10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40838

 

Clearwater Analytics Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	87-1043711
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
777 W. Main Street Suite 900 Boise, ID	83702
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (208) 918-2400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.001 per share	CWAN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☒

As of October 28, 2022, the number of outstanding shares of the registrant’s common stock was:

59,226,257 shares of Class A common stock.

1,654,530 shares of Class B common stock.

47,377,587 shares of Class C common stock.

130,083,755 shares of Class D common stock.

Table of Contents

		Page
	Glossary	ii
	SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	iv
PART I.	FINANCIAL INFORMATION	1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Loss	3
	Condensed Consolidated Statements of Changes in Equity (Deficit)	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signatures		36

i

GLOSSARY

As used in this Quarterly Report on Form 10-Q, the terms identified below have the meanings specified below unless otherwise noted or the context indicates otherwise:

•“Company,” “we,” “us,” “our,” “Clearwater” and similar references refer, (1) following the consummation of the Transactions, to Clearwater Analytics Holdings, Inc., and, unless otherwise stated, all of its direct and indirect subsidiaries, including CWAN Holdings, LLC, and (2) prior to the completion of the Transactions, to CWAN Holdings, LLC and, unless otherwise stated, all of its direct and indirect subsidiaries.

•“Annual Report” refers to our Annual Report on Form 10-K, dated December 31, 2021 (File No. 001-40838), as filed with the SEC on March 16, 2022.

•“Blocker Entities” refers to entities that, prior to the consummation of the Transactions, were affiliated with certain of the Continuing Equity Owners, each of which was a direct or indirect owner of LLC Interests in CWAN Holdings, LLC prior to the Transactions and is taxable as a corporation for U.S. federal income tax purposes.

•“Blocker Shareholders” refers to entities affiliated with certain of the Continuing Equity Owners, each of which was an owner of one or more of the Blocker Entities prior to the Transactions, which exchanged their interests in the Blocker Entities for shares of our Class A common stock, in the case of Other Continuing Equity Owners, and for shares of our Class D common stock, in the case of the Principal Equity Owners, in connection with the consummation of the Transactions.

•“Continuing Equity Owners” refers collectively to direct or indirect holders of LLC Interests and/or our Class B common stock, Class C common stock and/or Class D common stock immediately following consummation of the Transactions, including the Principal Equity Owners and certain of our directors and officers and their respective Permitted Transferees who may exchange at each of the irrespective options, in whole or in part from time to time, their LLC Interests (along with an equal number of shares of Class B common stock or Class C common stock, as the case may be (and such shares shall be immediately cancelled)) for newly issued shares of our Class A common stock or our Class D common stock, as the case may be, and additionally holders of shares of our Class D common stock may convert such shares at any time for newly issued shares of our Class A common stock, on a one-for-one basis (in which case their shares of our Class D common stock will be cancelled on a one-for-one basis upon any such issuance).

•“IPO” refers to our initial public offering, which closed in September 2021.

•“JOBS Act” means the Jumpstart Our Business Startups Act of 2012, as amended.

•“LLC Agreement” refers to CWAN Holdings, LLC’s Third Amended and Restated Limited Liability Company Agreement.

•“LLC Interests” refers to the common units of CWAN Holdings, LLC, including those that we purchased with a portion of the net proceeds from the IPO.

•“New Credit Agreement” refers to a new credit agreement which Clearwater Analytics, LLC entered into with JPMorgan Chase Bank, N.A. on September 28, 2021 in connection with the closing of the IPO.

•“NYSE” refers to the New York Stock Exchange.

•“Other Continuing Equity Owners” refers to Continuing Equity Owners who are not also Principal Equity Owners.

•“Permira” refers to Permira Advisers LLC, one of our largest owners through holdings by its affiliates.

•“Permitted Transferee” refers to, subject to the provisions of the LLC Agreement, (a) with respect to any Principal Equity Owner, any of such Principal Equity Owner’s affiliates and (b) with respect to any Other Continuing Equity Owner, any such Other Continuing Equity Owner’s affiliates or, in the case of individuals, members of their immediate family.

•“Previous Credit Agreement” refers to the Fifth Amendment to the Credit Agreement which Clearwater Analytics, LLC entered into with Ares Capital Corporation and Golub Capital LLC in October 2020. The outstanding borrowings under the Fifth Amendment to Credit Agreement were repaid in full in September 2021 in connection with the closing of the IPO.

•“Principal Equity Owners” refers to Welsh Carson, Warburg Pincus, Permira and their respective affiliates and Permitted Transferees.

•“QTD” for any given year means the three months ended September 30 of that year.

ii

•“SaaS” refers to Software-as-a-Service.

•“SEC” refers to the Securities and Exchange Commission.

•“Tax Receivable Agreement” or “TRA” refers to the Tax Receivable Agreement, dated as of September 28, 2021, by and among Clearwater Analytics Holdings, Inc., CWAN Holdings, LLC and the other parties thereto.

•“Transactions” refers to the organizational transactions described under “Transactions” in Note 1 to our unaudited condensed consolidated financial statements of this Quarterly Report on Form 10-Q.

•“Up-C” refers to the Company’s umbrella partnership-C-corporation organizational structure. See Note 1 “Organization and Description of Business” to our unaudited condensed consolidated financial statements of this Quarterly Report on Form 10-Q.

•“Warburg Pincus” refers to Warburg Pincus LLC, one of our largest owners through holdings by its affiliates.

•“Welsh Carson” refers to Welsh, Carson, Anderson & Stowe, one of our largest owners through holdings by its affiliates.

•“YTD” for any given year means the nine months ended September 30 of that year.

iii

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking” statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, technology developments, financing and investment plans, dividend policy, competitive position, industry and regulatory environment, potential growth opportunities and the effects of competition. Forward looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

Important factors that could cause actual results, performance or achievements to differ materially from our expectations include, but are not limited to, the following:

•we operate in a highly competitive industry, with many companies competing for business from insurance companies, asset managers, corporations and government entities on the basis of a number of factors, including the quality and breadth of solutions and services provided, ability to innovate, reputation and the prices of services, and this competition could hurt our financial performance;

•market volatility, a downturn in economic conditions or other factors may cause negative trends or fluctuations in the value of the assets on the Company’s platform;

•we have experienced rapid revenue growth over the past several years, which may be difficult to sustain, and we depend on attracting and retaining top talent to continue growing and operating our business, and if we are unable to hire, integrate, develop, motivate and retain our personnel, we may not be able to maintain or manage our growth, which could have a material adverse effect on our business, financial condition or results of operations;

•if our investment accounting and reporting solutions, regulatory reporting solutions or risk management or performance analytics solutions fail to perform properly due to undetected errors or similar problems, our business, financial condition, reputation or results of operations could be materially adversely affected;

•our business relies heavily on computer equipment, cloud-based services, electronic delivery systems, networks and telecommunications systems and infrastructure, the Internet and the information technology systems of third parties. Any failures or disruptions in any of the foregoing could result in reduced revenues, increased costs and the loss of clients and could harm our business, financial condition, reputation and results of operations;

•if we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed;

•if our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest, and our competitive position may be harmed;

•we may need to defend ourselves against third-party claims that we are infringing, misappropriating or otherwise violating others’ intellectual property rights, which could divert management’s attention, cause us to incur significant costs, and prevent us from selling or using the technology to which such rights relate;

•Our “Principal Equity Owners”, will continue to have significant influence over us, including control over decisions that require the approval of stockholders, which could limit your ability to influence the outcome of matters submitted to stockholders for a vote;

•we are classified as a “controlled company,” and as a result, we qualify for, and rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements. In addition, the Principal Equity Owners’ interests may conflict with our interests and the interests of other stockholders;

•the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and officers;

iv

•provisions in our certificate of incorporation and bylaws, may have the effect of delaying or preventing a change of control or changes in our management;

•there is no assurance that we will be able to complete our acquisition of JUMP Technology on our expected timing or at all, successfully integrate the operations and technology of JUMP Technology with those of our Company or retain the management and employees or clients of JUMP Technology; and

•those described in the section titled “Risk Factors” in our Annual Report and in periodic reports that we file with the SEC, and our reports to shareholders. These filings are available at www.sec.gov and on our website.

Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q and should not be relied upon as representing Clearwater's expectations or beliefs as of any date subsequent to the time they are made. Clearwater does not undertake to and specifically declines any obligation to update any forward-looking statements that may be made from time to time by or on behalf of Clearwater.

You should read this Quarterly Report on Form 10-Q in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2021, included in our Annual Report.

v

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited).

Clearwater Analytics Holdings, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share amounts and per share amounts, unaudited)

	September 30			December 31
	2022			2021
Assets
Current assets:
Cash and cash equivalents	$	288,523		$	254,597
Short-term investments		3,000			—
Accounts receivable, net		65,241			50,190
Prepaid expenses and other current assets		16,382			16,551
Total current assets		373,146			321,338
Property and equipment, net		13,534			10,738
Operating lease right-of-use assets, net		21,402			—
Deferred contract costs, non-current		5,765			5,687
Debt issuance costs - line of credit		776			922
Other non-current assets		5,105			5,670
Total assets	$	419,728		$	344,355
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,714		$	1,416
Accrued expenses and other current liabilities		25,745			27,032
Notes payable, current portion		2,750			2,750
Operating lease liability, current portion		5,343			—
Total current liabilities		35,552			31,198
Notes payable, less current maturities and unamortized debt issuance costs		49,158			51,157
Operating lease liability, less current portion		17,411			—
Tax receivable agreement liability		5,700			—
Other long-term liabilities		1,644			132
Total liabilities		109,465			82,487
Stockholders' Equity
Class A common stock, par value $0.001 per share; 1,500,000,000 shares authorized, 59,199,868 shares issued and outstanding as of September 30, 2022, 47,948,888 shares issued and outstanding as of December 31, 2021		59			48
Class B common stock, par value $0.001 per share; 500,000,000 shares authorized, 1,662,802 shares issued and outstanding as of September 30, 2022, 11,151,110 shares issued and outstanding as of December 31, 2021		2			11
Class C common stock, par value $0.001 per share; 500,000,000 shares authorized, 47,377,587 shares issued and outstanding as of September 30, 2022 and December 31, 2021		47			47
Class D common stock, par value $0.001 per share; 500,000,000 shares authorized, 130,083,755 shares issued and outstanding as of September 30, 2022 and December 31, 2021		130			130
Additional paid-in-capital		432,640			388,591
Accumulated other comprehensive loss		(1,880	)		(34	)
Accumulated Deficit		(184,648	)		(191,926	)
Total stockholders' equity attributable to Clearwater Analytics Holdings, Inc.		246,350			196,867
Non-controlling interests		63,913			65,001
Total stockholders' equity		310,263			261,868
Total liabilities and Stockholders' Equity	$	419,728		$	344,355

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Clearwater Analytics Holdings, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share amounts and per share amounts, unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue	$	76,552		$	64,489		$	220,739		$	182,259
Cost of revenue(2)		22,720			17,785			64,811			47,683
Gross profit		53,832			46,704			155,928			134,576
Operating expenses:
Research and development(2)		25,438			18,415			69,568			50,991
Sales and marketing(2)		13,187			10,126			38,254			26,151
General and administrative(2)		16,371			10,900			46,864			29,627
Total operating expenses		54,996			39,441			154,686			106,769
Income (loss) from operations		(1,164	)		7,263			1,242			27,807
Interest (income) expense, net		(693	)		8,302			139			25,261
Tax receivable agreement expense		2,600			—			5,700			—
Loss on debt extinguishment		—			10,303			—			10,303
Other income, net		(469	)		(130	)		(828	)		(65	)
Loss before provision for income taxes		(2,602	)		(11,212	)		(3,769	)		(7,692	)
Provision for income taxes		424			216			959			536
Net loss		(3,026	)		(11,428	)		(4,728	)		(8,228	)
Less: Net income (loss) attributable to non-controlling interests		(52	)		(3,114	)		277			86
Net loss attributable to Clearwater Analytics Holdings, Inc.	$	(2,974	)	$	(8,314	)	$	(5,005	)	$	(8,314	)
Net loss per share attributable to Class A and Class D common stockholders stock (Note 8) (1):
Basic	$	(0.02	)	$	(0.05	)	$	(0.03	)	$	(0.05	)
Diluted	$	(0.01	)	$	(0.05	)	$	(0.02	)	$	(0.05	)
Weighted average shares of Class A and Class D common stock outstanding:
Basic		187,824,531			177,449,844			184,026,378			177,449,844
Diluted		237,869,291			235,978,541			237,441,224			235,978,541

(1)Basic and diluted net loss per share of Class A and Class D common stock is applicable only for the periods after the IPO and related transactions (as defined in Note 1 to the Unaudited Condensed Consolidated Financial Statements). See Note 8 for the number of shares used in the computation of net loss per share of Class A and Class D common stock and the basis for the computation of net loss per share.

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

Cost of revenue	$	2,594	$	899	$	7,281	$	2,171
Operating expenses:
Research and development		5,133		2,226		14,003		5,912
Sales and marketing		2,941		1,655		9,452		3,782
General and administrative		6,033		2,903		18,032		7,374
Total equity-based compensation expense	$	16,701	$	7,683	$	48,768	$	19,239

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Condensed Consolidated Statements of Comprehensive Loss

(In thousands, unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net loss	$	(3,026	)	$	(11,428	)	$	(4,728	)	$	(8,228	)
Other comprehensive loss, net of taxes:
Foreign currency translation adjustment		(1,100	)		(127	)		(2,362	)		(111	)
Comprehensive loss	$	(4,126	)	$	(11,555	)	$	(7,090	)	$	(8,339	)
Less: Comprehensive loss attributable to non-controlling interests		(284	)		(3,233	)		(239	)		(17	)
Comprehensive loss attributable to Clearwater Analytics Holdings, Inc.	$	(3,842	)	$	(8,322	)	$	(6,851	)	$	(8,322	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Condensed Consolidated Statements of Changes in Equity (Deficit)

(In thousands, except share amounts, unaudited)

	Class A Shares			Class A Amount		Class B Shares			Class B Amount			Class C Shares		Class C Amount		Class D Shares		Class D Amount		Additional Paid in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Non- controlling Interest			Total stockholders' equity
Balance at December 31, 2021		47,948,888		$	48		11,151,110		$	11			47,377,587	$	47		130,083,755	$	130	$	388,591		$	(34	)	$	(191,926	)	$	65,001		$	261,868
Exercise of options to purchase common stock		857,647			1		—			—			—		—		—		—		4,226			—			—			1,387			5,613
Equity-based compensation		—			—		—			—			—		—		—		—		12,067			—			—			3,960			16,028
Foreign currency translation adjustment		—			—		—			—			—		—		—		—		—			(226	)		—			(74	)		(300	)
Net income		—			—		—			—			—		—		—		—		—			—			398			130			528
Accrued tax distributions payable to Continuing Equity Owners		—			—		—			—			—		—		—		—		—			—			—			27			27
Effect of LLC unit exchanges		6,643,614			7		(6,643,614	)		(7	)		—		—		—		—		—			—			8,348			(8,348	)		—
Balance at March 31, 2022		55,450,149		$	55		4,507,496		$	5			47,377,587	$	47		130,083,755	$	130	$	404,884		$	(260	)	$	(183,180	)	$	62,083		$	283,764
Exercise of options to purchase common stock		105,251			—		—			—			—		—		—		—		603			—			—			168			771
Restricted stock units released		93,750			—		—			—			—		—		—		—		—			—			—			—			—
ESPP shares issued		200,220			1		—			—			—		—		—		—		1,877			—			—			523			2,401
Equity-based compensation		—			—		—			—			—		—		—		—		12,759			—			—			3,555			16,314
Foreign currency translation adjustment		—			—		—			—			—		—		—		—		—			(752	)		—			(209	)		(961	)
Net loss		—			—		—			—			—		—		—		—		—			—			(2,428	)		198			(2,230	)
Accrued tax distributions payable to Continuing Equity Owners		—			—		—			—			—		—		—		—		—			—			—			(834	)		(834	)
Effect of LLC unit exchanges		1,810,711			2		(1,810,711	)		(2	)		—		—		—		—		—			—			2,410			(2,410	)		—
Balance at June 30, 2022		57,660,081		$	58		2,696,785		$	3			47,377,587	$	47		130,083,755	$	130	$	420,123		$	(1,012	)	$	(183,198	)	$	63,074		$	299,225
Exercise of options to purchase common stock		188,758			—		—			—			—		—		—		—		1,218			—			—			324			1,542
Restricted stock units released		479,485			—		—			—			—		—		—		—		—			—			—			—			—
Shares withheld for tax obligations		(162,439	)		—		—			—			—		—		—		—		(2,025	)		—			—			(539	)		(2,564	)
Equity-based compensation		—			—		—			—			—		—		—		—		13,324			—			—			3,549			16,873
Foreign currency translation adjustment		—			—		—			—			—		—		—		—		—			(868	)		—			(232	)		(1,100	)
Net loss		—			—		—			—			—		—		—		—		—			—			(2,974	)		(52	)		(3,026	)
Accrued tax distributions payable to Continuing Equity Owners		—			—		—			—			—		—		—		—		—			—			—			(687	)		(687	)
Effect of LLC unit exchanges		1,033,983			1		(1,033,983	)		(1	)		—		—		—		—		—			—		$	1,524		$	(1,524	)		—
Balance at September 30, 2022		59,199,868		$	59		1,662,802		$	2			47,377,587	$	47		130,083,755	$	130	$	432,640		$	(1,880	)	$	(184,648	)	$	63,913		$	310,263

