Clearwater Analytics Holdings, Inc. Q4 FY2021 Earnings Call

Good evening. Thank you for attending today's Clearwater Analytics Fourth Quarter and Full-Year 2021 Earnings Conference Call. My name is Selena, and I will be your moderator. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, I would now like to pass the conference over to our host, JR. Ritchie, Head of Investor Relations. Please go ahead.

Thank you, and welcome, everyone, to Clearwater Analytics fourth quarter 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 up to a question-and-answer session. I'd 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, including business outlook, expectations for future financial performance, and similar items, including without limitation, expressions using the terminology may, will, can, expect, and believe, 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 the conference call, except as required by law. For more information, please refer to the cautionary statements included in our earnings press release. Lastly, all metrics discussed in this call are non-GAAP, unless otherwise noted. A reconciliation 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, JR, and welcome everyone. Thank you all for your continued interest in Clearwater. We finished 2021 with strong revenue for Q4 at $69.8 million, which constitutes a year-on-year growth of 27%. For the full-year, revenue grew 24%, which is a very nice re-acceleration to our historic growth rates. Gross revenue retention remains consistently strong at 98%. I'm very happy to note that our net revenue retention increased to 111% in Q4, up 210 basis points year-over-year. We have continued to execute well, resulting in a gross margin of 75.5%, which in turn helped drive strong profitability in the quarter. We added 97 net new clients last year, and approximately 45% of them moved from legacy competitors to our platform. Some were on legacy platforms for over a decade, while others had barely finished implementations just a few years ago. We also won across the spectrum of clients. We now have 59 clients with at least $1 million in assets. I would be remiss if I did not acknowledge another significant win for us in Europe in the fourth quarter. Athora is a leading, fast-growing, and acquisitive European insurer that has assets across many countries in Europe, and we're delighted to welcome them to the Clearwater platform. To understand this transition to Clearwater, I would like to talk about the value we bring to our customers. Simply put, Clearwater provides clients with a comprehensive, reconciled view of the global portfolio every day while trying to invest across many asset classes and having reporting requirements across multiple regulatory regimes. Providing a comprehensive view is complex. Single clients can have investments in 60 asset classes and 40 currencies, and we bring it all together every day. Our platform aggregates, reconciles, and validates data from more than 2,500 sources daily and leverages a single security master, yielding a very strong network effect. This leads to a high-quality single source of truth, used by clients for portfolio construction, risk management, regulatory reporting, and tax compliance. This technology and approach stand in stark contrast to legacy providers who have multiple systems and Security Masters. Data from all those systems needs to be integrated, requiring significant manpower and often leading to unreliable accuracy levels. The power of the Clearwater single-instance multitenant platform is used by an increasingly wide set of clients across the globe, including insurance companies, asset managers, and corporations in North America, Europe, and Asia. We have not stressed enough that our platform is a true enabler of growth. Investing in new asset classes and reporting in new geographies used to require implementing new technologies and building operations teams. Our clients scale globally, invest aggressively across asset types, acquire businesses, and integrate them quickly because our solution provides the necessary infrastructure on demand. As one client told us, after a $4 billion acquisition, they had the new securities ready for reporting on our platform before the deal closed. Last year, we supported several clients in integrating new assets from acquisitions, others saw substantial organic growth, while still others onboarded additional asset types. But all had a constant and complete view of their portfolios daily. Clearwater gives clients the freedom to grow into new asset classes, geographies, and portfolios without doing new system implementations. Little has changed in our approach regarding the three growth horizons that provide us with multiple levers for future expansion. First, we are focusing on maintaining our growth trajectory by deepening relationships with current clients and capturing more market share in our core markets of insurance, asset management, and corporations in North America and Europe, where we have strong track records. Second, we are entering adjacent markets such as state and local governments in the U.S. and expanding into Asia while working on delivering adjacent solutions we can upsell across our vast customer base. Third, we plan to provide deeper insights, helping clients understand best practices in the ever-changing world of investing. Our mission is to be the world's most trusted and comprehensive technology platform for investment accounting and analytics, and we believe we can leverage our technology to revolutionize the broader world of investing. In terms of business highlights, we had significant wins in North America across various industries, including American Century Life Insurance, Carlisle Companies, Circle, City and County of San Francisco, Highmark Health, Madison Reed, Sprinkler, and many more. Our competitive win rate, based on deals reaching the proposal stage, remains strong at about 80%. We continue to displace legacy solutions that provide inaccurate data in the evolving world of investment accounting. Our international expansion continues impressively with new client signings, including a forum, following our first seven-figure clients in Asia, which we announced in Q3 under the leadership of Gayatri Raman, President of our Europe and Asia operations. Our international business grows nicely, accounting for over 20% of newly signed business in 2021. We have great momentum, and with approximately 40% of our total addressable market in Europe, we are excited about the opportunities ahead. We've made significant progress on our new product offering called Prism, allowing Clearwater to provide a modular investment data aggregation and reporting platform. In situations where clients cannot move away from their current infrastructure in a given country or for an asset class, we can use Prism to integrate other data sources into Clearwater's reporting platform for a comprehensive view of their global portfolio. We have a promising and growing pipeline for Prism in 2022. To maintain our technological advantage, we reinvested 24% of our revenues into R&D in 2021 and made significant strides with product enhancements in Q4. We improved product accessibility and usability and kept up with evolving standards such as NAIC, IFRS, Schedule BA, and others to support our clients. We also introduced additional support for multiple gaps around the world and enhanced our capabilities for alternative assets. This product investment allows us to be more comprehensive, integrate new technologies, and expand our competitive moats. Our three operating centers are now operating at scale, delivering 24/7 operations for clients worldwide. I'm especially proud of our leadership team at Tier-1. They work collaboratively and are committed to building a truly special company that transforms investment accounting in an increasingly complex world. Before returning with closing remarks, I would now like to hand the call over to our Chief Financial Officer, Jim Cox, to provide more details on our financial performance for the fourth quarter and full year of 2021, as well as initial guidance for 2022.

