this is all part of the same value chain, if you will.

Maybe just on some of the pro forma metrics of the business. Again, 115% NRR has been your guidepost for quite some time. Obviously, there's some near-term drag associated with Enfusion, just given the NRR of that business over the last couple of years.

But if you sort of pair that with both your optimism on pricing as well as the fact that you now have more product to sell, how do you think about just the mix and the drivers of NRR between price, cross-sell, upsell, some of the AUM dynamics and how they're evolving with the acquisitions?

Yes. I think 2.5, 3 years back, we were at 106%, 107%. We built this plan to 115%, and we have executed really well. And we got to 115% back down with Enfusion. And so we're building out the plan to say, how do you bring them back up in 2 years. So I feel like there's a is a really good playbook we have, which centers around commercial model, new product development, changing the client servicing model, which you have just finished after 2.5 years.

And I think we just kind of go back to the same playbook almost entirely. And which is why you hear me so confident about margins and all. We have just been through it. We know. And so it's a question of reimplementing it of those plans. But you do start to feel like we just do it, and now we've got to do it again, hopefully, easier this time with the same leaders. If you look at our team of Jim Cox and Subi Sethi, who is the Chief Operating Officer and Scott Erickson and Souvik and Cindy.

We've been together for 5 years. So we know this playbook. We have executed it together before. And so there's pretty high confidence in and security again, but it doesn't mean it's not work. I mean there is a lot of work. And we did start with -- I think we have met about 300 clients live across New York, London and Paris and just across the whole world and really sought their input.

And I think everything we have said to you, we presented to them. We presented to them how we bring these companies together, single security master, single data plane, which you were asking about, and it's an open system, which others could be able to use. And I've got to tell you that we are lucky that Morgan Stanley and other analysts sort of see the logic, the industrial logic really, really well. And the clients we have spent a lot of time with over the last month in person, I don't think one client has come to me and said, "Why were you guys doing this? They get the rationale sort of literally right away.

And so I think we're quite enthusiastic, but it's a lot of -- you have to get a lot of things right. But if we do, then we have diluted 12%, 13% and had 54% of revenue growth from it. It's not of the same quality because it's not -- we said GRR, NRR and the growth is not the same and the margins are not the same. But I do think over the next 1.5 years, we will get all those margins back up and get the growth back up in 2 years, in which case, for shareholders, including myself, it would have been a fantastic deal, which is what we hope.

We look forward to it. Thanks again for joining us, Sandeep.

Thank you.

Take care.