4

				Clearwater Analytics Holdings, Inc. Stockholders' Equity
	CWAN Holdings, LLC (Prior to Transactions) Members' Deficit			Class A Shares		Class A Amount		Class B Shares		Class B Amount		Class C Shares		Class C Amount		Class D Shares		Class D Amount		Additional Paid in Capital			Accumulated Other Comprehensive Income			Accumulated Deficit			Non- controlling Interest			Total members' deficit
Balance at December 31, 2020	$	(245,806	)		—		—		—		—		—		—		—		—	$	(98,860	)	$	58			—			—		$	(344,608	)
Issuance of common units		—			—		—		—		—		—		—		—		—		1,560			—			—			—			1,560
Repurchase of common units		—			—		—		—		—		—		—		—		—		(626	)		—			—			—			(626	)
Options withheld for minimum tax obligations for net unit settlement		—			—		—		—		—		—		—		—		—		(587	)		—			—			—			(587	)
Equity-based compensation		—			—		—		—		—		—		—		—		—		4,865			—			—			—			4,865
Foreign currency translation adjustment		—			—		—		—		—		—		—		—		—		—			21			—			—			21
Net income		3,411			—		—		—		—		—		—		—		—		—			—			—			—			3,411
Balance at March 31, 2021	$	(242,395	)		—		—		—		—		—		—		—		—	$	(93,648	)	$	79			—			—		$	(335,964	)
Exercise of options to purchase common units		—			—		—		—		—		—		—		—		—		251			—			—			—			251
Equity-based compensation		—			—		—		—		—		—		—		—		—		6,691			—			—			—			6,691
Foreign currency translation adjustment		—			—		—		—		—		—		—		—		—		—			(5	)		—			—			(5	)
Net loss		(211	)		—		—		—		—		—		—		—		—		—			—			—			—			(211	)
Balance at June 30, 2021	$	(242,606	)		—		—		—		—		—		—		—		—	$	(86,706	)	$	74			—			—		$	(329,238	)
Activity prior to the Transactions
Exercise of options to purchase common units		—			—		—		—		—		—		—		—		—		8			—			—			—			8
Options withheld for minimum tax obligations for net unit settlement		—			—		—		—		—		—		—		—		—		(1,598	)		—			—			—			(1,598	)
Equity-based compensation		—			—		—		—		—		—		—		—		—		6,425			—			—			—			6,425
Foreign currency translation adjustment		—			—		—		—		—		—		—		—		—		—			(117	)		—			—			(117	)
Net income (loss)		(371	)		—		—		—		—		—		—		—		—		—			—			—			—			(371	)
Effect of the Transactions
Effect of organizational transactions		242,977			12,866,089		13		11,151,110		11		47,377,587		47		130,083,755		130		—			—			(243,178	)		—			—
Issuance of Class A common stock sold in initial public offering, net of underwriting discounts and offering costs		—			34,500,000		35		—		—		—		—		—		—		577,052			—			—			—			577,087
Allocation of equity to non-controlling interest		—			—		—		—		—		—		—		—		—		(122,813	)		11			60,258			62,545			—
Activity subsequent to the Transactions
Equity-based compensation		—			—		—		—		—		—		—		—		—		946			—			—			312			1,258
Foreign currency translation adjustment		—			—		—		—		—		—		—		—		—		—			(8	)		—			(2	)		(10	)
Net income (loss)		—			—		—		—		—		—		—		—		—		—			—			(8,314	)		(2,742	)		(11,056	)
Balance at September 30, 2021	$	—			47,366,089	$	47		11,151,110	$	11		47,377,587	$	47		130,083,755	$	130	$	373,314		$	(40	)	$	(191,234	)	$	60,112		$	242,387

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Clearwater Analytics Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands, unaudited)

	Nine Months Ended September 30,
	2022			2021
OPERATING ACTIVITIES
Net loss	$	(4,728	)	$	(8,228	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		3,499			2,204
Noncash operating lease cost		5,226			—
Equity-based compensation		48,768			19,239
Change in tax receivable agreement liability		5,700			—
Amortization of deferred contract acquisition costs		3,221			2,404
Amortization of debt issuance costs, included in interest expense		210			1,474
Deferred tax benefit		(590	)		—
Debt extinguishment costs		—			10,303
Changes in operating assets and liabilities:
Accounts receivable, net		(15,051	)		(16,117	)
Prepaid expenses and other assets		1,618			(8,717	)
Deferred commissions		(3,593	)		(2,922	)
Accounts payable		240			194
Accrued expenses and other liabilities		(4,673	)		(8,893	)
Net cash provided by (used in) operating activities		39,847			(9,059	)
INVESTING ACTIVITIES
Purchases of property and equipment		(5,880	)		(3,499	)
Purchase of short-term investments		(3,000	)		—
Net cash used in investing activities		(8,880	)		(3,499	)
FINANCING ACTIVITIES
Proceeds from issuance of common units		—			1,560
Proceeds from exercise of options		7,926			259
Minimum tax withholding paid on behalf of employees for net share/unit settlement		(2,564	)		(2,185	)
Repurchase of common units		—			(626	)
Proceeds from employee stock purchase plan		2,401			—
Repayments of borrowings		(2,063	)		(434,231	)
Payments of costs associated with early repayment of debt		—			(2,029	)
Proceeds from borrowings		—			55,000
Payment of debt issuance costs		—			(1,400	)
Proceeds from initial public offering, net of underwriting discounts		—			582,188
Payment of costs associated with the IPO		(214	)		(1,850	)
Payment of tax distributions		(17	)		—
Net cash provided by financing activities		5,469			196,686
Effect of exchange rate changes on cash and cash equivalents		(2,510	)		(122	)
Net increase in cash and cash equivalents during the period		33,926			184,006
Cash and cash equivalents, beginning of period		254,597			61,088
Cash and cash equivalents, end of period	$	288,523		$	245,094
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	766		$	25,847
Cash paid for income taxes	$	1,425		$	67
NON-CASH INVESTING AND FINANCING ACTIVITIES
Purchase of property and equipment included in accounts payable and accrued expense	$	162		$	325
Direct costs incurred with the IPO included in other assets and accrued expenses	$	—		$	3,251
Tax distributions to unitholders included in accrued expense	$	1,646		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Clearwater Analytics Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Organization and Description of Business

Clearwater Analytics Holdings, Inc. was incorporated as a Delaware corporation on May 18, 2021, as a holding company for the purpose of facilitating the IPO and other related transactions in order to carry on the business of the Company. Prior to the IPO, all business operations were conducted through Carbon Analytics Holdings, LLC, which changed its name to CWAN Holdings, LLC (“CWAN Holdings”) in connection with the IPO. Clearwater provides a SaaS solution for automated investment data aggregation, reconciliation, accounting and reporting services to insurers, investment managers, corporations, institutional investors and government entities. Following the IPO, Clearwater Analytics Holdings, Inc.'s principal asset consists of ownership of common units in CWAN Holdings. As the sole managing member of CWAN Holdings, Clearwater Analytics Holdings, Inc. operates and controls all the business operations of Clearwater. Our corporate structure following the IPO, as described above, is commonly referred to as an “Up-C” structure.

The Company headquarters are located in Boise, ID, and we operate in five offices throughout the U.S. and six offices internationally.

Initial Public Offering

On September 28, 2021, the Company completed its IPO, in which it sold 34,500,000 shares of Class A common stock (including shares issued pursuant to the exercise in full of the underwriters’ option to purchase additional shares) at a public offering price of $18.00 per share for net proceeds of $582.2 million, after deducting underwriting discounts of $38.8 million (but excluding other offering expenses of $5.3 million). The Company used proceeds from the IPO to (i) purchase 34,500,000 common units of CWAN Holdings (“LLC interests”); (ii) repay approximately $437.4 million of outstanding borrowings under the Previous Credit Agreement including prepayment premiums and accrued interest; (iii) pay $5.3 million of expenses related to the IPO; with the remaining proceeds intended to be used for general corporate purposes.

Transactions

In connection with the IPO, the Company completed the following organizational transactions (the “Transactions”):

•the amendment and restatement of the limited liability company agreement of CWAN Holdings to, among other things, appoint Clearwater Analytics Holdings, Inc. as the sole managing member of CWAN Holdings and provide certain exchange and redemption rights to direct or indirect holders of interests in CWAN Holdings and/or our Class B common Stock, Class C common Stock and/or Class D common stock immediately following consummation of the Transactions, including the Principal Equity Owners, and the Continuing Equity Owners;

•the amendment and restatement of the certificate of incorporation of Clearwater Analytics Holdings, Inc. to create Class A, B, C and D common stock;

•the mergers of Blocker Entities into Clearwater Analytics Holdings, Inc. and the issuance of Class A common stock, Class B common stock, Class C common stock, and Class D common stock to Blocker Shareholders and the Continuing Equity Owners. Blocker Entities refers to entities affiliated with certain of the Continuing Equity Owners, each of which was a direct or indirect owner of LLC Interests in CWAN Holdings prior to the Transactions and was taxable as a corporation for U.S. federal income tax purposes, and Blocker Shareholders refers to entities affiliated with certain of the Continuing Equity Owners, each of which was an owner of one or more of the Blocker Entities prior to the Transactions, which exchanged their interests in the Blocker Entities for shares of our Class A common stock, in the case of Continuing Equity Owners other than the Principal Equity Owners, and for shares of our Class D common stock, in the case of the Principal Equity Owners, in connection with the consummation of the Transactions;

•the issue of 11,151,110 shares of Class B common stock to Continuing Equity Owners other than the Principal Equity Owners and 47,377,587 shares of Class C common stock to the Principal Equity Owners, on a one-to-one basis with the number of common units of CWAN Holdings. Holders of our Class B and Class C common stock, along with the holders of our Class A and Class D common stock have certain voting rights, but holders of our Class B and Class C common stock do not have an economic interest in the Company;

•the issue of 130,083,755 shares of Class D common stock to the Principal Equity Owners, on a one-to-one basis, with the number of common units of CWAN Holdings. Holders of Class D common stock have certain voting rights and are entitled an economic interest in the Company; and

•the execution of the Tax Receivable Agreement, by and among Clearwater Analytics Holdings, Inc., CWAN Holdings, LLC and the other parties thereto (Note 10).

7

As of September 30, 2022, the Company owns 79.4% of the interests in CWAN Holdings. Continuing Equity Owners which hold Class B and Class C common stock own the remaining 20.6% of the interests in CWAN Holdings. The attributes of the Company's classes of common stock are summarized in the following table:

Class of Common Stock	Votes per Share	Economic Rights
Class A common stock	1	Yes
Class B common stock	1	No
Class C common stock	10	No
Class D common stock	10	Yes

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the SEC and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full fiscal year.

Principles of consolidation

The condensed consolidated financial statements include the accounts of the Company and its directly and indirectly wholly-owned or controlled subsidiaries. As the Transactions are considered transactions between entities under common control, the financial statements for periods prior to the IPO and the Transactions have been adjusted to combine the previously separate entities for presentation purposes. All intercompany balances and transactions have been eliminated through consolidation. Clearwater Analytics Holdings, Inc. consolidated the financial results of CWAN Holdings as a Variable Interest Entity (“VIE”). Clearwater Analytics Holdings, Inc. owns the majority economic interest and has the power to control all the business and affairs of CWAN Holdings.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensed consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Actual results could differ materially from those estimates.

Items subject to estimates and assumptions include the useful lives and recoverability of long-lived assets, the average period of benefit associated with deferred contract costs, sales reserves, the incremental borrowing rate applied in lease accounting, accruals for sales tax liabilities, the fair value of equity awards, tax valuation allowance and probability of making payments under the TRA, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the result of which forms the basis for making judgments about the carrying values of assets and liabilities, and measurement of revenues and expenses. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, the Company’s condensed consolidated financial statements will be affected.

Significant Accounting Policies

The Company's significant accounting policies are discussed in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies in the Annual Report. There have been no significant changes to these policies that have had a material impact on the Company's unaudited condensed consolidated financial statements and related notes during the three and nine months ended September 30, 2022, except as noted below.

Short-term Investments

We classify our investments with an original maturity of greater than three months, but less than one year, as short-term investments. Investments in debt securities that we have the positive intent and ability to hold until maturity are classified as held-to-maturity debt securities. Our held-to-maturity debt securities consist of short term certificates of deposit which mature in less than one year. Held-to-maturity debt investments are recorded at amortized cost, which approximates fair value, and realized gains or losses are reported in earnings. The Company does not hold any other short-term investments.

8

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which provides clarification to ASU 2016-02. These ASU's (collectively, the “new lease standard”) requires lessees to recognize on the balance sheet the assets and liabilities for the assets and obligations created by those leases. The standard was effective for public companies for annual periods beginning after December 15, 2018, including interim periods therein. The Company is allowed to use the private company adoption timelines, and therefore the standard is effective for the Company for its annual period beginning January 1, 2022, and interim periods therein.

On January 1, 2022, the Company adopted ASU No. 2016-02, and its associated amendments using the modified retrospective transition method by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. There was no cumulative-effect adjustment recorded to stockholders' equity upon adoption. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carry forward its historical lease classification, assessment on whether a contract was or contains a lease, and initial direct costs for leases that existed prior to January 1, 2022. The Company also elected to combine its lease and non-lease components and not recognize right-of-use (“ROU”) assets and lease liabilities for leases with an initial term of 12 months or less. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of ROU assets.

At the date of adoption, the Company derecognized a deferred rent liability of approximately $1.5 million, and recognized a $23.1 million ROU asset and $24.6 million lease liability based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases.

Note 3. Revenue Recognition

The Company is applying the optional exemption to not disclose transaction price allocated to the remaining performance obligations as the Company’s performance obligations are part of contracts that have an expected original duration of one year or less.

Of the total revenue recognized for the three and nine months ended September 30, 2022, $0.1 million and $0.4 million was included in the deferred revenue balance as of December 31, 2021, respectively. Revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were not material.

The following table presents the Company’s revenue disaggregated by geography, based on billing address of the customer (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
United States	$	65,420	$	59,445	$	189,307	$	166,765
Rest of World		11,132		5,044		31,432		15,494
Total revenue	$	76,552	$	64,489	$	220,739	$	182,259

Note 4. Fair Value Measurements

The following tables set forth the fair value of the Company’s financial assets measured at fair value as of September 30, 2022 and December 31, 2021 in accordance with the fair value hierarchy (in thousands):

	September 30, 2022
	Level I		Level II		Level III		Total
Financial Assets:
Cash and cash equivalents:
Money market funds	$	284,873	$	—	$	—	$	284,873
Short-term investments:
Certificates of deposit		—		3,000		—		3,000
Total assets measured at fair value	$	284,873	$	3,000	$	—	$	287,873

9

	December 31, 2021
	Level I		Level II		Level III		Total
Financial Assets:
Cash and cash equivalents:
Money market funds	$	248,744	$	—	$	—	$	248,744
Total assets measured at fair value	$	248,744	$	—	$	—	$	248,744

During the nine months ended September 30, 2022 and year ended December 31, 2021, there were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 of the fair value hierarchy.

Note 5. Supplemental Consolidated Balance Sheet Information

Accounts Receivable, net

Accounts receivable, net consisted of the following (in thousands):

	September 30,			December 31,
	2022			2021
Unbilled accounts receivable	$	27,696		$	27,086
Billed accounts receivable		37,640			23,227
Allowance for doubtful accounts and reserves		(95	)		(123	)
Accounts receivable, net	$	65,241		$	50,190

The majority of invoices included within the unbilled accounts receivable balance are issued within the first few days of the month directly following the period of service.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Prepaid expenses	$	10,233	$	11,722
Deferred contract costs, current portion		3,867		3,573
Other current assets		2,282		1,256
Prepaid expense and other current assets	$	16,382	$	16,551

Property and equipment, net

Depreciation and amortization expense for the three months ended September 30, 2022 and 2021 was $1.4 million and $0.8 million, respectively, and for the nine months ended September 30, 2022 and 2021 was $3.5 million and $2.2 million, respectively. Accumulated depreciation and amortization as of September 30, 2022 and December 31, 2021 was $15.5 million and $12.2 million, respectively.

10

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Accrued bonus	$	6,652	$	8,295
Accrued interest		424		9
Accrued benefits and retirement		4,866		4,368
Accrued vendor liabilities		4,819		4,756
Accrued commissions		2,217		2,350
Deferred revenue		1,293		795
Income tax payable		1,114		771
Accrued sales tax exposure		969		1,444
Tax distributions payable to Continuing Equity Owners		112		169
Deferred rent		—		1,514
Other current liabilities		3,279		2,561
Accrued expenses and other liabilities	$	25,745	$	27,032

Note 6. Leases

The Company adopted ASC 842 as of January 1, 2022. The Company leases facilities under non-cancelable operating lease agreements with varying terms that range from one to 10 years. In addition, some of these leases have renewal options for up to five years. The Company determines if an arrangement contains a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, and operating lease liabilities on the Company's condensed consolidated balance sheets. The Company does not have any finance leases.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company does not account for lease components (e.g., fixed payments including rent) separately from the non-lease components (e.g., common-area maintenance costs).

Rent expense was $1.0 million and $2.7 million for the three and nine months ended September 30, 2021, respectively, which the Company recognized on a straight-line basis over the non-cancellable lease term.

Future minimum lease payments at December 31, 2021 under the Company’s non-cancellable leases were as follows (in thousands):

2022	$	3,927
2023		3,843
2024		3,649
2025		3,434
2026		3,007
Thereafter		809
Total minimum lease payments	$	18,669

11

Operating lease cost was $1.9 million and $5.2 million for the three and nine months ended September 30, 2022, respectively. Variable lease cost and short-term lease cost were immaterial during the three and nine months ended September 30, 2022. Future minimum lease payments at September 30, 2022 under the Company’s non-cancellable leases were as follows (in thousands):

2022 (remaining three months)	$	1,602
2023		5,940
2024		5,555
2025		5,486
2026		4,839
Thereafter		1,190
Total future minimum lease payments		24,612
Less: Imputed interest		(1,858	)
Present value of future minimum lease payments		22,754
Less: Current portion of operating lease liability		(5,343	)
Operating lease liabilities - noncurrent	$	17,411

The following table presents supplemental information for the Company's non-cancellable operating leases for the nine months ended September 30, 2022 (in thousands, except for weighted average and percentage data):

Weighted average remaining lease term	4.29
Weighted average discount rate		3.77	%
Cash paid for amounts included in the measurement of lease liabilities	$	1,534
Noncash right-of-use assets obtained in exchange for operating lease obligations(1)	$	26,027

(1)Amount includes (i) $23.1 million related to the adoption of ASC 842 for existing operating leases on January 1, 2022, (ii) $3.5 million related to the Company entering into new non-cancellable operating lease agreements during 2022, and (iii) partially offset by a noncash reduction of $0.6 million related to the remeasurement of the existing Noida, India lease due to a change in the lease term of the agreement.