Thanks, Sandeep. And thank all of you for joining us today. We are very pleased with what can only be described as stellar financial performance for both the fourth quarter and full year. The fourth quarter exceeded our guidance for revenue and adjusted EBITDA margin due to robust client demand and an acceleration of client onboarding activity. I'll start with a review of our financial results for the fourth quarter and full year 2021, then wrap up with guidance for the first quarter and for full year 2022. Before detailing our core financial results, I'll first address two items impacting year-over-year comparability of our fourth-quarter results. First, you will notice that we recorded a $49 million one-time recapitalization compensation expense charge in the fourth quarter of 2020. In November 2020, we completed a recapitalization transaction on behalf of existing unitholders, allowing them to sell their units to new investors. In connection with the transaction, existing unitholders contributed $49 million towards bonuses to employees and payroll taxes. Next, following a comprehensive review of sales tax reporting obligations, we recorded a provision of $9.1 million to cover historical sales tax liabilities in many states, all of which was recorded in general and administrative expense in Q4 2020. In 2021, we began collecting and remitting sales tax to jurisdictions on behalf of our customers, contacting existing customers and executing voluntary disclosure agreements. Some customers proved usage outside the taxing jurisdiction, leading to a $2 million reduction in this liability during the fourth quarter of 2021. Without that reduction, Q4 2021 adjusted EBITDA margin would have been 25.9%, consistent with our guidance. Moving to our financial results for Q4 and the full year of 2021, please note that all results discussed will be on a non-GAAP or adjusted basis, unless otherwise noted. Revenue in Q4 was $69.8 million, up 27% year-over-year due to successful onboarding of several large clients during the quarter and growth from existing clients. Fourth-quarter revenue exceeded expectations as our investments to expedite client onboarding began paying off sooner than anticipated. For the full year, revenue grew an impressive 24%, returning to a durable growth pattern. As of December 31, 2021, annualized recurring revenue (ARR) reached $277.8 million, a $20.8 million increase over September 30, 2021, representing a 26% year-over-year increase. This increase primarily relates to strong new sales throughout the year. Gross revenue retention remained a consistent 98%, marking the 12th consecutive quarter of 98% retention rates. Net revenue retention was healthy at 111%, up 210 basis points from Q4 2020 due to strong retention, price increases, and upsells across our client base, as clients see us as a key enabler of their growth. Gross profit for the quarter was $52.7 million, with a gross margin of 75.5% thanks to strong revenue performance. We achieved these gross margins while increasing investments to accelerate client onboarding and expand our international delivery capabilities. For the full year, gross margin was 75.6%, up 50 basis points over 2020. Looking ahead, we expect gross margins to remain at a similar level for the full year 2022. Research and development expenses for the quarter were $16.5 million, or 23.7% of revenue, slightly below expectations due to slower-than-anticipated headcount growth. The hiring market for top engineering talent is very tight, but we are focused on strategies to accelerate our hiring in 2022. For the full year, research and development expenses were just over 24% of revenue, and we expect 2022 R&D expenses to be stable as a percentage of revenue while making investments to drive growth in core markets and future products. Sales and marketing expenses in the quarter were $9.6 million, or 13.7% of revenue, up 280 basis points year-over-year. For the