Note 7. Non-controlling Interest

In connection with the Transactions, the Company became the sole managing member of CWAN Holdings, and has the sole voting interest in, and control of the management of, CWAN Holdings. As a result, the Company consolidates the financial results of CWAN Holdings. The non-controlling interest on our condensed consolidated balance sheet relates to the interests of CWAN Holdings held by the Continuing Equity Owners. The ownership of the LLC interests is summarized as follows:

	September 30, 2022					December 31, 2021
	Shares		Ownership %			Shares		Ownership %
Clearwater Analytics Holdings, Inc. interest in CWAN Holdings		189,283,623		79.4	%		178,032,643		75.3	%
Continuing Equity Owners' interest in CWAN Holdings		49,040,389		20.6	%		58,528,697		24.7	%
		238,324,012		100.0	%		236,561,340		100.0	%

12

Note 8. Loss Per Share

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted net loss per share of Class A and Class D common stock for the periods following the Transactions (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Numerator:
Net loss	$	(3,026	)	$	(11,428	)	$	(4,728	)	$	(8,228	)
Less: Net income (loss) attributable to CWAN Holdings prior to the Transactions		—			(371	)		—			2,829
Less: Net income (loss) attributable to non-controlling interests		(52	)		(2,742	)		277			(2,742	)
Net loss attributable to Clearwater Analytics Holdings, Inc. - basic		(2,974	)		(8,314	)		(5,005	)		(8,314	)
Reallocation of net income (loss) attributable to non-controlling interests from the assumed exchange of Class B and Class C stock for Class A and Class D stock		(52	)		(2,742	)		277			(2,742	)
Net loss attributable to Clearwater Analytics Holdings, Inc. - diluted	$	(3,026	)	$	(11,056	)	$	(4,728	)	$	(11,056	)

The following tables sets forth the computation of basic and diluted net loss per share of Class A and Class D common stock (in thousands, except share amounts and per share amounts):

	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Class A			Class D			Class A			Class D
Basic net loss attributable to Class A and Class D common stockholders
Numerator:
Allocation of net loss attributable to Clearwater Analytics, Inc.	$	(914	)	$	(2,060	)	$	(1,467	)	$	(3,538	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		57,740,776			130,083,755			53,942,623			130,083,755
Basic net loss per share attributable to Class A and Class D common stockholders	$	(0.02	)	$	(0.02	)	$	(0.03	)	$	(0.03	)

13

	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Class A			Class D			Class A			Class D
Diluted net loss attributable to Class A and Class D common stockholders
Numerator:
Undistributed loss for basic computation	$	(914	)	$	(2,060	)	$	(1,467	)	$	(3,538	)
Reallocation of earnings as a result of conversion of Class B to Class A shares and conversion Class C to Class D shares		146			(198	)		273			4
Reallocation of earnings as a result of conversion of Class D to Class A shares		(2,258	)		—			(3,534	)		—
Allocation of undistributed loss	$	(3,026	)	$	(2,258	)	$	(4,728	)	$	(3,534	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		57,740,776			130,083,755			53,942,623			130,083,755
Add: weighted-average effect of dilutive securities exchangeable for Class A common stock:
Conversion of Class B stock to Class A stock, and conversion of Class C stock to Class D stock		2,667,173			47,377,587			6,037,259			47,377,587
Conversion of Class D to Class A common shares outstanding		177,461,342			—			177,461,342			—
Weighted average number of shares of Class A and Class D common stock outstanding - diluted		237,869,291			177,461,342			237,441,224			177,461,342
Diluted net loss per share attributable to Class A and Class D common stockholders	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)

	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Class A			Class D			Class A			Class D
Basic net loss attributable to Class A and Class D common stockholders
Numerator:
Allocation of net loss attributable to Clearwater Analytics, Inc.	$	(2,219	)	$	(6,095	)	$	(2,219	)	$	(6,095	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic(1)		47,366,089			130,083,755			47,366,089			130,083,755
Basic net loss per share attributable to Class and Class D common stockholders	$	(0.05	)	$	(0.05	)	$	(0.05	)	$	(0.05	)

(1)Weighted average number of shares of Class A and Class D common stock outstanding represents only the period from September 24, 2021 to September 30, 2021, which represents the period wherein we had outstanding Class A and Class D common stock.

14

	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Class A			Class D			Class A			Class D
Diluted net loss attributable to Class A and Class D common stockholders
Numerator:
Undistributed loss for basic computation	$	(2,219	)	$	(6,095	)	$	(2,219	)	$	(6,095	)
Reallocation of earnings as a result of conversion of Class B to Class A shares and conversion Class C to Class D shares		(522	)		(2,219	)		(522	)		(2,219	)
Reallocation of earnings as a result of conversion of Class D to Class A shares		(8,314	)		—			(8,314	)		—
Allocation of undistributed loss	$	(11,055	)	$	(8,314	)	$	(11,055	)	$	(8,314	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		47,366,089			130,083,755			47,366,089			130,083,755
Add: weighted-average effect of dilutive securities exchangeable for Class A common stock:
Conversion of Class B stock to Class A stock, and conversion of Class C stock to Class D stock		11,151,110			47,377,587			11,151,110			47,377,587
Conversion of Class D to Class A common shares outstanding		177,461,342			—			177,461,342			—
Weighted average number of shares of Class A and Class D common stock outstanding - diluted		235,978,541			177,461,342			235,978,541			177,461,342
Diluted net loss per share attributable to Class A and Class D common stockholders	$	(0.05	)	$	(0.05	)	$	(0.05	)	$	(0.05	)

Shares of the Company's Class B and Class C common stock do not participate in the earnings or losses of Clearwater Analytics Holdings, Inc. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B and Class C common stock under the two-class method has not been presented.

The following weighted-average potentially dilutive securities were evaluated under the treasury stock method for potentially dilutive effects and have been excluded from diluted net loss per share in the periods presented due to their anti-dilutive effect:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Stock options of Clearwater Analytics Holdings, Inc.		10,163,645		13,041,159		10,939,998		13,041,159
RSUs of Clearwater Analytics Holdings, Inc.		713,091		61,845		1,044,382		61,845
Employee stock purchase plans		11,536		—		7,187		—
Total		10,888,272		13,103,004		11,991,567		13,103,004

Note 9. Equity-Based Compensation

In September 2021, the Board of Directors of the Company (the “Board”) adopted the Clearwater Analytics Holdings, Inc. 2021 Omnibus Incentive Plan (the “2021 Plan”), pursuant to which employees, consultants and directors of our Company and our affiliates performing services for us, including our executive officers, are eligible to receive awards. The 2021 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), bonus stock, dividend equivalents, other stock-based awards, substitute awards, annual incentive awards and performance awards intended to align the interests of participants with those of our shareholders. A total of 57,197,804 shares of common stock are authorized for issuance under the 2021 Plan. In connection with the approval of the 2021 Plan, the 2017 Equity Incentive Plan (the “2017 Plan”) was terminated and all outstanding stock options and RSUs were transferred to the 2021 Plan.

15

Options

The following table summarizes the stock option activity for the nine months ended September 30, 2022 (in thousands, except per share data):

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance - December 31, 2021		22,315,171		$	8.52
Granted		43,986			18.19
Exercised		(1,151,656	)		6.88
Forfeited		(941,296	)		10.48
Balance - September 30, 2022		20,266,205		$	8.54		7.57	$	169,187
Options vested - September 30, 2022		10,678,809		$	6.78			$	107,180

The weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 2022 was $7.74 per share. The aggregate intrinsic value as of September 30, 2022 disclosed in the above table is based on the difference between the exercise price of the stock option and the closing stock price on the NYSE on September 30, 2022. As of September 30, 2022, the total unrecognized compensation expense related to unvested options was $51.4 million, which is expected to be recognized over a weighted average period of 2.3 years.

RSUs

During June 2021, the Company began to grant RSUs to employees. The summary of RSU activity for the nine months ended September 30, 2022 is as follows (in thousands, except per share data):

	Units Activity			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Unvested units as of December 31, 2021		6,070,668		$	—
Granted		1,426,336			19.21
Released		(573,235	)	—
Cancelled		(514,121	)	—
Unvested units as of September 30, 2022		6,409,648				$	107,618

The aggregate intrinsic value disclosed in the above table is based on the closing stock price on the NYSE on September 30, 2022. As of September 30, 2022, there was $88.5 million of unrecognized equity-based compensation expense related to RSUs, which is expected to be recognized over a weighted average period of 2.9 years.

Determination of Fair Value

The Company estimated the fair value of each stock option awarded on the date of grant using the Black-Scholes option-pricing model utilizing the assumptions noted below:

Fair Value of Units – prior to the IPO, the fair value of the common stock underlying the equity-based awards was determined by the Company’s Board of Directors, with input from management and third-party valuations. Subsequent to the IPO, the fair value of the common stock underlying equity-awards was determined using the closing price on the date of the award being granted.

Expected Term – the expected term represents the period that the awards are expected to be outstanding. The Company issues “plain vanilla,” awards and the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the equity-based awards.

Expected Volatility – the stock price volatility is estimated based on the volatility of a set of publicly traded comparable companies with a look back period consistent with the expected life.

16

Risk-Free Interest Rate – the risk-free interest rate is calculated using the average of the published interest rates of U.S. Treasury zero-coupon issues with maturities that approximate the expected term of the equity-based awards.

Dividend Rate – the dividend yield assumption is zero. Although the Company made a special one-time dividend in conjunction with the November 2020 recapitalization transaction, the Company has no history of making regular dividends, nor plans to make future dividend payments.

The following assumptions were used to calculate the fair value of options granted to employees on the date of grant using the Black-Scholes option-pricing model:

	Nine Months Ended September 30,
	2022			2021
Weighted-average grant date fair value per option	$	7.74		$	4.63
Fair value of units	$17.72 - $18.68			$12.40 - $23.89
Expected term (in years)		5.50		6.00 - 6.25
Expected volatility		44	%	40% - 42%
Risk-free interest rates	1.8% - 2.0%			0.6% - 1.3%

In addition to the Black-Scholes assumptions discussed immediately above, forfeitures may also have a significant impact on the related equity-based compensation. The forfeiture of options and RSUs is recognized as forfeitures occur.

In the period subsequent to the IPO, the Company estimated the fair value of each RSU awarded using the closing price on the date of the award being granted.

Employee Stock Purchase Plan

In September 2021, the Board adopted the Clearwater Analytics Holdings, Inc. 2021 Employee Stock Purchase Plan (“ESPP”). As of January 1, 2022, a total of 5,837,791 shares of Class A common stock were available for issuance under the ESPP. The offering periods are scheduled to start on June 1 and December 1 of each year. Eligible employees may purchase the Company's common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of six-month offering periods. An employee's payroll deductions under the ESPP are limited to 10% of the employee's compensation and an employee may not purchase more than $25,000 of stock during any calendar year in which the employee’s option to purchase stock under the ESPP is outstanding at any time.

On May 31, 2022, a total of 200,220 shares were issued to employees for the offering period ended May 31, 2022. As of September 30, 2022, total unrecognized equity-based compensation costs related to ESPP were $0.3 million, which is expected to be recognized over the remaining current offering period ending November 30, 2022.

ESPP payroll contributions accrued at September 30, 2022 totaled $1.4 million and are included within accrued expenses in the consolidated balance sheets. Employee payroll contributions used to purchase shares under the ESPP will be reclassified to stockholders' equity at the end of the offering period.

Note 10. Income Taxes

As a result of the IPO, Clearwater Analytics Holdings, Inc. owns a portion of CWAN Holdings, which contains all operations of the business and is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, CWAN Holdings is generally not subject to U.S. federal, state, and local income taxes. Any taxable income or loss generated by CWAN Holdings is passed through to and included in the taxable income or loss of its members in accordance with the terms of the operating agreement of CWAN Holdings. Before the IPO, the majority of CWAN Holdings’ income was passed through to its members and nontaxable to the entity. CWAN Holdings’ international wholly-owned subsidiaries are subject to taxes in foreign jurisdictions.

Clearwater Analytics Holdings, Inc. is taxed as a corporation and pays corporate federal, state, and local taxes on income allocated to it from CWAN Holdings based on Clearwater Analytics Holdings, Inc.’s economic interest held in CWAN Holdings. While the Company consolidates CWAN Holdings for financial reporting purposes, the Company will not be taxed on the earnings attributed to the non-controlling interests. As a result, the income tax burden on the earnings taxed to the non-controlling interests is not reported by the Company in its condensed consolidated financial statements.

17

Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in the applicable quarter. In each quarter, we update the estimated annual effective tax rate and make a year-to-date adjustment to the provision. The estimated annual effective tax rate may be subject to significant volatility due to several factors, including our ability to accurately predict the proportion of our pretax income in multiple jurisdictions, certain book-tax differences, and exchanges from non-controlling interests.

The following table provides details of the provision for income taxes:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Loss before provision for income taxes	$	(2,602	)	$	(11,212	)	$	(3,769	)	$	(7,692	)
Provision for income taxes		424			216			959			536
Effective tax rate		(16.3	%)		(1.9	%)		(25.4	%)		(7.0	%)

For the three and nine months ended September 30, 2022, the Company’s effective tax rate was different than the statutory rate primarily because of foreign taxes, equity-based compensation and the valuation allowance on U.S. deferred tax assets. In addition, the Company is not liable for income taxes on the portion of CWAN Holdings’ earnings that are attributable to non-controlling interests.

For the three and nine months ended September 30, 2021, the Company’s effective tax rate was different than the statutory rate primarily because of foreign taxes and the valuation allowance on U.S. deferred tax assets. In addition, the Company is not liable for income taxes on the portion of CWAN Holdings’ earnings that are attributable to non-controlling interests.

The Company regularly monitors its uncertain tax positions, and as of September 30, 2022, there were no material unrecognized tax benefits that, if realized, would affect the estimated annual effective tax rate, nor do we expect any significant changes within the next 12 months.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence as of September 30, 2022, we believe that it is more likely than not that the tax benefits of the U.S. losses incurred may not be realized. Accordingly, we have recorded a full valuation allowance against the tax benefits of the U.S. losses incurred. We intend to maintain the full valuation allowance on the U.S. net deferred tax assets until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance.

On March 16, 2022, Idaho enacted House Bill 563 that amended portions of relevant tax laws. Due to our valuation allowance in the U.S., this legislation did not have a significant impact on the provision for income taxes for the three and nine months ended September 30, 2022. However, we expect our blended state tax rate to decrease due to the new law.

On August 9, 2022, the Creating Helpful Incentives to Produce Semiconductors Act (“CHIPS Act”) was passed into law and amended portions of relevant tax laws. The CHIPS Act did not have a significant impact on the provision for income taxes for the three and nine months ended September 30, 2022. We do not expect this legislation to materially affect us.

On August 16, 2022, the Inflation Reduction Act was passed into law and amended portions of relevant tax laws. The Inflation Reduction Act did not have a significant impact on the provision for income taxes for the three and nine months ended September 30, 2022. We do not expect this legislation to materially affect us.

Tax Receivable Agreement Liability

Pursuant to our election under Section 754 of the Internal Revenue Code (the “Code”), we expect to obtain an increase in our share of the tax basis in the net assets of CWAN Holdings when its units are redeemed or exchanged. We intend to treat any redemptions and exchanges of CWAN Holdings units as direct purchases of the units for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that we would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent the tax basis is allocated to those capital assets.

18

In connection with the IPO and related transactions, we entered into a TRA that provides for the payment by us of 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of CWAN Holdings resulting from any redemptions or exchanges of CWAN Holdings units, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest and TRA bonus payments pursuant to the TRA (the “TRA Payments”). We expect to benefit from the remaining 15% of any tax benefits that we may actually realize. The TRA Payments are not conditioned upon any continued ownership interest in CWAN Holdings or the Company. The rights of each member of CWAN Holdings, that is a party to the TRA, are assignable to transferees of their respective CWAN Holdings units.

The estimation of a liability under the TRA is, by its nature, imprecise and subject to significant assumptions regarding a number of factors, including (but not limited to) the amount and timing of taxable income generated by the Company each year as well as the tax rate then applicable. The future tax benefits related to ownership exchanges as of September 30, 2022 are estimated to be $410 million, of which $348 million is estimated to be the associated TRA liability.

As noted above, the Company evaluated the realizability of its U.S. deferred tax assets and has recorded a full valuation against those benefits. As a result, the Company determined that it is not probable that payments will be made to TRA holders for these future tax benefits, and as such no TRA liability related to future years has been recorded as of September 30, 2022.

We are projecting taxable income for the current year and have recorded a TRA liability of $5.7 million as of September 30, 2022. There are many assumptions and considerations that impact our taxable income position in the current year, some of which are out of our direct control. As such, the estimate of our taxable income position (and thus, the TRA liability recognized) for the current year could change significantly.

As non-controlling interest holders exercise their right to exchange their units in CWAN Holdings, a TRA liability may be recorded based on 85% of the estimated future tax benefits that the Company may realize as a result of increases in the tax basis of CWAN Holdings. The amount of the increase in the tax basis, the related estimated tax benefits, and the related TRA liability to be recorded will depend (among other things) on the price of the Company’s Class A stock at the time of the relevant redemption or exchange.

Note 11. Commitments and Contingencies

On September 29, 2022, we announced our entry into a binding put option and exclusivity agreement that will lead to the acquisition of JUMP Technology, a privately held developer of an innovative, modular, technology platform that is dedicated to the investment management industry spanning investment managers, hedge funds, private banks, family offices, insurers, and institutional investors. We believe that this acquisition will expand our capabilities in investment management and operations with a complete front-to-back end solution. We will purchase JUMP Technology pursuant to the terms of a customary French put and exclusivity agreement for €75 million. Additionally, Employees will receive up to 3.8 million restricted stock units in the Company to be earned over four years from their grant date. The acquisition will add 100 employees serving 70 customers across Europe. The transaction is expected to close in the fourth quarter of 2022, subject to completion of French regulatory requirements and other closing conditions.

Note 12. Transactions with Related Parties

During January 2021, the Company paid $9.6 million in relation to management fees to Principal Equity Owners which is recorded as prepaid management fees within prepaid expenses and other current assets and non-current assets. The prepaid management fees are being amortized over four years. In the three months ended September 30, 2022 and 2021, the Company recognized a management fee to Principal Equity Owners of $0.6 million and $0.6 million, respectively. In the nine months ended September 30, 2022 and 2021, the Company recognized a management fee to Principal Equity Owners of $1.8 million and $1.7 million, respectively.

In connection with Marcus Ryu not standing for re-election to the Company’s board of directors at its annual meeting in June 2022, to retain Mr. Ryu’s valuable insights, in April 2022 we entered into an advisory agreement with Mr. Ryu. Pursuant to this agreement, Mr. Ryu will serve as a senior advisor to the Company with respect to our go-to-market strategy in the insurance sector for a period of 18 months following the 2022 annual meeting. In consideration for Mr. Ryu’s service as a senior advisor, the options to purchase our Class A shares already owned by Mr. Ryu were amended to provide for a half-yearly vesting period following the next annual vesting period of his options.

19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

Overview

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

We provide investment accounting and reporting, performance measurement, compliance monitoring and risk analytics solutions for asset managers, insurance companies and large corporations. Every day, Clearwater’s powerful platform aggregates and normalizes data on over $5.9 trillion of global invested assets for over 1,100 clients. We bring modern software to an industry that has long been dominated by difficult-to-use, high cost legacy technologies and processes, which often lack data integrity and traceability, and often require significant manual intervention. The strength of our platform is demonstrated by our approximately 80% win rate for new clients over the prior four years in deals that reached the proposal stage.

We allow our clients to replace legacy systems with modern cloud-native software. Our platform helps clients reduce cost, time, errors and risk and allows them to reallocate resources to other value-creating activities. Our software aggregates, reconciles and validates data from more than 2,500 daily data feeds and more than four million securities that have been modeled across multiple currencies, asset classes and countries. This cleansed and validated data runs through our proprietary accounting, performance, compliance and risk solutions to provide clients with powerful analytics and daily or on-demand configurable reporting. We offer multi-asset class, multi-basis, multi-currency accounting and analytics that provide clients with a comprehensive view of their holdings and related performance. This allows our clients to make better, more timely decisions about their investment portfolios.

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

We have a 100% recurring revenue model. We charge our clients a fee that is primarily based on the amount of assets they manage on our platform, subject to contracted minimums. A majority of the assets on our platform are high-grade fixed income assets, leading to relatively low levels of volatility and highly predictable revenue streams. When applicable, we charge additional transaction fees for certain alternative asset classes or additional modules (e.g., derivatives and other financial instruments). For new clients, we are utilizing a commercial construct that includes a base fee for clients’ current assets; a variable fee that scales with the growth of the client’s assets, annual price increases and the ability to charge separately for additional functionality or modules.

On September 29, 2022, we announced our entry into a binding put option and exclusivity agreement that will lead to the acquisition of JUMP Technology, a privately held developer of an innovative, modular, technology platform that is dedicated to the investment management industry spanning investment managers, hedge funds, private banks, family offices, insurers, and institutional investors. We believe that this acquisition will expand our capabilities in investment management and operations with a complete front-to-back end solution. We will purchase JUMP Technology pursuant to the terms of a customary French put and exclusivity agreement for €75 million. Additionally, Employees will receive up to 3.8 million restricted stock units in the Company to be earned over four years from their grant date. The acquisition will add 100 employees serving 70 customers across Europe. The transaction is expected to close in the fourth quarter of 2022, subject to completion of French regulatory requirements and other closing conditions.

20

Key Factors Affecting Our Performance

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

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

•Expanding and Retaining Relationships with Existing Clients: Our future growth is dependent upon retaining our existing clients and expanding our relationships with these clients through increases in the amount of their assets on our platform. We have enjoyed consistent gross revenue retention rates of approximately 98% over the past fifteen quarters. The consistency in revenue retention creates predictability in our business and enables us to better plan our future investments. Our relationships with our clients expands as these clients add more assets to our platform, with our net revenue retention rates (as defined below under “—Key Operating Measures”) above 103% over the past two years. Clients may add assets as a result of acquiring new clients themselves or by acquiring new businesses or simply through organic growth, which produces additional assets that they manage using our platform. We believe that our client service model and technology platform are strong contributing factors in our attractive retention rates. As such, we expect to continue to invest in both our operations and research and development functions to maintain and increase our high levels of client satisfaction, which we believe will lead to strong client retention and expansion.

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

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

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

•Fluctuations in the Market Value of Assets on the Platform: We generally bill our clients monthly in arrears based on a basis point rate applied to our clients’ assets on our platform, which can be influenced by general economic conditions. While 78% of the assets on our platform were high-grade fixed income securities and structured products as of December 31, 2021 and therefore typically subject to low levels of volatility, the value of our clients’ assets on our platform varies on a daily basis due to changes in securities prices, cash flow needs, incremental buying and selling of assets and other strategic priorities of our clients. For these reasons, our revenue is subject to fluctuations based on economic conditions, including market conditions and the changing interest rate environment. For example, our net revenue retention rate was impacted by decreases in clients’ assets on our platform resulting in a year to date impact of 5% reduction in growth of our annualized recurring revenue. Increasingly, we are contracting with new clients utilizing a base plus variable pricing model to mitigate the effects of the market fluctuations.

21

Key Components of Results of Operations

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

Revenue

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

Cost of Revenue

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

Operating Expenses

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

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

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

Interest (Income) Expense, Net

Interest (income) expense, net primarily relates to interest income on our cash and cash equivalents less interest expense from our debt obligations. Interest expense reflects interest accrued on our outstanding term loan during the course of the applicable period. The accrual of interest varies depending on the timing and amount of borrowings and repayments during the period as well as fluctuations in interest rates.

Tax Receivable Agreement Expense

In connection with the IPO and related transactions, we entered into a TRA that provides for the payment by us of 85% of certain tax benefits that we realize as a result of increases in our tax basis of CWAN Holdings resulting from redemptions or exchanges of CWAN Holdings units. Tax receivable agreement expense relates to payments we anticipate making under the TRA.

Loss on Debt Extinguishment

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

Other Income, Net

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

Provision for Income Taxes

Provision for income taxes consists of income taxes related to federal, state, and foreign jurisdictions where we conduct our business. Our effective tax rate may increase in the future as our ownership in CWAN Holdings increases via exchanges from historical partners. In addition, our discrete items may not be consistent from period to period and could cause volatility in our effective tax rate.

22

Key Operating Measures

We consider certain operating measures, such as annualized recurring revenue, gross retention rates and net retention rates, in measuring the performance of our business. The following table summarizes these operating measures for the dates presented:

	Nine Months Ended September 30,
	2022			2021
Annualized recurring revenue (in thousands)	$	303,560		$	257,022
Gross revenue retention rate		98	%		98	%
Net revenue retention rate		103	%		111	%

Annualized Recurring Revenue

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

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

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

Annualized recurring revenue increased 18% on account of growth in our client base as we brought new clients onto our platform and also added additional assets onto our platform from existing clients. The increase in annualized recurring revenue was partially offset by the decreases in client’s assets on the platform from decreases in fixed income and equity security prices during the first 9 months of 2022 resulting in a 5% reduction in the growth of annualize recurring revenue.

Gross Revenue Retention Rate

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

Gross revenue retention rates have remained consistent at approximately 98% since 2019. We believe the consistent and high gross revenue retention rate is a testament to the value proposition that our leading solution offers.

Net Revenue Retention Rate

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

Net revenue retention rate as of September 30, 2022 was 103% which represents growth in clients on our platform of 3% year over year. Net revenue retention rate as of September 30, 2022 decreased compared to net revenue retention rate as of September 30, 2021 primarily due to decreases in the market value of assets which clients maintain on our platform and decreased pricing of our clients’ fixed income securities.

23

Non-GAAP Financial Measures

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

Adjusted EBITDA and Adjusted EBITDA Margin

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

The following tables reconcile net loss to Adjusted EBITDA and include amounts expressed as a percentage of revenue for the periods indicated.

	Three Months Ended September 30,										Nine Months Ended September 30,
	2022					2021					2022					2021
	(in thousands, except percentages)
Net loss	$	(3,026	)	(4	%)	$	(11,428	)	(18	%)	$	(4,728	)	(2	%)	$	(8,228	)	(5	%)
Adjustments:
Interest (income) expense, net		(693	)	-1	%		8,302		13	%		139		0	%		25,261		14	%
Loss on debt extinguishment		—		0	%		10,303		16	%		—		0	%		10,303		6	%
Depreciation and amortization		1,381		2	%		792		1	%		3,499		2	%		2,204		1	%
Equity-based compensation		16,701		22	%		7,683		12	%		48,768		22	%		19,239		11	%
Tax receivable agreement expense		2,600		3	%		—		0	%		5,700		3	%		—		0	%
Transaction expenses(1)		1,327		2	%		—		0	%		1,327		1	%		—		0	%
Other expenses(2)		559		1	%		1,430		2	%		2,081		1	%		3,825		2	%
Adjusted EBITDA		18,849		25	%		17,082		26	%		56,786		26	%		52,604		29	%
Revenue	$	76,552		100	%	$	64,489		100	%	$	220,739		100	%	$	182,259		100	%

(1)Transaction expenses include legal, accounting, banking, consulting, diligence, and other expenses related to completed and contemplated acquisitions.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(in thousands)
Up-C structure expenses	$	—		$	726		$	158		$	1,652
Management fees and reimbursed expenses		604			618			1,792			1,702
Provision for income tax expense		424			216			959			536
Miscellaneous		(469	)		(130	)		(828	)		(65	)
Total other expenses	$	559		$	1,430		$	2,081		$	3,825

24

Results of Operations

The following tables set forth our results of operations for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue	$	76,552		$	64,489		$	220,739		$	182,259
Cost of revenue(1)		22,720			17,785			64,811			47,683
Gross profit		53,832			46,704			155,928			134,576
Operating expenses:
Research and development(1)		25,438			18,415			69,568			50,991
Sales and marketing(1)		13,187			10,126			38,254			26,151
General and administrative(1)		16,371			10,900			46,864			29,627
Total operating expenses		54,996			39,441			154,686			106,769
Income (loss) from operations		(1,164	)		7,263			1,242			27,807
Interest (income) expense, net		(693	)		8,302			139			25,261
Tax receivable agreement expense		2,600			—			5,700			—
Loss on debt extinguishment		—			10,303			—			10,303
Other income, net		(469	)		(130	)		(828	)		(65	)
Loss before income taxes		(2,602	)		(11,212	)		(3,769	)		(7,692	)
Provision for income taxes		424			216			959			536
Net loss		(3,026	)		(11,428	)		(4,728	)		(8,228	)
Less: Net income (loss) attributable to non-controlling interests		(52	)		(3,114	)		277			86
Net loss attributable to Clearwater Analytics Holdings, Inc.	$	(2,974	)	$	(8,314	)	$	(5,005	)	$	(8,314	)

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

Cost of revenue	$	2,594	$	899	$	7,281	$	2,171
Operating expenses:
Research and development		5,133		2,226		14,003		5,912
Sales and marketing		2,941		1,655		9,452		3,782
General and administrative		6,033		2,903		18,032		7,374
Total equity-based compensation expense	$	16,701	$	7,683	$	48,768	$	19,239

25

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue		100	%		100	%		100	%		100	%
Cost of revenue		30	%		28	%		29	%		26	%
Gross profit		70	%		72	%		71	%		74	%
Operating expenses:
Research and development		33	%		29	%		32	%		28	%
Sales and marketing		17	%		16	%		17	%		14	%
General and administrative		21	%		17	%		21	%		16	%
Total operating expenses		72	%		61	%		70	%		59	%
Income (loss) from operations		(2	%)		11	%		1	%		15	%
Interest (income) expense, net		(1	%)		13	%		0	%		14	%
Tax receivable agreement expense		3	%		0	%		3	%		0	%
Other income, net		(1	%)		(0	%)		(0	%)		(0	%)
Loss before income taxes		(3	%)		(17	%)		(2	%)		(4	%)
Provision for income taxes		1	%		0	%		0	%		0	%
Net loss		(4	%)		(18	%)		(2	%)		(5	%)

Comparison of the Three Months and Nine Months Ended September 30, 2022 and 2021 (unaudited)

Revenue

	Three Months Ended September 30,									Nine Months Ended September 30,
(In thousands, except percentages)	2022		2021		$ Change		% Change			2022		2021		$ Change		% Change
Revenue	$	76,552	$	64,489	$	12,063		19	%	$	220,739	$	182,259	$	38,480		21	%

Revenue increased $12.1 million and $38.5 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods of 2021. The increase was on account of growth in our client base as we brought new clients onto our platform, as well as changes to our existing clients’ assets on our platform. Average assets on our platform that were billed to new and existing clients increased 15% and 17% for the three and nine months ended September 30, 2022, respectively, compared to the same periods of 2021. Average basis point rate billed to clients increased by 3.7% and 3.4% for the three and nine months ended September 30, 2022, respectively, compared to the same periods of 2021.

26

Cost of Revenue

	Three Months Ended September 30,											Nine Months Ended September 30,
(In thousands, except percentages)	2022			2021			$ Change		% Change			2022			2021			$ Change		% Change
Equity-based compensation	$	2,594		$	899		$	1,695		189	%	$	7,281		$	2,171		$	5,110		235	%
All other cost of revenue		20,126			16,886			3,240		19	%		57,530			45,512			12,018		26	%
Total cost of revenue	$	22,720		$	17,785		$	4,935		28	%	$	64,811		$	47,683		$	17,128		36	%
Percent of revenue		30	%		28	%							29	%		26	%

Cost of revenue changed as follows:

	Change From 2021 to 2022 QTD		Change From 2021 to 2022 YTD
Increased payroll and related	$	1,699	$	7,806
Increased equity-based compensation		1,695		5,110
Increased depreciation and amortization		406		969
Increased data costs		399		1,005
Increased travel and entertainment		379		865
Increased technology		286		526
Increased outside services and contractors		50		443
Increased facilities and infrastructure expenses		14		416
Other items		7		(12	)
Total change	$	4,935	$	17,128

The increase in cost of revenue for the three and nine months ended September 30, 2022 was primarily due to increased payroll and related costs as a result of headcount growth of additional employees across our client services, onboarding and reconciliation teams to support a larger client base as well as increased equity-based compensation due to increased grant-date fair value of equity awards and higher headcount. Cost of revenue headcount grew at a faster rate than overall revenue growth as we continue to expand our scale to support our expected continued international expansion. International revenue grew to 15% and 14% of revenues in the three and nine months ended September 30, 2022, respectively, compared to 8% and 9% in the three and nine months ended September 30, 2021, respectively. In addition, cost of revenue increased due to increased data costs to support a larger client base, increased travel and entertainment costs due to a reduction in travel restrictions related to the COVID-19 pandemic, higher utilization of third-party contractors on operational activities, and increased allocation of facilities cost.

Operating Expenses

Research and Development

	Three Months Ended September 30,											Nine Months Ended September 30,
(In thousands, except percentages)	2022			2021			$ Change		% Change			2022			2021			$ Change		% Change
Equity-based compensation	$	5,133		$	2,226		$	2,907		131	%	$	14,003		$	5,912		$	8,091		137	%
All other research and development		20,305			16,189			4,116		25	%		55,565			45,079			10,486		23	%
Total research and development	$	25,438		$	18,415		$	7,023		38	%	$	69,568		$	50,991		$	18,577		36	%
Percent of revenue		33	%		29	%							32	%		28	%

27

Research and development expenses changed as follows:

	Change From 2021 to 2022 QTD			Change From 2021 to 2022 YTD
Increased payroll and related	$	2,942		$	6,653
Increased equity-based compensation		2,907			8,091
Increased technology		1,175			3,243
Increased travel and entertainment		175			437
Increased depreciation and amortization		174			234
Increased facilities and infrastructure expenses		69			307
Decreased outside services and contractors		(419	)		(388	)
Total change	$	7,023		$	18,577

The increase in research and development expense for the three month and nine months ended September 30, 2022 was primarily due to increased payroll and related costs as a result of headcount growth of additional employees to focus on new offerings, as well as increased equity-based compensation due to increased grant-date fair value of equity awards and higher headcount. In addition, research and development expense increased due to increased technology costs from higher utilization of third-party cloud computing services and other third-party IT services, increased travel and entertainment costs due to a reduction in travel restrictions related to the COVID-19 pandemic, and increased allocation of depreciation and facilities costs. These increases were partially offset by lower utilization of third-party consultants on development activities due to a focus on internal hiring of developers.

Sales and Marketing

	Three Months Ended September 30,											Nine Months Ended September 30,
(In thousands, except percentages)	2022			2021			$ Change		% Change			2022			2021			$ Change		% Change
Equity-based compensation	$	2,941		$	1,655		$	1,286		78	%	$	9,452		$	3,782		$	5,670		150	%
All other sales and marketing		10,246			8,471			1,775		21	%		28,802			22,369			6,433		29	%
Total sales and marketing	$	13,187		$	10,126		$	3,061		30	%	$	38,254		$	26,151		$	12,103		46	%
Percent of revenue		17	%		16	%							17	%		14	%

Sales and marketing expense changed as follows:

	Change From 2021 to 2022 QTD			Change From 2021 to 2022 YTD
Increased equity-based compensation	$	1,286		$	5,670
Increased payroll and related		714			4,451
Increased marketing		734			1,635
Increased travel and entertainment		298			963
Increased technology		66			158
Increased facilities and infrastructure expenses		26			204
Decreased outside services and contractors		(69	)		(955	)
Other items		6			(23	)
Total change	$	3,061		$	12,103

28

The increase in sales and marketing expense for the three and nine months ended September 30, 2022 was primarily due to increased equity-based compensation due to increased grant-date fair value of equity awards and higher headcount, as well as increased payroll and related costs as a result of additional employees to expand sales coverage. In addition, sales and marketing expense increased from higher marketing costs due to increased focus on public relations, events and branding across the globe including the in-person Clearwater Connect conference in September 2022, increased travel and entertainment costs due to a reduction in travel restrictions related to the COVID-19 pandemic, increased utilization of IT services and increased allocation of facilities cost. These increases were partially offset by lower utilization of third-party consultants supporting marketing initiatives.