full year, sales and marketing expenses came in at 12.6% of revenue, representing an increase of nearly 370 basis points year-over-year, demonstrating our ongoing investment in go-to-market capabilities domestically and internationally. These investments have helped drive the revenue re-acceleration we saw in 2021. We plan to maintain our 2022 investments in sales and marketing at levels similar to Q4 2021 as we believe we have made most of the key hires needed for our growth strategy in the near term. General and administrative expenses for the quarter were $6.5 million, or 9.4% of revenue, a significant decrease year-over-year due to the sales tax liability reduction. For the full year, G&A came in at 10% of revenue. Looking ahead, we expect G&A expenses to increase slightly as a percentage of revenue as we annualize the impact of public company costs stemming from our IPO, while we expect to scale back-office functions over time, providing long-term operational leverage. Adjusted EBITDA for the quarter came in above expectations at $20.1 million, or 28.8% of revenue, up $13.3 million from Q4 2020, primarily due to strong revenue performance and favorable adjustments to our sales tax liabilities. For the year, adjusted EBITDA was $72.7 million, or 28.8% of revenue, an increase of nearly 80 basis points year-over-year as we driven robust, sustainable growth throughout 2021. I'll address overall margin expectations for 2022 later in my remarks, but first let's turn to our balance sheet and cash flow. We ended the quarter with $254.6 million in cash and cash equivalents and $53 million in total debt. Free cash flow for the fourth quarter was $10.9 million, which included $1.5 million of capital expenditures, mostly for capitalized software development costs. Focusing now on guidance for Q1 2022, we expect revenue to be approximately $70 million, representing 23% year-over-year growth from Q1 2021. We expect Q1 adjusted EBITDA in the range of $17 million to $18 million, with adjusted EBITDA margin expected to decrease sequentially from Q4 2021 as we continue to make targeted investments in client onboarding and R&D while absorbing incremental public company costs. Regarding full-year 2022 guidance: we are currently expecting revenue in the range of $302 million to $304 million, indicating over 20% year-over-year growth at the midpoint. Some investors have inquired about potential impacts of higher interest rates on the AUM value of our clients' fixed income holdings. To date, we've seen no strong indication that higher interest rate expectations have adversely impacted our revenue, but we will continue to monitor this situation and will provide additional commentary throughout the year as we update guidance. We expect our adjusted EBITDA to be in the range of $80 million to $82 million, with adjusted EBITDA margins likely increasing throughout the year as we plan to invest heavily in hiring early in the year while also absorbing incremental public company costs until late in Q3. Equity-based compensation expense is expected to be approximately $66 million, depreciation and amortization expected to be approximately $5 million, and we expect interest expense of approximately $2 million. Our full-year non-GAAP effective tax rate is expected to be 29%, and we project a fully diluted weighted average share count of about 255 million shares. To summarize, we are very pleased with our business performance in Q4 and for the full year 2021. We produced accelerated topline growth and maintained strong adjusted EBITDA margins while making strategic investments in driving future sales growth and increased client onboarding. As we enter 2022, our revenue retention remains robust, and our healthy pipeline makes us optimistic about the accelerating demand for our solutions in the marketplace. We are excited about the significant opportunities ahead. With that, I'll turn it over to Sandeep for closing thoughts.