General and Administrative

	Three Months Ended September 30,											Nine Months Ended September 30,
(In thousands, except percentages)	2022			2021			$ Change		% Change			2022			2021			$ Change		% Change
Equity-based compensation	$	6,033		$	2,903		$	3,130		108	%	$	18,032		$	7,374		$	10,658		145	%
All other general and administrative		10,338			7,997			2,341		29	%		28,832			22,253			6,579		30	%
Total general and administrative	$	16,371		$	10,900		$	5,471		50	%	$	46,864		$	29,627		$	17,237		58	%
Percent of revenue		21	%		17	%							21	%		16	%

General and administrative expenses changed as follows:

	Change From 2021 to 2022 QTD			Change From 2021 to 2022 YTD
Increased equity-based compensation	$	3,130		$	10,658
Increased transaction expenses		1,327			1,327
Increased (decreased) outside services and contractors		(113	)		1,867
Increased insurance		661			2,182
Increased technology		582			1,043
Increased payroll and related		379			1,537
Increased travel and entertainment		118			554
Increased (decreased) facilities and infrastructure expenses		(50	)		285
Decreased Up-C structure expenses		(726	)		(1,494	)
Decreased recruiting		(189	)		(970	)
Other items		352			248
Total change	$	5,471		$	17,237

The increase in general and administrative expense for the three and nine months ended September 30, 2022 was primarily due to increased equity-based compensation expense due to increased grant-date fair value of equity awards and additional headcount, increased transaction expenses related to the pending acquisition of JUMP Technology, and utilization of accounting and legal professional services in connection with being a public company. In addition, general and administrative expenses increased due to insurance costs for our directors and officers, higher utilization of IT services, increased payroll and related costs as a result of headcount growth of additional employees, increased travel and entertainment expense due to a reduction in travel restrictions related to the COVID-19 pandemic, and allocation of facility costs. These increases were partially offset by decreased costs associated with setting up our the Up-C structure and the Tax Receivable Agreement, and decreased third-party agency recruitment costs.

29

Non-Operating Expenses

	Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands, except percentages)	2022			2021			$ Change			% Change			2022			2021			$ Change			% Change
Interest (income) expense, net	$	(693	)	$	8,302		$	(8,995	)		(108	%)	$	139		$	25,261		$	(25,122	)		(99	%)
Tax receivable agreement expense		2,600			—			2,600		NMF				5,700			—			5,700		NMF
Loss on debt extinguishment		—			10,303			(10,303	)		(100	%)		—			10,303			(10,303	)		(100	%)
Other income, net		(469	)		(130	)		(339	)		261	%		(828	)		(65	)		(763	)		1174	%

NMF - not meaningful

The decrease in interest (income) expense, net for the three and nine months ended September 30, 2022 is due to decreased interest expense from lower borrowings under the New Credit Agreement compared with borrowings under the Previous Credit Agreement, enhanced by increased interest income on our cash and cash equivalents from higher interest rates.

The TRA expense is incurred in the period in which we determine that it is probable that payments will be made under the terms of the TRA. Due to our current estimation that we will have taxable income because of the current tax law that requires capitalization of research and development expenses, we currently expect to utilize tax deductions subject to our TRA and have therefore recorded the associated TRA expense. There are many assumptions and considerations that impact our taxable income position in the current year, some of which are out of our direct control. As such, the estimate of our taxable income position (and thus, the TRA expense we incur) for the current year could change significantly. Note that if our current estimates and assumptions do not change then the TRA liability related to this expense is expected to be paid in the fourth quarter of 2023.

The loss on extinguishment relates to a prepayment premium and unamortized debt issue costs following the repayment of borrowings under the Previous Credit Agreement in September 2021. Other income, net relates to foreign exchange gains and losses driven by fluctuations in exchange rates.

Provision for Income Taxes

	Three Months Ended September 30,									Nine Months Ended September 30,
(In thousands, except percentages)	2022		2021		$ Change		% Change			2022		2021		$ Change		% Change
Provision for income taxes	$	424	$	216	$	208		96	%	$	959	$	536	$	423		79	%

The increase in provision for income taxes for the three and nine months ended September 30, 2022 relates to change in mix of foreign jurisdiction taxable income in the period.

Liquidity and Capital Resources

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

As of September 30, 2022, we had cash and cash equivalents of $288.5 million. Cash and cash equivalents primarily consist of money market mutual funds, which are highly liquid investments purchased with an original or remaining maturity of 90 days or less at the date of purchase. We believe our existing cash and cash equivalents will be sufficient to meet our operating working capital and capital expenditure requirements over the next 12 months, and the €75 million capital requirement for the closing of our acquisition of JUMP Technology, currently expected to be completed in the fourth quarter of 2022. Our future financing requirements will depend on many factors, including our growth rate, revenue retention rates, the timing and extent of spending to support development of our platform and any future investments or acquisitions we may make. Additional funds may not be available on terms favorable to us or at all, including as a result of disruptions in the credit markets. See “Risk Factors” in the Annual Report.

30

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

	Nine Months Ended September 30,
	2022			2021
	(In thousands)
Net cash provided by (used in) operating activities	$	39,847		$	(9,059	)
Net cash used in investing activities		(8,880	)		(3,499	)
Net cash provided by financing activities		5,469			196,686
Effect of exchange rate changes on cash and cash equivalents		(2,510	)		(122	)
Net increase in cash and cash equivalents	$	33,926		$	184,006

Cash Flows from Operating Activities

Net cash provided by operating activities of $39.8 million during the nine months ended September 30, 2022 was primarily the result of our net loss plus non-cash charges, including equity-based compensation, tax receivable agreement expense, operating lease expense and depreciation and amortization. Cash flows resulting from changes in assets and liabilities include an increase in accounts receivable, an increase in deferred commissions, a decrease in prepaid expenses and other assets and a decrease in accrued expenses and other liabilities. Accounts receivable increased $15.0 million, which is comprised of $4.9 million from growth in revenues and $10.1 million from ageing of receivable balances for certain customers due to short-term deterioration in days sales outstanding which we continue to believe is collectible. The increase in deferred commissions is due to higher revenues during the period. Prepaid expenses decreased primarily due to the amortization of existing prepaid balances. Accrued expenses and other liabilities decreased $4.7 million primarily due to payments for our operating leases, which were offset by increased accrued interest and deferred revenue.

Net cash used in operating activities of $9.1 million during the nine months ended September 30, 2021 was primarily the result of changes in operating assets and liabilities that decreased operating cash flow by $36.5 million. Accounts receivable increased $16.1 million during the period. The increase is comprised of $5.9 million from growth in revenues and $10.2 million from ageing of small receivable balances across several customers who are experiencing delayed processing of remittances due to the recent increased trend of employees voluntarily leaving jobs and the time to train new employees. Prepaid expenses and other assets increased primarily from the prepayment of management fees to certain affiliates of the Principal Equity Owners in the amount of $9.6 million. Deferred commissions increased $2.9 million due to higher revenue in the period. Accrued sales tax liability decreased $6.2 million as we remitted sales tax payable for prior periods to different jurisdictions, and accrued interest on debt decreased $2.3 million due to payment of unpaid interest upon early repayment of borrowings under our Previous Credit Agreement.

Cash Flows from Investing Activities

Net cash used in investing activities of $8.8 million during the nine months ended September 30, 2022 was attributable to purchase of property and equipment and short-term investments, and internally developed software.

Net cash used in investing activities of $3.5 million during the nine months ended September 30, 2021 was attributable to purchase of property and equipment, and internally developed software.

Cash Flows from Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2022 was $5.5 million, of which $7.9 million was proceeds from the exercise of options and $2.4 million was proceeds from our employee stock purchase plan, which was partially offset by $2.6 million used to pay minimum tax withholding on behalf of employees for net share settlement, $2.1 million used in the repayment of borrowings and $0.2 million used in the repayment of costs associated with the IPO.

Net cash provided by financing activities during the nine months ended September 30, 2021 was $197.7 million, of which $582.2 million was proceeds from the IPO, net of underwriting discounts, $55.0 million was proceeds from borrowings under our New Credit Agreement, $1.6 million was proceeds from issuance of common units, $0.3 million proceeds from exercise of options, which was offset by $434.2 million repayment of borrowings and $2.0 million for prepayment premium and legal fees in relation to the early repayment of the Previous Credit Agreement, $2.2 million was used to pay minimum tax withholding on behalf of employees for net unit settlement, $1.9 million used to pay expense associated with the IPO, $1.4 million used for payment of debt issuance costs, and $0.6 million used in the repurchase of common units.

31

Critical Accounting Policies and Estimates

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

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

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in the Annual Report under the caption “Critical Accounting Estimates” in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7.

On January 1, 2022, we adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding ROU assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. We adopted the new guidance using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. See Note 2 — Basis of Presentation and Summary of Significant Accounting Policies and Note 6 — Leases in the notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding the adoption.

JOBS Act Accounting Election

We meet the definition of an emerging growth company under the Jumpstart Our Business Startups Act of 2012, which permits us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. As a result, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements is included in Note 2, “Recently Adopted Accounting Pronouncements” in the accompanying unaudited condensed consolidated financial statements.

32

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

AUM Market Price Risk

Substantially all of our revenue is derived from fees that are primarily based on the amount of assets on our platform. These fees are stated in basis points, or 1/100th of 1%. Though in substantially all cases we charge a minimum fee regardless of the assets that are loaded onto our platform, our revenues fluctuate based on the value of the assets that our clients maintain on our platform. Movements in funds invested between different securities or fluctuations in securities prices or investment performance could cause the value of AUM to decline, which would result in lower fees we receive from our clients.

Interest Rate Risk

We have interest rate risk relating to debt and associated interest expense under the New Credit Agreement, which is indexed to LIBOR or LIBOR equivalent once LIBOR is phased out. At any time, a rise in interest rates could have a material adverse impact on our earnings and cash flows. Conversely, a decrease in interest rates could result in a material increase in earnings and cash flows. We estimate that a hypothetical increase or decrease in LIBOR of 100 basis points would increase or decrease, respectively, our interest expense by approximately $0.5 million on an annual basis, based on our $52.3 million debt balance under the New Credit Agreement at September 30, 2022.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a–15(e) and Rule 15d–15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022. Based on the evaluation of our disclosure controls and procedures as of September 30, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost–effective control system, misstatements due to error or fraud may occur and not be detected.

33

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are subject to certain legal proceedings and claims that arise in the normal course of business. In the opinion of our management, we are not involved in any litigation or proceedings with third parties that we believe could have a material adverse effect on our results of operations, financial condition or business.

Item 1A. Risk Factors.

For a discussion of potential risks and uncertainties, see the information in the section titled "Risk Factors" in the Annual Report.

Item 2. Unregistered Sales of Equity Securities.

Pursuant to the LLC Agreement, shares of the Company's Class B common stock may each be exchanged, together with a corresponding LLC Interest, at the option of the holder of such share of Class B common stock for one fully paid and non-assessable share of Class A common stock. There is no cash or other consideration paid by the holder converting such shares and, accordingly, there is no cash or other consideration received by the Company. The shares of Class A common stock common stock issued by the Company in such exchanges are exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

On July 31, 2022, we issued to stockholders 5,000 shares of Class A common stock upon the exchange of the same number of shares of our Class B common stock and corresponding LLC Interests held by such stockholders.

On August 31, 2022, we issued to stockholders 80,645 shares of Class A common stock upon the exchange of the same number of shares of our Class B common stock and corresponding LLC Interests held by such stockholders.

On September 30, 2022, we issued to stockholders 948,338 shares of Class A common stock upon the exchange of the same number of shares of our Class B common stock and corresponding LLC Interests held by such stockholders.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

34

Item 6. Exhibits.

Exhibits filed or furnished herewith are designated by an asterisk (*); all exhibits not so designated are incorporated by reference to a prior filing as indicated.

Exhibit Number	Description	Report or Registration Statement	SEC File or Registration Number	Exhibit Reference
3.1	Amended and Restated Certificate of Incorporation of Clearwater Analytics Holdings, Inc., dated September 27, 2021	8-K filed September 28, 2021	001-40838	3.1
3.2	Amended and Restated Bylaws of Clearwater Analytics Holdings, Inc., dated September 27, 2021	8-K filed September 28, 2021	001-40838	3.2
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
+101.INS	Inline XBRL Instance Document
+101.SCH	Inline XBRL Taxonomy Extension Schema Document
+101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
+101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
+101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
+101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on

its behalf by the undersigned thereunto duly authorized.

	Company Name
Date: November 4, 2022	By:	/s/ Jim Cox
		Jim Cox
		Chief Financial Officer
		(Principal Financial and Accounting Officer and Authorized Signatory)

36

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sandeep Sahai, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Clearwater Analytics Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 4, 2022	By:	/s/ Sandeep Sahai
		Sandeep Sahai
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jim Cox, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Clearwater Analytics Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 4, 2022	By:	/s/ Jim Cox
		Jim Cox
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Clearwater Analytics Holdings, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: November 4, 2022	By:	/s/ Sandeep Sahai
		Sandeep Sahai
		Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Clearwater Analytics Holdings, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: November 4, 2022	By:	/s/ Jim Cox
		Jim Cox
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2022	Oct. 28, 2022
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Trading Symbol	CWAN
Entity Registrant Name	Clearwater Analytics Holdings, Inc.
Entity Central Index Key	0001866368
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity File Number	001-40838
Entity Tax Identification Number	87-1043711
Entity Address, Address Line One	777 W. Main Street
Entity Address, Address Line Two	Suite 900
Entity Address, City or Town	Boise
Entity Address, State or Province	ID
Entity Address, Postal Zip Code	83702
City Area Code	208
Local Phone Number	918-2400
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	DE
Document Quarterly Report	true
Document Transition Report	false
Title of 12(b) Security	Class A common stock, par value $0.001 per share
Security Exchange Name	NYSE
Entity Bankruptcy Proceedings, Reporting Current	false
Class A Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		59,226,257
Class B Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		1,654,530
Class C Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		47,377,587
Class D Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		130,083,755

XML

Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 288,523	$ 254,597
Short-term investments	3,000
Accounts receivable, net	65,241	50,190
Prepaid expenses and other current assets	16,382	16,551
Total current assets	373,146	321,338
Property and equipment, net	13,534	10,738
Operating lease right-of-use assets, net	21,402
Deferred contract costs, non-current	5,765	5,687
Debt issuance costs - line of credit	776	922
Other non-current assets	5,105	5,670
Total assets	419,728	344,355
Current liabilities:
Accounts payable	1,714	1,416
Accrued expenses and other current liabilities	25,745	27,032
Notes payable, current portion	2,750	2,750
Operating lease liability, current portion	5,343
Total current liabilities	35,552	31,198
Notes payable, less current maturities and unamortized debt issuance costs	49,158	51,157
Operating lease liability, less current portion	17,411
Tax receivable agreement liability	5,700
Other long-term liabilities	1,644	132
Total liabilities	109,465	82,487
Stockholders' Equity
Additional paid-in-capital	432,640	388,591
Accumulated other comprehensive loss	(1,880)	(34)
Accumulated Deficit	(184,648)	(191,926)
Total stockholders' equity attributable to Clearwater Analytics Holdings, Inc.	246,350	196,867
Non-controlling interests	63,913	65,001
Total stockholders' equity	310,263	261,868
Total liabilities and Stockholders' Equity	419,728	344,355
Class A
Stockholders' Equity
Common stock	59	48
Class B
Stockholders' Equity
Common stock	2	11
Class C
Stockholders' Equity
Common stock	47	47
Class D
Stockholders' Equity
Common stock	$ 130	$ 130

XML

Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares	Sep. 30, 2022	Dec. 31, 2021
Class A
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	1,500,000,000	1,500,000,000
Common stock, shares issued	59,199,868	47,948,888
Common stock, shares outstanding	59,199,868	47,948,888
Class B
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	1,662,802	11,151,110
Common stock, shares outstanding	1,662,802	11,151,110
Class C
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	47,377,587	47,377,587
Common stock, shares outstanding	47,377,587	47,377,587
Class D
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	130,083,755	130,083,755
Common stock, shares outstanding	130,083,755	130,083,755

XML

Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Statement [Abstract]
Revenue		$ 76,552	$ 64,489	$ 220,739	$ 182,259
Cost of revenue	[1]	22,720	17,785	64,811	47,683
Gross Profit, Total		53,832	46,704	155,928	134,576
Operating expenses:
Research and development	[1]	25,438	18,415	69,568	50,991
Sales and marketing	[1]	13,187	10,126	38,254	26,151
General and administrative	[1]	16,371	10,900	46,864	29,627
Total operating expenses		54,996	39,441	154,686	106,769
Income (loss) from operations		(1,164)	7,263	1,242	27,807
Interest (income) expense, net		(693)	8,302	139	25,261
Tax receivable agreement expense		2,600		5,700
Loss on debt extinguishment			(10,303)		(10,303)
Other income, net		(469)	(130)	(828)	(65)
Loss before provision for income taxes		(2,602)	(11,212)	(3,769)	(7,692)
Provision for income taxes		424	216	959	536
Net loss		(3,026)	(11,428)	(4,728)	(8,228)
Less: Net income (loss) attributable to non-controlling interests		(52)	(3,114)	277	86
Net loss attributable to Clearwater Analytics Holdings, Inc.		$ (2,974)	$ (8,314)	$ (5,005)	$ (8,314)
Net loss per share attributable to Class A and Class D common stockholders stock (Note 8) (1):
Basic	[2]	$ (0.02)	$ (0.05)	$ (0.03)	$ (0.05)
Diluted	[2]	$ (0.01)	$ (0.05)	$ (0.02)	$ (0.05)
Weighted average shares of Class A and Class D common stock outstanding:
Basic		187,824,531	177,449,844	184,026,378	177,449,844
Diluted		237,869,291	235,978,541	237,441,224	235,978,541

[1] Amounts include equity-based compensation as follows:   Cost of revenue   $ 2,594     $ 899     $ 7,281     $ 2,171   Operating expenses:                         Research and development     5,133       2,226       14,003       5,912   Sales and marketing     2,941       1,655       9,452       3,782   General and administrative     6,033       2,903       18,032       7,374   Total equity-based compensation expense   $ 16,701     $ 7,683     $ 48,768     $ 19,239    

[2] Basic and diluted net loss per share of Class A and Class D common stock is applicable only for the periods after the IPO and related transactions (as defined in Note 1 to the Unaudited Condensed Consolidated Financial Statements). See Note 8 for the number of shares used in the computation of net loss per share of Class A and Class D common stock and the basis for the computation of net loss per share.