Thank you, Jim. As you can see, we continue to run a strong, disciplined company. We are proud of the many achievements we made throughout 2021, including ending Q4 on a strong note and going public in Q3 without letting the process slow our business. We believe we have a disruptive platform in an industry ripe for change, and we plan to methodically pursue our three growth strategies. We look forward to 2022, continuing to execute, delight our customers, and build a special company that all of us are proud to call our own. With that, let me turn it over to the operator for questions.

Thank you. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause briefly as questions are registered. The first question comes from Kevin McVeigh with Credit Suisse. Please proceed.

Thank you so much, and congratulations. Really exceptional results. I guess, Sandeep or Jim, in terms of the 2022 guidance, can you help us understand what type of AUM is embedded in that? And I know it's probably difficult, but is there any way to think about what type of interest rate assumptions are in there just because it sounds like you're getting that question a little bit in terms of what type of rate assumptions are factored into the guidance.

Sure, Kevin, thanks. This is Jim. Let me just start with Q1, regarding the 23% revenue growth. We're picking a single point, $70 million for Q1, which is unusual. That's the acknowledgment that we're further into the quarter and our confidence levels are naturally higher. The full-year guidance of $302 to $304 million is about $7 million more than the street consensus at the midpoint, and it's consistent with our growth rate of being greater than 20%. You referenced interest rates, but that's one of many factors in these unusual times, including the invasion in Ukraine, volatility in equity and commodity markets, inflationary pressures, the 25-basis-point change in interest rates, and ongoing impacts from COVID. The macro environment is difficult to predict two or three quarters out, and we wanted to provide guidance we felt confident in, given that uncertainty. Based on current conditions and our pipeline, we haven't seen changes in our business model or platform, and we expect to continue AUM growth through new customer additions, expansion with existing customers, and enhanced services.

No, please go ahead.

What I was going to say, Kevin, is if you think about client fees, the entire investment strategy revolves around protecting the asset pool based on their needs. We've traditionally had very low visibility in that area. During the IPO roadshow, we discussed the disruption we experienced in early 2020, which had minimal impact on our assets under management. Expectations shifted in November of last year, but despite our expectations of change, we have not observed significant shifts so far. While some clients are reallocating their assets, we continue to monitor these movements.

I would almost think, Sandeep, given that broader perspective on the platforms, that increased volatility might actually accelerate demand for what you're providing. That's how we should be thinking about it, right?

Yes, exactly. Whenever there's uncertainty, it favors a transition to cloud services and managed solutions, which is exactly what users are looking for.

Thank you very much. Great job.

Thanks.

Thank you, Kevin. The next question comes from Michael Turrin with Wells Fargo. Please proceed.

Michael, are you on mute?

Hello?

Michael, are you there?

We can hear you, go ahead.

We can hear you now.

This is Michael Berdock for Michael Turrin. Congrats again on a fantastic end to the year and the first couple of strong quarters after going public. I wanted to double-click on the guidance numbers and your commentary on expenses in fiscal '22. It seems like you are planning for a sizable step-up in sales and marketing expenses. Is there a particular focus area for this investment, such as geography or verticals, and should we expect this to drive growth above the 20% level?

Sure, Michael. That's a great question. We feel good about the opportunities we have, and in response to your question, we plan to continue accelerating our international investments. We saw strong returns last year, and we will lean further into it. Our new CMO is implementing an aggressive marketing strategy, and we have a major event planned in London for April, so we'll be ramping up marketing spending this year. Additionally, we made substantial investments in building those teams last year, which is reflected in the anticipated increase in expenses.

I'll add a few things to that. The investment level is consistent with Q4 levels. In previous discussions, we indicated that we would increase operational spending again. The upticks observed in Q4 are aligned with this strategy. Many of our offices in continental Europe and Asia were set up last year, and while they may not have contributed meaningfully to the 2021 growth, we expect them to play a larger role in 2022 and beyond. The 13% to 14% investment in sales and marketing should align well with our growth projections as we can maintain EBITDA at the levels we desire.

Got it. Thank you. And a quick follow-up. Did you quantify the number of quota carrying reps, and if not, could you?

We have not historically disclosed that, but it's something we can consider.

Michael, I just want to note that we're investing significantly. Good Lord, I look at those numbers and am amazed. We're adding several sales representatives as we prepare for onboarding and growth this year, and we look forward to their contributions.

Great. Thank you, and congrats again.

Thank you, Mike.

Thank you. The next question comes from Jackson Ader with JPMorgan. Please proceed.

Hey, guys. Thanks for taking our questions. I want to ask about the onboarding investments you've made. I'm curious because I think a lot of times you sign a customer, and you will run Clearwater in parallel with their legacy systems. Do the onboarding investments aim to drive faster time to that parallel running, or are they trying to shorten the duration of that pilot period? I'm trying to understand the sustainability of that onboarding tailwind to growth.