XML

Condensed Consolidated Statements of Operations (unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Total equity-based compensation expense	$ 16,701	$ 7,683	$ 48,768	$ 19,239
Cost of revenue
Total equity-based compensation expense	2,594	899	7,281	2,171
Research and development
Total equity-based compensation expense	5,133	2,226	14,003	5,912
Sales and marketing
Total equity-based compensation expense	2,941	1,655	9,452	3,782
General and administrative
Total equity-based compensation expense	$ 6,033	$ 2,903	$ 18,032	$ 7,374

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Statement of Comprehensive Income [Abstract]
Net loss	$ (3,026)	$ (11,428)	$ (4,728)	$ (8,228)
Other comprehensive loss, net of taxes:
Foreign currency translation adjustment	(1,100)	(127)	(2,362)	(111)
Comprehensive loss	(4,126)	(11,555)	(7,090)	(8,339)
Less: Comprehensive loss attributable to non-controlling interests	(284)	(3,233)	(239)	(17)
Comprehensive loss attributable to Clearwater Analytics Holdings, Inc.	$ (3,842)	$ (8,322)	$ (6,851)	$ (8,322)

XML

Condensed Consolidated Statements of Changes in Equity (Deficit) (unaudited) - USD ($) $ in Thousands	Total	Activity prior to the Transactions	Activity subsequent to the Transactions	IPO Effect of the Transactions	Members' Deficit CWAN Holdings, LLC	Members' Deficit CWAN Holdings, LLC Activity prior to the Transactions	Members' Deficit CWAN Holdings, LLC Effect of the Transactions	Additional Paid-In Capital	Additional Paid-In Capital Activity prior to the Transactions	Additional Paid-In Capital Effect of the Transactions	Additional Paid-In Capital Activity subsequent to the Transactions	Additional Paid-In Capital IPO Effect of the Transactions	Accumulated Other Comprehensive Income (Loss)	Accumulated Other Comprehensive Income (Loss) Activity prior to the Transactions	Accumulated Other Comprehensive Income (Loss) Effect of the Transactions	Accumulated Other Comprehensive Income (Loss) Activity subsequent to the Transactions	Accumulated Deficit	Accumulated Deficit Effect of the Transactions	Accumulated Deficit Activity subsequent to the Transactions	Non-controlling Interest	Non-controlling Interest Effect of the Transactions	Non-controlling Interest Activity subsequent to the Transactions	Common Stock Class A	Common Stock Class A Effect of the Transactions	Common Stock Class A IPO Effect of the Transactions	Common Stock Class B	Common Stock Class B Effect of the Transactions	Common Stock Class C	Common Stock Class C Effect of the Transactions	Common Stock Class D	Common Stock Class D Effect of the Transactions
Beginning Balance at Dec. 31, 2020	$ (344,608)				$ (245,806)			$ (98,860)					$ 58
Issuance of common units	1,560							1,560
Repurchase of common units	(626)							(626)
Options withheld for minimum tax obligations for net unit settlement	(587)							(587)
Equity-based compensation	4,865							4,865
Foreign currency translation adjustment	21												21
Net income (loss)	3,411				3,411
Ending Balance at Mar. 31, 2021	(335,964)				(242,395)			(93,648)					79
Beginning Balance at Dec. 31, 2020	(344,608)				(245,806)			(98,860)					58
Net income (loss)	(8,228)
Ending Balance at Sep. 30, 2021	242,387							373,314					(40)				$ (191,234)			$ 60,112			$ 47			$ 11		$ 47		$ 130
Ending balance, shares at Sep. 30, 2021																							47,366,089			11,151,110		47,377,587		130,083,755
Beginning Balance at Mar. 31, 2021	(335,964)				(242,395)			(93,648)					79
Exercise of options to purchase common stock	251							251
Equity-based compensation	6,691							6,691
Foreign currency translation adjustment	(5)												(5)
Net income (loss)	(211)				(211)
Ending Balance at Jun. 30, 2021	(329,238)				$ (242,606)			(86,706)					74
Issuance of common units				$ 577,087								$ 577,052													$ 35
Issuance of common units, shares																									34,500,000
Exercise of options to purchase common stock		$ 8							$ 8
Options withheld for minimum tax obligations for net unit settlement		(1,598)							(1,598)
Effect of organizational transactions, value							$ 242,977											$ (243,178)						$ 13			$ 11		$ 47		$ 130
Effect of organizational transactions, shares																								12,866,089			11,151,110		47,377,587		130,083,755
Allocation of equity to non-controlling interest										$ (122,813)					$ 11			$ 60,258			$ 62,545
Equity-based compensation		6,425	$ 1,258						$ 6,425		$ 946											$ 312
Foreign currency translation adjustment		(117)	(10)											$ (117)		$ (8)						(2)
Net income (loss)	(11,428)	$ (371)	$ (11,056)			$ (371)													$ (8,314)			$ (2,742)
Ending Balance at Sep. 30, 2021	242,387							373,314					(40)				(191,234)			60,112			$ 47			$ 11		$ 47		$ 130
Ending balance, shares at Sep. 30, 2021																							47,366,089			11,151,110		47,377,587		130,083,755
Beginning Balance at Dec. 31, 2021	261,868							388,591					(34)				(191,926)			65,001			$ 48			$ 11		$ 47		$ 130
Beginning balance, shares at Dec. 31, 2021																							47,948,888			11,151,110		47,377,587		130,083,755
Exercise of options to purchase common stock	5,613							4,226												1,387			$ 1
Exercise of options to purchase common stock, shares																							857,647
Equity-based compensation	16,028							12,067												3,960
Foreign currency translation adjustment	(300)												(226)							(74)
Net income (loss)	528																398			130
Accrued tax distributions payable to Continuing Equity Owners	(27)																			(27)
Effect of LLC unit exchanges, value																	8,348			(8,348)			$ 7			$ (7)
Effect of LLC unit exchanges, shares																							6,643,614			(6,643,614)
Ending Balance at Mar. 31, 2022	283,764							404,884					(260)				(183,180)			62,083			$ 55			$ 5		$ 47		$ 130
Ending balance, shares at Mar. 31, 2022																							55,450,149			4,507,496		47,377,587		130,083,755
Beginning Balance at Dec. 31, 2021	261,868							388,591					(34)				(191,926)			65,001			$ 48			$ 11		$ 47		$ 130
Beginning balance, shares at Dec. 31, 2021																							47,948,888			11,151,110		47,377,587		130,083,755
Net income (loss)	(4,728)
Ending Balance at Sep. 30, 2022	310,263							432,640					(1,880)				(184,648)			63,913			$ 59			$ 2		$ 47		$ 130
Ending balance, shares at Sep. 30, 2022																							59,199,868			1,662,802		47,377,587		130,083,755
Beginning Balance at Mar. 31, 2022	283,764							404,884					(260)				(183,180)			62,083			$ 55			$ 5		$ 47		$ 130
Beginning balance, shares at Mar. 31, 2022																							55,450,149			4,507,496		47,377,587		130,083,755
Exercise of options to purchase common stock	771							603												168
Exercise of options to purchase common stock, shares																							105,251
Restricted stock units released																							93,750
ESPP shares issued	2,401							1,877												523			$ 1
ESPP shares issued, shares																							200,220
Equity-based compensation	16,314							12,759												3,555
Foreign currency translation adjustment	(961)												(752)							(209)
Net income (loss)	(2,230)																(2,428)			198
Accrued tax distributions payable to Continuing Equity Owners	(834)																			(834)
Effect of LLC unit exchanges, value																	2,410			(2,410)			$ 2			$ (2)
Effect of LLC unit exchanges, shares																							1,810,711			(1,810,711)
Ending Balance at Jun. 30, 2022	299,225							420,123					(1,012)				(183,198)			63,074			$ 58			$ 3		$ 47		$ 130
Ending balance, shares at Jun. 30, 2022																							57,660,081			2,696,785		47,377,587		130,083,755
Exercise of options to purchase common stock	1,542							1,218												324
Exercise of options to purchase common stock, shares																							188,758
Restricted stock units released																							479,485
Shares withheld for tax obligations,share																							(162,439)
Shares withheld for tax obligations	(2,564)							(2,025)												(539)
Equity-based compensation	16,873							13,324												3,549
Foreign currency translation adjustment	(1,100)												(868)							(232)
Net income (loss)	(3,026)																(2,974)			(52)
Accrued tax distributions payable to Continuing Equity Owners	(687)																			(687)
Effect of LLC unit exchanges, value																	1,524			(1,524)			$ 1			$ (1)
Effect of LLC unit exchanges, shares																							1,033,983			(1,033,983)
Ending Balance at Sep. 30, 2022	$ 310,263							$ 432,640					$ (1,880)				$ (184,648)			$ 63,913			$ 59			$ 2		$ 47		$ 130
Ending balance, shares at Sep. 30, 2022																							59,199,868			1,662,802		47,377,587		130,083,755

XML

Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
OPERATING ACTIVITIES
Net loss	$ (4,728)	$ (8,228)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	3,499	2,204
Noncash operating lease cost	5,226
Equity-based compensation	48,768	19,239
Change in tax receivable agreement liability	5,700
Amortization of deferred contract acquisition costs	3,221	2,404
Amortization of debt issuance costs, included in interest expense	210	1,474
Deferred tax benefit	(590)
Debt extinguishment costs		10,303
Changes in operating assets and liabilities:
Accounts receivable, net	(15,051)	(16,117)
Prepaid expenses and other assets	1,618	(8,717)
Deferred commissions	(3,593)	(2,922)
Accounts payable	240	194
Accrued expenses and other liabilities	(4,673)	(8,893)
Net cash provided by (used in) operating activities	39,847	(9,059)
INVESTING ACTIVITIES
Purchases of property and equipment	(5,880)	(3,499)
Purchase of short-term investments	(3,000)
Net cash used in investing activities	(8,880)	(3,499)
FINANCING ACTIVITIES
Proceeds from issuance of common units		1,560
Proceeds from exercise of options	7,926	259
Minimum tax withholding paid on behalf of employees for net share/unit settlement	(2,564)	(2,185)
Repurchase of common units		(626)
Proceeds from employee stock purchase plan	2,401
Repayments of borrowings	(2,063)	(434,231)
Payments of costs associated with early repayment of debt		(2,029)
Proceeds from borrowings		55,000
Payment of debt issuance costs		(1,400)
Proceeds from initial public offering, net of underwriting discounts		582,188
Payment of costs associated with the IPO	(214)	(1,850)
Payment of tax distributions	(17)
Net cash provided by financing activities	5,469	196,686
Effect of exchange rate changes on cash and cash equivalents	(2,510)	(122)
Net increase in cash and cash equivalents during the period	33,926	184,006
Cash and cash equivalents, beginning of period	254,597	61,088
Cash and cash equivalents, end of period	288,523	245,094
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	766	25,847
Cash paid for income taxes	1,425	67
NON-CASH INVESTING AND FINANCING ACTIVITIES
Purchase of property and equipment included in accounts payable and accrued expense	162	325
Direct costs incurred with the IPO included in other assets and accrued expenses		$ 3,251
Tax distributions to unitholders included in accrued expense	$ 1,646

XML

Organization and Description of Business

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Description of Business

Note 1. Organization and Description of Business

Clearwater Analytics Holdings, Inc. was incorporated as a Delaware corporation on May 18, 2021, as a holding company for the purpose of facilitating the IPO and other related transactions in order to carry on the business of the Company. Prior to the IPO, all business operations were conducted through Carbon Analytics Holdings, LLC, which changed its name to CWAN Holdings, LLC (“CWAN Holdings”) in connection with the IPO. Clearwater provides a SaaS solution for automated investment data aggregation, reconciliation, accounting and reporting services to insurers, investment managers, corporations, institutional investors and government entities. Following the IPO, Clearwater Analytics Holdings, Inc.'s principal asset consists of ownership of common units in CWAN Holdings. As the sole managing member of CWAN Holdings, Clearwater Analytics Holdings, Inc. operates and controls all the business operations of Clearwater. Our corporate structure following the IPO, as described above, is commonly referred to as an “Up-C” structure.

The Company headquarters are located in Boise, ID, and we operate in five offices throughout the U.S. and six offices internationally.

Initial Public Offering

On September 28, 2021, the Company completed its IPO, in which it sold 34,500,000 shares of Class A common stock (including shares issued pursuant to the exercise in full of the underwriters’ option to purchase additional shares) at a public offering price of $18.00 per share for net proceeds of $582.2 million, after deducting underwriting discounts of $38.8 million (but excluding other offering expenses of $5.3 million). The Company used proceeds from the IPO to (i) purchase 34,500,000 common units of CWAN Holdings (“LLC interests”); (ii) repay approximately $437.4 million of outstanding borrowings under the Previous Credit Agreement including prepayment premiums and accrued interest; (iii) pay $5.3 million of expenses related to the IPO; with the remaining proceeds intended to be used for general corporate purposes.

Transactions

In connection with the IPO, the Company completed the following organizational transactions (the “Transactions”):

•the amendment and restatement of the limited liability company agreement of CWAN Holdings to, among other things, appoint Clearwater Analytics Holdings, Inc. as the sole managing member of CWAN Holdings and provide certain exchange and redemption rights to direct or indirect holders of interests in CWAN Holdings and/or our Class B common Stock, Class C common Stock and/or Class D common stock immediately following consummation of the Transactions, including the Principal Equity Owners, and the Continuing Equity Owners;

•the amendment and restatement of the certificate of incorporation of Clearwater Analytics Holdings, Inc. to create Class A, B, C and D common stock;

•the mergers of Blocker Entities into Clearwater Analytics Holdings, Inc. and the issuance of Class A common stock, Class B common stock, Class C common stock, and Class D common stock to Blocker Shareholders and the Continuing Equity Owners. Blocker Entities refers to entities affiliated with certain of the Continuing Equity Owners, each of which was a direct or indirect owner of LLC Interests in CWAN Holdings prior to the Transactions and was taxable as a corporation for U.S. federal income tax purposes, and Blocker Shareholders refers to entities affiliated with certain of the Continuing Equity Owners, each of which was an owner of one or more of the Blocker Entities prior to the Transactions, which exchanged their interests in the Blocker Entities for shares of our Class A common stock, in the case of Continuing Equity Owners other than the Principal Equity Owners, and for shares of our Class D common stock, in the case of the Principal Equity Owners, in connection with the consummation of the Transactions;

•the issue of 11,151,110 shares of Class B common stock to Continuing Equity Owners other than the Principal Equity Owners and 47,377,587 shares of Class C common stock to the Principal Equity Owners, on a one-to-one basis with the number of common units of CWAN Holdings. Holders of our Class B and Class C common stock, along with the holders of our Class A and Class D common stock have certain voting rights, but holders of our Class B and Class C common stock do not have an economic interest in the Company;

•the issue of 130,083,755 shares of Class D common stock to the Principal Equity Owners, on a one-to-one basis, with the number of common units of CWAN Holdings. Holders of Class D common stock have certain voting rights and are entitled an economic interest in the Company; and

•the execution of the Tax Receivable Agreement, by and among Clearwater Analytics Holdings, Inc., CWAN Holdings, LLC and the other parties thereto (Note 10).

As of September 30, 2022, the Company owns 79.4% of the interests in CWAN Holdings. Continuing Equity Owners which hold Class B and Class C common stock own the remaining 20.6% of the interests in CWAN Holdings. The attributes of the Company's classes of common stock are summarized in the following table:

Class of Common Stock	Votes per Share	Economic Rights
Class A common stock	1	Yes
Class B common stock	1	No
Class C common stock	10	No
Class D common stock	10	Yes

XML

Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the SEC and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full fiscal year.

Principles of consolidation

The condensed consolidated financial statements include the accounts of the Company and its directly and indirectly wholly-owned or controlled subsidiaries. As the Transactions are considered transactions between entities under common control, the financial statements for periods prior to the IPO and the Transactions have been adjusted to combine the previously separate entities for presentation purposes. All intercompany balances and transactions have been eliminated through consolidation. Clearwater Analytics Holdings, Inc. consolidated the financial results of CWAN Holdings as a Variable Interest Entity (“VIE”). Clearwater Analytics Holdings, Inc. owns the majority economic interest and has the power to control all the business and affairs of CWAN Holdings.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensed consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Actual results could differ materially from those estimates.

Items subject to estimates and assumptions include the useful lives and recoverability of long-lived assets, the average period of benefit associated with deferred contract costs, sales reserves, the incremental borrowing rate applied in lease accounting, accruals for sales tax liabilities, the fair value of equity awards, tax valuation allowance and probability of making payments under the TRA, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the result of which forms the basis for making judgments about the carrying values of assets and liabilities, and measurement of revenues and expenses. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, the Company’s condensed consolidated financial statements will be affected.

Significant Accounting Policies

The Company's significant accounting policies are discussed in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies in the Annual Report. There have been no significant changes to these policies that have had a material impact on the Company's unaudited condensed consolidated financial statements and related notes during the three and nine months ended September 30, 2022, except as noted below.

Short-term Investments

We classify our investments with an original maturity of greater than three months, but less than one year, as short-term investments. Investments in debt securities that we have the positive intent and ability to hold until maturity are classified as held-to-maturity debt securities. Our held-to-maturity debt securities consist of short term certificates of deposit which mature in less than one year. Held-to-maturity debt investments are recorded at amortized cost, which approximates fair value, and realized gains or losses are reported in earnings. The Company does not hold any other short-term investments.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which provides clarification to ASU 2016-02. These ASU's (collectively, the “new lease standard”) requires lessees to recognize on the balance sheet the assets and liabilities for the assets and obligations created by those leases. The standard was effective for public companies for annual periods beginning after December 15, 2018, including interim periods therein. The Company is allowed to use the private company adoption timelines, and therefore the standard is effective for the Company for its annual period beginning January 1, 2022, and interim periods therein.

On January 1, 2022, the Company adopted ASU No. 2016-02, and its associated amendments using the modified retrospective transition method by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. There was no cumulative-effect adjustment recorded to stockholders' equity upon adoption. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carry forward its historical lease classification, assessment on whether a contract was or contains a lease, and initial direct costs for leases that existed prior to January 1, 2022. The Company also elected to combine its lease and non-lease components and not recognize right-of-use (“ROU”) assets and lease liabilities for leases with an initial term of 12 months or less. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of ROU assets.

At the date of adoption, the Company derecognized a deferred rent liability of approximately $1.5 million, and recognized a $23.1 million ROU asset and $24.6 million lease liability based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases.

XML

Revenue Recognition

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Note 3. Revenue Recognition

The Company is applying the optional exemption to not disclose transaction price allocated to the remaining performance obligations as the Company’s performance obligations are part of contracts that have an expected original duration of one year or less.

Of the total revenue recognized for the three and nine months ended September 30, 2022, $0.1 million and $0.4 million was included in the deferred revenue balance as of December 31, 2021, respectively. Revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were not material.

The following table presents the Company’s revenue disaggregated by geography, based on billing address of the customer (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
United States	$	65,420	$	59,445	$	189,307	$	166,765
Rest of World		11,132		5,044		31,432		15,494
Total revenue	$	76,552	$	64,489	$	220,739	$	182,259

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 4. Fair Value Measurements

The following tables set forth the fair value of the Company’s financial assets measured at fair value as of September 30, 2022 and December 31, 2021 in accordance with the fair value hierarchy (in thousands):

	September 30, 2022
	Level I		Level II		Level III		Total
Financial Assets:
Cash and cash equivalents:
Money market funds	$	284,873	$	—	$	—	$	284,873
Short-term investments:
Certificates of deposit		—		3,000		—		3,000
Total assets measured at fair value	$	284,873	$	3,000	$	—	$	287,873

	December 31, 2021
	Level I		Level II		Level III		Total
Financial Assets:
Cash and cash equivalents:
Money market funds	$	248,744	$	—	$	—	$	248,744
Total assets measured at fair value	$	248,744	$	—	$	—	$	248,744

During the nine months ended September 30, 2022 and year ended December 31, 2021, there were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 of the fair value hierarchy.

XML

Supplemental Consolidated Balance Sheet Information

9 Months Ended

Sep. 30, 2022

Balance Sheet Related Disclosures [Abstract]

Supplemental Consolidated Balance Sheet Information

Note 5. Supplemental Consolidated Balance Sheet Information

Accounts Receivable, net

Accounts receivable, net consisted of the following (in thousands):

	September 30,			December 31,
	2022			2021
Unbilled accounts receivable	$	27,696		$	27,086
Billed accounts receivable		37,640			23,227
Allowance for doubtful accounts and reserves		(95	)		(123	)
Accounts receivable, net	$	65,241		$	50,190

The majority of invoices included within the unbilled accounts receivable balance are issued within the first few days of the month directly following the period of service.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Prepaid expenses	$	10,233	$	11,722
Deferred contract costs, current portion		3,867		3,573
Other current assets		2,282		1,256
Prepaid expense and other current assets	$	16,382	$	16,551

Property and equipment, net

Depreciation and amortization expense for the three months ended September 30, 2022 and 2021 was $1.4 million and $0.8 million, respectively, and for the nine months ended September 30, 2022 and 2021 was $3.5 million and $2.2 million, respectively. Accumulated depreciation and amortization as of September 30, 2022 and December 31, 2021 was $15.5 million and $12.2 million, respectively.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Accrued bonus	$	6,652	$	8,295
Accrued interest		424		9
Accrued benefits and retirement		4,866		4,368
Accrued vendor liabilities		4,819		4,756
Accrued commissions		2,217		2,350
Deferred revenue		1,293		795
Income tax payable		1,114		771
Accrued sales tax exposure		969		1,444
Tax distributions payable to Continuing Equity Owners		112		169
Deferred rent		—		1,514
Other current liabilities		3,279		2,561
Accrued expenses and other liabilities	$	25,745	$	27,032

XML

Leases

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Leases

Note 6. Leases

The Company adopted ASC 842 as of January 1, 2022. The Company leases facilities under non-cancelable operating lease agreements with varying terms that range from one to 10 years. In addition, some of these leases have renewal options for up to five years. The Company determines if an arrangement contains a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, and operating lease liabilities on the Company's condensed consolidated balance sheets. The Company does not have any finance leases.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company does not account for lease components (e.g., fixed payments including rent) separately from the non-lease components (e.g., common-area maintenance costs).

Rent expense was $1.0 million and $2.7 million for the three and nine months ended September 30, 2021, respectively, which the Company recognized on a straight-line basis over the non-cancellable lease term.

Future minimum lease payments at December 31, 2021 under the Company’s non-cancellable leases were as follows (in thousands):

2022	$	3,927
2023		3,843
2024		3,649
2025		3,434
2026		3,007
Thereafter		809
Total minimum lease payments	$	18,669

Operating lease cost was $1.9 million and $5.2 million for the three and nine months ended September 30, 2022, respectively. Variable lease cost and short-term lease cost were immaterial during the three and nine months ended September 30, 2022. Future minimum lease payments at September 30, 2022 under the Company’s non-cancellable leases were as follows (in thousands):

2022 (remaining three months)	$	1,602
2023		5,940
2024		5,555
2025		5,486
2026		4,839
Thereafter		1,190
Total future minimum lease payments		24,612
Less: Imputed interest		(1,858	)
Present value of future minimum lease payments		22,754
Less: Current portion of operating lease liability		(5,343	)
Operating lease liabilities - noncurrent	$	17,411

The following table presents supplemental information for the Company's non-cancellable operating leases for the nine months ended September 30, 2022 (in thousands, except for weighted average and percentage data):

Weighted average remaining lease term	4.29
Weighted average discount rate		3.77	%
Cash paid for amounts included in the measurement of lease liabilities	$	1,534
Noncash right-of-use assets obtained in exchange for operating lease obligations(1)	$	26,027

(1)Amount includes (i) $23.1 million related to the adoption of ASC 842 for existing operating leases on January 1, 2022, (ii) $3.5 million related to the Company entering into new non-cancellable operating lease agreements during 2022, and (iii) partially offset by a noncash reduction of $0.6 million related to the remeasurement of the existing Noida, India lease due to a change in the lease term of the agreement.

XML

Non-controlling Interest

9 Months Ended

Sep. 30, 2022

Noncontrolling Interest [Abstract]

Non-controlling Interest

Note 7. Non-controlling Interest

In connection with the Transactions, the Company became the sole managing member of CWAN Holdings, and has the sole voting interest in, and control of the management of, CWAN Holdings. As a result, the Company consolidates the financial results of CWAN Holdings. The non-controlling interest on our condensed consolidated balance sheet relates to the interests of CWAN Holdings held by the Continuing Equity Owners. The ownership of the LLC interests is summarized as follows:

	September 30, 2022					December 31, 2021
	Shares		Ownership %			Shares		Ownership %
Clearwater Analytics Holdings, Inc. interest in CWAN Holdings		189,283,623		79.4	%		178,032,643		75.3	%
Continuing Equity Owners' interest in CWAN Holdings		49,040,389		20.6	%		58,528,697		24.7	%
		238,324,012		100.0	%		236,561,340		100.0	%

XML

Loss Per Share

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Loss Per Share

Note 8. Loss Per Share

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted net loss per share of Class A and Class D common stock for the periods following the Transactions (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Numerator:
Net loss	$	(3,026	)	$	(11,428	)	$	(4,728	)	$	(8,228	)
Less: Net income (loss) attributable to CWAN Holdings prior to the Transactions		—			(371	)		—			2,829
Less: Net income (loss) attributable to non-controlling interests		(52	)		(2,742	)		277			(2,742	)
Net loss attributable to Clearwater Analytics Holdings, Inc. - basic		(2,974	)		(8,314	)		(5,005	)		(8,314	)
Reallocation of net income (loss) attributable to non-controlling interests from the assumed exchange of Class B and Class C stock for Class A and Class D stock		(52	)		(2,742	)		277			(2,742	)
Net loss attributable to Clearwater Analytics Holdings, Inc. - diluted	$	(3,026	)	$	(11,056	)	$	(4,728	)	$	(11,056	)

The following tables sets forth the computation of basic and diluted net loss per share of Class A and Class D common stock (in thousands, except share amounts and per share amounts):

	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Class A			Class D			Class A			Class D
Basic net loss attributable to Class A and Class D common stockholders
Numerator:
Allocation of net loss attributable to Clearwater Analytics, Inc.	$	(914	)	$	(2,060	)	$	(1,467	)	$	(3,538	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		57,740,776			130,083,755			53,942,623			130,083,755
Basic net loss per share attributable to Class A and Class D common stockholders	$	(0.02	)	$	(0.02	)	$	(0.03	)	$	(0.03	)

	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Class A			Class D			Class A			Class D
Diluted net loss attributable to Class A and Class D common stockholders
Numerator:
Undistributed loss for basic computation	$	(914	)	$	(2,060	)	$	(1,467	)	$	(3,538	)
Reallocation of earnings as a result of conversion of Class B to Class A shares and conversion Class C to Class D shares		146			(198	)		273			4
Reallocation of earnings as a result of conversion of Class D to Class A shares		(2,258	)		—			(3,534	)		—
Allocation of undistributed loss	$	(3,026	)	$	(2,258	)	$	(4,728	)	$	(3,534	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		57,740,776			130,083,755			53,942,623			130,083,755
Add: weighted-average effect of dilutive securities exchangeable for Class A common stock:
Conversion of Class B stock to Class A stock, and conversion of Class C stock to Class D stock		2,667,173			47,377,587			6,037,259			47,377,587
Conversion of Class D to Class A common shares outstanding		177,461,342			—			177,461,342			—
Weighted average number of shares of Class A and Class D common stock outstanding - diluted		237,869,291			177,461,342			237,441,224			177,461,342
Diluted net loss per share attributable to Class A and Class D common stockholders	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)

	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Class A			Class D			Class A			Class D
Basic net loss attributable to Class A and Class D common stockholders
Numerator:
Allocation of net loss attributable to Clearwater Analytics, Inc.	$	(2,219	)	$	(6,095	)	$	(2,219	)	$	(6,095	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic(1)		47,366,089			130,083,755			47,366,089			130,083,755
Basic net loss per share attributable to Class and Class D common stockholders	$	(0.05	)	$	(0.05	)	$	(0.05	)	$	(0.05	)

(1)Weighted average number of shares of Class A and Class D common stock outstanding represents only the period from September 24, 2021 to September 30, 2021, which represents the period wherein we had outstanding Class A and Class D common stock.

	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Class A			Class D			Class A			Class D
Diluted net loss attributable to Class A and Class D common stockholders
Numerator:
Undistributed loss for basic computation	$	(2,219	)	$	(6,095	)	$	(2,219	)	$	(6,095	)
Reallocation of earnings as a result of conversion of Class B to Class A shares and conversion Class C to Class D shares		(522	)		(2,219	)		(522	)		(2,219	)
Reallocation of earnings as a result of conversion of Class D to Class A shares		(8,314	)		—			(8,314	)		—
Allocation of undistributed loss	$	(11,055	)	$	(8,314	)	$	(11,055	)	$	(8,314	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		47,366,089			130,083,755			47,366,089			130,083,755
Add: weighted-average effect of dilutive securities exchangeable for Class A common stock:
Conversion of Class B stock to Class A stock, and conversion of Class C stock to Class D stock		11,151,110			47,377,587			11,151,110			47,377,587
Conversion of Class D to Class A common shares outstanding		177,461,342			—			177,461,342			—
Weighted average number of shares of Class A and Class D common stock outstanding - diluted		235,978,541			177,461,342			235,978,541			177,461,342
Diluted net loss per share attributable to Class A and Class D common stockholders	$	(0.05	)	$	(0.05	)	$	(0.05	)	$	(0.05	)

Shares of the Company's Class B and Class C common stock do not participate in the earnings or losses of Clearwater Analytics Holdings, Inc. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B and Class C common stock under the two-class method has not been presented.

The following weighted-average potentially dilutive securities were evaluated under the treasury stock method for potentially dilutive effects and have been excluded from diluted net loss per share in the periods presented due to their anti-dilutive effect:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Stock options of Clearwater Analytics Holdings, Inc.		10,163,645		13,041,159		10,939,998		13,041,159
RSUs of Clearwater Analytics Holdings, Inc.		713,091		61,845		1,044,382		61,845
Employee stock purchase plans		11,536		—		7,187		—
Total		10,888,272		13,103,004		11,991,567		13,103,004

XML

Equity-Based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Equity-Based Compensation

Note 9. Equity-Based Compensation

In September 2021, the Board of Directors of the Company (the “Board”) adopted the Clearwater Analytics Holdings, Inc. 2021 Omnibus Incentive Plan (the “2021 Plan”), pursuant to which employees, consultants and directors of our Company and our affiliates performing services for us, including our executive officers, are eligible to receive awards. The 2021 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), bonus stock, dividend equivalents, other stock-based awards, substitute awards, annual incentive awards and performance awards intended to align the interests of participants with those of our shareholders. A total of 57,197,804 shares of common stock are authorized for issuance under the 2021 Plan. In connection with the approval of the 2021 Plan, the 2017 Equity Incentive Plan (the “2017 Plan”) was terminated and all outstanding stock options and RSUs were transferred to the 2021 Plan.

Options

The following table summarizes the stock option activity for the nine months ended September 30, 2022 (in thousands, except per share data):

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance - December 31, 2021		22,315,171		$	8.52
Granted		43,986			18.19
Exercised		(1,151,656	)		6.88
Forfeited		(941,296	)		10.48
Balance - September 30, 2022		20,266,205		$	8.54		7.57	$	169,187
Options vested - September 30, 2022		10,678,809		$	6.78			$	107,180

The weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 2022 was $7.74 per share. The aggregate intrinsic value as of September 30, 2022 disclosed in the above table is based on the difference between the exercise price of the stock option and the closing stock price on the NYSE on September 30, 2022. As of September 30, 2022, the total unrecognized compensation expense related to unvested options was $51.4 million, which is expected to be recognized over a weighted average period of 2.3 years.

RSUs

During June 2021, the Company began to grant RSUs to employees. The summary of RSU activity for the nine months ended September 30, 2022 is as follows (in thousands, except per share data):

	Units Activity			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Unvested units as of December 31, 2021		6,070,668		$	—
Granted		1,426,336			19.21
Released		(573,235	)	—
Cancelled		(514,121	)	—
Unvested units as of September 30, 2022		6,409,648				$	107,618

The aggregate intrinsic value disclosed in the above table is based on the closing stock price on the NYSE on September 30, 2022. As of September 30, 2022, there was $88.5 million of unrecognized equity-based compensation expense related to RSUs, which is expected to be recognized over a weighted average period of 2.9 years.

Determination of Fair Value

The Company estimated the fair value of each stock option awarded on the date of grant using the Black-Scholes option-pricing model utilizing the assumptions noted below:

Fair Value of Units – prior to the IPO, the fair value of the common stock underlying the equity-based awards was determined by the Company’s Board of Directors, with input from management and third-party valuations. Subsequent to the IPO, the fair value of the common stock underlying equity-awards was determined using the closing price on the date of the award being granted.

Expected Term – the expected term represents the period that the awards are expected to be outstanding. The Company issues “plain vanilla,” awards and the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the equity-based awards.

Expected Volatility – the stock price volatility is estimated based on the volatility of a set of publicly traded comparable companies with a look back period consistent with the expected life.

Risk-Free Interest Rate – the risk-free interest rate is calculated using the average of the published interest rates of U.S. Treasury zero-coupon issues with maturities that approximate the expected term of the equity-based awards.

Dividend Rate – the dividend yield assumption is zero. Although the Company made a special one-time dividend in conjunction with the November 2020 recapitalization transaction, the Company has no history of making regular dividends, nor plans to make future dividend payments.

The following assumptions were used to calculate the fair value of options granted to employees on the date of grant using the Black-Scholes option-pricing model:

	Nine Months Ended September 30,
	2022			2021
Weighted-average grant date fair value per option	$	7.74		$	4.63
Fair value of units	$17.72 - $18.68			$12.40 - $23.89
Expected term (in years)		5.50		6.00 - 6.25
Expected volatility		44	%	40% - 42%
Risk-free interest rates	1.8% - 2.0%			0.6% - 1.3%

In addition to the Black-Scholes assumptions discussed immediately above, forfeitures may also have a significant impact on the related equity-based compensation. The forfeiture of options and RSUs is recognized as forfeitures occur.

In the period subsequent to the IPO, the Company estimated the fair value of each RSU awarded using the closing price on the date of the award being granted.

Employee Stock Purchase Plan

In September 2021, the Board adopted the Clearwater Analytics Holdings, Inc. 2021 Employee Stock Purchase Plan (“ESPP”). As of January 1, 2022, a total of 5,837,791 shares of Class A common stock were available for issuance under the ESPP. The offering periods are scheduled to start on June 1 and December 1 of each year. Eligible employees may purchase the Company's common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of six-month offering periods. An employee's payroll deductions under the ESPP are limited to 10% of the employee's compensation and an employee may not purchase more than $25,000 of stock during any calendar year in which the employee’s option to purchase stock under the ESPP is outstanding at any time.

On May 31, 2022, a total of 200,220 shares were issued to employees for the offering period ended May 31, 2022. As of September 30, 2022, total unrecognized equity-based compensation costs related to ESPP were $0.3 million, which is expected to be recognized over the remaining current offering period ending November 30, 2022.

ESPP payroll contributions accrued at September 30, 2022 totaled $1.4 million and are included within accrued expenses in the consolidated balance sheets. Employee payroll contributions used to purchase shares under the ESPP will be reclassified to stockholders' equity at the end of the offering period.

XML

Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 10. Income Taxes

As a result of the IPO, Clearwater Analytics Holdings, Inc. owns a portion of CWAN Holdings, which contains all operations of the business and is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, CWAN Holdings is generally not subject to U.S. federal, state, and local income taxes. Any taxable income or loss generated by CWAN Holdings is passed through to and included in the taxable income or loss of its members in accordance with the terms of the operating agreement of CWAN Holdings. Before the IPO, the majority of CWAN Holdings’ income was passed through to its members and nontaxable to the entity. CWAN Holdings’ international wholly-owned subsidiaries are subject to taxes in foreign jurisdictions.