Jackson, this is Sandeep. Thanks for your question. When considering onboarding, the first thing to note is that you can't cheat time. You need to be thorough to ensure confidence in the system worldwide. While we can build a solid organization to execute quickly, we want to ensure we have leadership capable of managing large programs. We recently won a significant deal with Athora, which exemplifies our ability to execute effectively. Are we trying to incrementally improve efficiency? Yes, that's always a goal, but we now have leadership that can confidently handle any size program.

Got it. Okay, great. Just one quick follow-up: Is there any seasonality in the market we should consider in terms of RFP cycles? Is it just your typical fourth quarter that tends to be the heaviest, or is there anything to think about as we head into '22 on replacement cycles?

From what I gather, there isn't a specific seasonal trend in decision-making. However, traditionally, the European market becomes quieter in Q3 due to various factors, as clients often want to finalize their year-end closing. However, revenue does not directly follow these seasonal trends.

Right. I was asking more about deal flow and bookings. Thank you.

Thank you, Jackson.

Thank you. The next question comes from Bhavan Suri with William Blair. Please proceed.

Hey, guys, can you hear me okay?

We can. Loud and clear.

Great. Loud and clear. Congratulations on a great set of results. I wanted to discuss your recent hire of the new CGO. With respect to AI and machine learning, can you share longer-term plans for leveraging those capabilities to gain additional insights from the assets on the platform? What are your thoughts on how to utilize data from the platform to drive additional product sets?

That's my favorite question tonight, thank you, Bhavan. We are thrilled to have Jody Kochansky on board. He brings significant technology experience and insight that is critical in our industry. Key focus areas will revolve around insights from our data, as clients require clarity from their data. We continue to make progress, but insights derive from normalizing data, which is why we push so heavily on Prism. Prism offers comprehensive data aggregation and reporting while integrating various external data sources, enabling valuable global insights. Clearwater will become increasingly valuable as we enhance insights into our clients' portfolios, and we are committed to investing in this area over the coming years.

Let me give you one example. We asked our data science team about our exposure to Russian securities last Monday, given the current situation. They indicated that our exposure is just 0.03% through our securities in Russia or those denominated in Roubles. This reflects what we can learn from our aggregated data. This example illustrates the potential insights we can gain.

That was very helpful. I didn't plan on asking that question, but I appreciate the answer. I would like to get an update on competition. Is it still the status quo, and who do you see as your primary competitors? It would be helpful to know about any changes in win rates.

I appreciate your questions and participation tonight. Our win rate stays steady at around 80% once a proposal is made, consistent for some time. This rate also applies to our circumstances in Europe currently, despite previous challenges there. While we are more visible now, there's competitive pressure from legacy providers. However, we've maintained significant momentum and measurable performance comparing with previous years. We continually invest in R&D to remain comprehensive and competitive, pushing boundaries in asset classes and global markets. Our targeted investments continue until we see substantial changes.

Great, thank you for your detailed answers and congratulations.

Thank you, Bhavan. The next question comes from Gabriela Borges with Goldman Sachs. Please proceed.

Good afternoon and thanks for taking my question, and congrats on the quarterly results. I wanted to follow up on NRR commentary, specifically NRR in the aftermath phase. You mentioned asset managers becoming key players. Can you elaborate on the dynamics of NRR growth among asset managers and insurance companies, especially in the specific context of their evolving strategies?

Thank you for the question, Gabriela. We're excited about our NRR growth and the 210 basis point increase. For asset managers, growth stems from two main drivers. First, we see natural growth as a trend. Second, clients are increasingly turning toward us in multiple divisions within their business as they grow. Notably, insurance companies are acquiring more assets. We see notable growth from these clients who may need assistance in navigating new jurisdictions. While asset management is larger, insurance clients contribute significantly to adjusting our numbers.

Gabriela, you made a valid point—when we first presented our IPO roadshow, we emphasized our positioning with asset managers. We also recognized the potential growth within the insurance sector, which is now swiftly evolving.

That's insightful. Thank you. On your press release, you mentioned over 100 new clients, with nearly 45% coming from legacy competitors. How does this compare historically? What insights do you have regarding the remaining 55% of new clients?

Great question! Historically, we maintain a balance of growth attributed to both new logos and current client growth. If we see 45% moving from legacy competitors, where did the other half originate? Many were moving away from custodians handling multiple asset classes to streamline operations; others transitioned from internal systems or even Excel solutions. Those clients represent about 50-55% of new business.

Additionally, the last segment includes greenfield opportunities. These new firms seek investment solutions to utilize their excess cash creatively—a growing trend we're observing.

That's helpful. Thank you.

Thank you, Gabriela.

Thank you. The next question comes from James Faucette with Morgan Stanley. Please proceed.

Thanks a lot. I wanted to delve deeper into your strategies for growing internationally, particularly your expectations regarding contributions from that front. Currently, international business appears to contribute less than 10% of total revenue, yet Europe likely holds around 40% of your total addressable market. How do you see that evolving?

You're right; international revenue does contribute less than 10% now, but it accounted for 20% of our new business last year. That's encouraging, and we anticipate continued growth in alignment with our strategic focus in a large addressable market.

Today, many of our larger clients invest globally. Our focus on Europe has already yielded results, and we expect to see a full range of opportunities unfold. As Jim mentioned, investments align with what we see performed in North America. International demand mirrors domestic needs and offers us insights into current trends.

That makes sense, and given your adjacent market initiatives have gained traction in Asia perhaps earlier than expected, are you re-evaluating those initiatives, and should we expect incremental investments in '22?

In 2022, you will see a full-fledged offering. We have been structuring our team targeting new markets, and while there may not be substantial contributions right away, those investments will become integral to our growth trajectory, especially as we progress through this year and 2023.

That's great. Thanks a lot.

Thank you.

Thank you. The next question comes from Rishi Jaluria with RBC Capital Markets. Please proceed.

It's great to see the acceleration in the quarter. I have two quick questions: first on gross margins. Can you discuss the long-term opportunity for gross margin expansion? Second, I'd like to understand your stance on stock-based compensation—SBC seems set to rise to mid-20s as you guide for significant dilution, certainly a shift from expectations—what's the long-term philosophy on SBC?

Sure. Sandeep and I concentrate on gross margins and the long-term potential for growth there continues to be promising. We aim for over 80% gross margins for a healthy SaaS experience. That's not our current priority, however, as we're investing in global growth and infrastructure. Regarding SBC, the Q4 run rate was $70 million, and while we expect $66 million, it reflects historical charges, notably the recapitalization from 2020 affecting valuation primarily with no economic impact. We'll phase out over the upcoming years as compensation amortizes.

Our talent acquisition strategy focuses on tech capabilities in what is a competitive landscape. We regularly consult compensation experts to align with industry standards among peer companies. We are focused on staying competitive while ensuring equity remains attractive to retain our workforce. We do not seek extraordinary approaches but instead maintain consistency in line with market conditions.

That's very helpful. Thank you.

Thank you.

Thank you. The next question comes from Yun Kim with Loop Capital. Please proceed.

Thanks, and congrats on a strong finish to the year. Have you continued to make progress internationally? What are you seeing in terms of your land-and-expand efforts? Are initial land deal sizes smaller than those in the U.S., with faster expansion afterwards?

Thank you for your question. When Jim mentioned that 20% of new business came from Europe, remember this is only for new accounts. That’s an incredible statistic. Ordinarily, we would think of smaller deals turning into larger ones over time, but our recent deals have been substantial. The significant deal we announced illustrates our ability to attract larger clients in Europe.

I also want to know if one industry, such as asset management or insurance, is outperforming expectations, and if you're seeing meaningful pricing trends in any verticals.

Jim, I think you're well-positioned to discuss that.

Yes, certainly. We are indeed seeing strong growth in the insurance segment, and state and local governments have accelerated growth off a smaller base. Asset management continues to be incredibly strong, which is part of the story leading to exceeded expectations since we went public.

It's good to hear that. Thanks so much.

Thanks, all. JR, is that our last question?

Yes, that's our last question. Sandeep, if you want to provide closing remarks.

Before Sandeep does that, I just have one administrative note to share: our lock-up period will end Monday following the IPO process, as stated in the 8-K.

I want to thank all of you for your insightful questions; they reflect a solid understanding of our business. We appreciate your ongoing support and feedback! Thank you all.

This concludes the Clearwater Analytics' fourth-quarter and full-year 2021 earnings conference call. Thank you for your participation. You may now disconnect your line.