Clearwater Analytics Holdings, Inc. is taxed as a corporation and pays corporate federal, state, and local taxes on income allocated to it from CWAN Holdings based on Clearwater Analytics Holdings, Inc.’s economic interest held in CWAN Holdings. While the Company consolidates CWAN Holdings for financial reporting purposes, the Company will not be taxed on the earnings attributed to the non-controlling interests. As a result, the income tax burden on the earnings taxed to the non-controlling interests is not reported by the Company in its condensed consolidated financial statements.

Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in the applicable quarter. In each quarter, we update the estimated annual effective tax rate and make a year-to-date adjustment to the provision. The estimated annual effective tax rate may be subject to significant volatility due to several factors, including our ability to accurately predict the proportion of our pretax income in multiple jurisdictions, certain book-tax differences, and exchanges from non-controlling interests.

The following table provides details of the provision for income taxes:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Loss before provision for income taxes	$	(2,602	)	$	(11,212	)	$	(3,769	)	$	(7,692	)
Provision for income taxes		424			216			959			536
Effective tax rate		(16.3	%)		(1.9	%)		(25.4	%)		(7.0	%)

For the three and nine months ended September 30, 2022, the Company’s effective tax rate was different than the statutory rate primarily because of foreign taxes, equity-based compensation and the valuation allowance on U.S. deferred tax assets. In addition, the Company is not liable for income taxes on the portion of CWAN Holdings’ earnings that are attributable to non-controlling interests.

For the three and nine months ended September 30, 2021, the Company’s effective tax rate was different than the statutory rate primarily because of foreign taxes and the valuation allowance on U.S. deferred tax assets. In addition, the Company is not liable for income taxes on the portion of CWAN Holdings’ earnings that are attributable to non-controlling interests.

The Company regularly monitors its uncertain tax positions, and as of September 30, 2022, there were no material unrecognized tax benefits that, if realized, would affect the estimated annual effective tax rate, nor do we expect any significant changes within the next 12 months.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence as of September 30, 2022, we believe that it is more likely than not that the tax benefits of the U.S. losses incurred may not be realized. Accordingly, we have recorded a full valuation allowance against the tax benefits of the U.S. losses incurred. We intend to maintain the full valuation allowance on the U.S. net deferred tax assets until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance.

On March 16, 2022, Idaho enacted House Bill 563 that amended portions of relevant tax laws. Due to our valuation allowance in the U.S., this legislation did not have a significant impact on the provision for income taxes for the three and nine months ended September 30, 2022. However, we expect our blended state tax rate to decrease due to the new law.

On August 9, 2022, the Creating Helpful Incentives to Produce Semiconductors Act (“CHIPS Act”) was passed into law and amended portions of relevant tax laws. The CHIPS Act did not have a significant impact on the provision for income taxes for the three and nine months ended September 30, 2022. We do not expect this legislation to materially affect us.

On August 16, 2022, the Inflation Reduction Act was passed into law and amended portions of relevant tax laws. The Inflation Reduction Act did not have a significant impact on the provision for income taxes for the three and nine months ended September 30, 2022. We do not expect this legislation to materially affect us.

Tax Receivable Agreement Liability

Pursuant to our election under Section 754 of the Internal Revenue Code (the “Code”), we expect to obtain an increase in our share of the tax basis in the net assets of CWAN Holdings when its units are redeemed or exchanged. We intend to treat any redemptions and exchanges of CWAN Holdings units as direct purchases of the units for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that we would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent the tax basis is allocated to those capital assets.

In connection with the IPO and related transactions, we entered into a TRA that provides for the payment by us of 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of CWAN Holdings resulting from any redemptions or exchanges of CWAN Holdings units, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest and TRA bonus payments pursuant to the TRA (the “TRA Payments”). We expect to benefit from the remaining 15% of any tax benefits that we may actually realize. The TRA Payments are not conditioned upon any continued ownership interest in CWAN Holdings or the Company. The rights of each member of CWAN Holdings, that is a party to the TRA, are assignable to transferees of their respective CWAN Holdings units.

The estimation of a liability under the TRA is, by its nature, imprecise and subject to significant assumptions regarding a number of factors, including (but not limited to) the amount and timing of taxable income generated by the Company each year as well as the tax rate then applicable. The future tax benefits related to ownership exchanges as of September 30, 2022 are estimated to be $410 million, of which $348 million is estimated to be the associated TRA liability.

As noted above, the Company evaluated the realizability of its U.S. deferred tax assets and has recorded a full valuation against those benefits. As a result, the Company determined that it is not probable that payments will be made to TRA holders for these future tax benefits, and as such no TRA liability related to future years has been recorded as of September 30, 2022.

We are projecting taxable income for the current year and have recorded a TRA liability of $5.7 million as of September 30, 2022. There are many assumptions and considerations that impact our taxable income position in the current year, some of which are out of our direct control. As such, the estimate of our taxable income position (and thus, the TRA liability recognized) for the current year could change significantly.

As non-controlling interest holders exercise their right to exchange their units in CWAN Holdings, a TRA liability may be recorded based on 85% of the estimated future tax benefits that the Company may realize as a result of increases in the tax basis of CWAN Holdings. The amount of the increase in the tax basis, the related estimated tax benefits, and the related TRA liability to be recorded will depend (among other things) on the price of the Company’s Class A stock at the time of the relevant redemption or exchange.

XML

Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 11. Commitments and Contingencies

On September 29, 2022, we announced our entry into a binding put option and exclusivity agreement that will lead to the acquisition of JUMP Technology, a privately held developer of an innovative, modular, technology platform that is dedicated to the investment management industry spanning investment managers, hedge funds, private banks, family offices, insurers, and institutional investors. We believe that this acquisition will expand our capabilities in investment management and operations with a complete front-to-back end solution. We will purchase JUMP Technology pursuant to the terms of a customary French put and exclusivity agreement for €75 million. Additionally, Employees will receive up to 3.8 million restricted stock units in the Company to be earned over four years from their grant date. The acquisition will add 100 employees serving 70 customers across Europe. The transaction is expected to close in the fourth quarter of 2022, subject to completion of French regulatory requirements and other closing conditions.

XML

Transactions with Related Parties

9 Months Ended

Sep. 30, 2022

Related Party Transactions [Abstract]

Transactions with Related Parties

Note 12. Transactions with Related Parties

During January 2021, the Company paid $9.6 million in relation to management fees to Principal Equity Owners which is recorded as prepaid management fees within prepaid expenses and other current assets and non-current assets. The prepaid management fees are being amortized over four years. In the three months ended September 30, 2022 and 2021, the Company recognized a management fee to Principal Equity Owners of $0.6 million and $0.6 million, respectively. In the nine months ended September 30, 2022 and 2021, the Company recognized a management fee to Principal Equity Owners of $1.8 million and $1.7 million, respectively.

In connection with Marcus Ryu not standing for re-election to the Company’s board of directors at its annual meeting in June 2022, to retain Mr. Ryu’s valuable insights, in April 2022 we entered into an advisory agreement with Mr. Ryu. Pursuant to this agreement, Mr. Ryu will serve as a senior advisor to the Company with respect to our go-to-market strategy in the insurance sector for a period of 18 months following the 2022 annual meeting. In consideration for Mr. Ryu’s service as a senior advisor, the options to purchase our Class A shares already owned by Mr. Ryu were amended to provide for a half-yearly vesting period following the next annual vesting period of his options.

XML

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the SEC and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full fiscal year.

Principles of consolidation

Principles of consolidation

The condensed consolidated financial statements include the accounts of the Company and its directly and indirectly wholly-owned or controlled subsidiaries. As the Transactions are considered transactions between entities under common control, the financial statements for periods prior to the IPO and the Transactions have been adjusted to combine the previously separate entities for presentation purposes. All intercompany balances and transactions have been eliminated through consolidation. Clearwater Analytics Holdings, Inc. consolidated the financial results of CWAN Holdings as a Variable Interest Entity (“VIE”). Clearwater Analytics Holdings, Inc. owns the majority economic interest and has the power to control all the business and affairs of CWAN Holdings.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensed consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Actual results could differ materially from those estimates.

Items subject to estimates and assumptions include the useful lives and recoverability of long-lived assets, the average period of benefit associated with deferred contract costs, sales reserves, the incremental borrowing rate applied in lease accounting, accruals for sales tax liabilities, the fair value of equity awards, tax valuation allowance and probability of making payments under the TRA, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the result of which forms the basis for making judgments about the carrying values of assets and liabilities, and measurement of revenues and expenses. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, the Company’s condensed consolidated financial statements will be affected.

Significant Accounting Policies

Significant Accounting Policies

The Company's significant accounting policies are discussed in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies in the Annual Report. There have been no significant changes to these policies that have had a material impact on the Company's unaudited condensed consolidated financial statements and related notes during the three and nine months ended September 30, 2022, except as noted below.

Short-term Investments

Short-term Investments

We classify our investments with an original maturity of greater than three months, but less than one year, as short-term investments. Investments in debt securities that we have the positive intent and ability to hold until maturity are classified as held-to-maturity debt securities. Our held-to-maturity debt securities consist of short term certificates of deposit which mature in less than one year. Held-to-maturity debt investments are recorded at amortized cost, which approximates fair value, and realized gains or losses are reported in earnings. The Company does not hold any other short-term investments.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which provides clarification to ASU 2016-02. These ASU's (collectively, the “new lease standard”) requires lessees to recognize on the balance sheet the assets and liabilities for the assets and obligations created by those leases. The standard was effective for public companies for annual periods beginning after December 15, 2018, including interim periods therein. The Company is allowed to use the private company adoption timelines, and therefore the standard is effective for the Company for its annual period beginning January 1, 2022, and interim periods therein.

On January 1, 2022, the Company adopted ASU No. 2016-02, and its associated amendments using the modified retrospective transition method by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. There was no cumulative-effect adjustment recorded to stockholders' equity upon adoption. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carry forward its historical lease classification, assessment on whether a contract was or contains a lease, and initial direct costs for leases that existed prior to January 1, 2022. The Company also elected to combine its lease and non-lease components and not recognize right-of-use (“ROU”) assets and lease liabilities for leases with an initial term of 12 months or less. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of ROU assets.

At the date of adoption, the Company derecognized a deferred rent liability of approximately $1.5 million, and recognized a $23.1 million ROU asset and $24.6 million lease liability based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases.

XML

Organization and Description of Business (Tables)

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Classes of Common Stock

The attributes of the Company's classes of common stock are summarized in the following table:

Class of Common Stock	Votes per Share	Economic Rights
Class A common stock	1	Yes
Class B common stock	1	No
Class C common stock	10	No
Class D common stock	10	Yes

XML

Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2022

Table Text Block [Abstract]

Summary of Revenue Disaggregated by Geography

The following table presents the Company’s revenue disaggregated by geography, based on billing address of the customer (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
United States	$	65,420	$	59,445	$	189,307	$	166,765
Rest of World		11,132		5,044		31,432		15,494
Total revenue	$	76,552	$	64,489	$	220,739	$	182,259

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Summary of Financial Assets Measured at Fair Value

The following tables set forth the fair value of the Company’s financial assets measured at fair value as of September 30, 2022 and December 31, 2021 in accordance with the fair value hierarchy (in thousands):

	September 30, 2022
	Level I		Level II		Level III		Total
Financial Assets:
Cash and cash equivalents:
Money market funds	$	284,873	$	—	$	—	$	284,873
Short-term investments:
Certificates of deposit		—		3,000		—		3,000
Total assets measured at fair value	$	284,873	$	3,000	$	—	$	287,873

	December 31, 2021
	Level I		Level II		Level III		Total
Financial Assets:
Cash and cash equivalents:
Money market funds	$	248,744	$	—	$	—	$	248,744
Total assets measured at fair value	$	248,744	$	—	$	—	$	248,744

XML

Supplemental Consolidated Balance Sheet Information (Tables)

9 Months Ended

Sep. 30, 2022

Balance Sheet Related Disclosures [Abstract]

Schedule of Accounts Receivable, Net

Accounts receivable, net consisted of the following (in thousands):

	September 30,			December 31,
	2022			2021
Unbilled accounts receivable	$	27,696		$	27,086
Billed accounts receivable		37,640			23,227
Allowance for doubtful accounts and reserves		(95	)		(123	)
Accounts receivable, net	$	65,241		$	50,190

Schedule of Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Prepaid expenses	$	10,233	$	11,722
Deferred contract costs, current portion		3,867		3,573
Other current assets		2,282		1,256
Prepaid expense and other current assets	$	16,382	$	16,551

Schedule of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Accrued bonus	$	6,652	$	8,295
Accrued interest		424		9
Accrued benefits and retirement		4,866		4,368
Accrued vendor liabilities		4,819		4,756
Accrued commissions		2,217		2,350
Deferred revenue		1,293		795
Income tax payable		1,114		771
Accrued sales tax exposure		969		1,444
Tax distributions payable to Continuing Equity Owners		112		169
Deferred rent		—		1,514
Other current liabilities		3,279		2,561
Accrued expenses and other liabilities	$	25,745	$	27,032

XML

Leases (Tables)

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Schedule of Future Minimum Lease Payments under Non-cancellable Leases

Future minimum lease payments at December 31, 2021 under the Company’s non-cancellable leases were as follows (in thousands):

2022	$	3,927
2023		3,843
2024		3,649
2025		3,434
2026		3,007
Thereafter		809
Total minimum lease payments	$	18,669

Schedule of Future Minimum Lease Payments under Non-cancellable Operating Leases

Future minimum lease payments at September 30, 2022 under the Company’s non-cancellable leases were as follows (in thousands):

2022 (remaining three months)	$	1,602
2023		5,940
2024		5,555
2025		5,486
2026		4,839
Thereafter		1,190
Total future minimum lease payments		24,612
Less: Imputed interest		(1,858	)
Present value of future minimum lease payments		22,754
Less: Current portion of operating lease liability		(5,343	)
Operating lease liabilities - noncurrent	$	17,411

Schedule of Supplemental information for Non-cancellable Operating Leases

The following table presents supplemental information for the Company's non-cancellable operating leases for the nine months ended September 30, 2022 (in thousands, except for weighted average and percentage data):

Weighted average remaining lease term	4.29
Weighted average discount rate		3.77	%
Cash paid for amounts included in the measurement of lease liabilities	$	1,534
Noncash right-of-use assets obtained in exchange for operating lease obligations(1)	$	26,027

(1)Amount includes (i) $23.1 million related to the adoption of ASC 842 for existing operating leases on January 1, 2022, (ii) $3.5 million related to the Company entering into new non-cancellable operating lease agreements during 2022, and (iii) partially offset by a noncash reduction of $0.6 million related to the remeasurement of the existing Noida, India lease due to a change in the lease term of the agreement.

XML

Non-controlling Interest (Tables)

9 Months Ended

Sep. 30, 2022

Noncontrolling Interest [Abstract]

Schedule of Ownership of Non-controlling Interest

The ownership of the LLC interests is summarized as follows:

	September 30, 2022					December 31, 2021
	Shares		Ownership %			Shares		Ownership %
Clearwater Analytics Holdings, Inc. interest in CWAN Holdings		189,283,623		79.4	%		178,032,643		75.3	%
Continuing Equity Owners' interest in CWAN Holdings		49,040,389		20.6	%		58,528,697		24.7	%
		238,324,012		100.0	%		236,561,340		100.0	%

XML

Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Schedule of Computation of Basic and Diluted Net Loss Per Share

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted net loss per share of Class A and Class D common stock for the periods following the Transactions (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Numerator:
Net loss	$	(3,026	)	$	(11,428	)	$	(4,728	)	$	(8,228	)
Less: Net income (loss) attributable to CWAN Holdings prior to the Transactions		—			(371	)		—			2,829
Less: Net income (loss) attributable to non-controlling interests		(52	)		(2,742	)		277			(2,742	)
Net loss attributable to Clearwater Analytics Holdings, Inc. - basic		(2,974	)		(8,314	)		(5,005	)		(8,314	)
Reallocation of net income (loss) attributable to non-controlling interests from the assumed exchange of Class B and Class C stock for Class A and Class D stock		(52	)		(2,742	)		277			(2,742	)
Net loss attributable to Clearwater Analytics Holdings, Inc. - diluted	$	(3,026	)	$	(11,056	)	$	(4,728	)	$	(11,056	)

The following tables sets forth the computation of basic and diluted net loss per share of Class A and Class D common stock (in thousands, except share amounts and per share amounts):

	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Class A			Class D			Class A			Class D
Basic net loss attributable to Class A and Class D common stockholders
Numerator:
Allocation of net loss attributable to Clearwater Analytics, Inc.	$	(914	)	$	(2,060	)	$	(1,467	)	$	(3,538	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		57,740,776			130,083,755			53,942,623			130,083,755
Basic net loss per share attributable to Class A and Class D common stockholders	$	(0.02	)	$	(0.02	)	$	(0.03	)	$	(0.03	)

	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Class A			Class D			Class A			Class D
Diluted net loss attributable to Class A and Class D common stockholders
Numerator:
Undistributed loss for basic computation	$	(914	)	$	(2,060	)	$	(1,467	)	$	(3,538	)
Reallocation of earnings as a result of conversion of Class B to Class A shares and conversion Class C to Class D shares		146			(198	)		273			4
Reallocation of earnings as a result of conversion of Class D to Class A shares		(2,258	)		—			(3,534	)		—
Allocation of undistributed loss	$	(3,026	)	$	(2,258	)	$	(4,728	)	$	(3,534	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		57,740,776			130,083,755			53,942,623			130,083,755
Add: weighted-average effect of dilutive securities exchangeable for Class A common stock:
Conversion of Class B stock to Class A stock, and conversion of Class C stock to Class D stock		2,667,173			47,377,587			6,037,259			47,377,587
Conversion of Class D to Class A common shares outstanding		177,461,342			—			177,461,342			—
Weighted average number of shares of Class A and Class D common stock outstanding - diluted		237,869,291			177,461,342			237,441,224			177,461,342
Diluted net loss per share attributable to Class A and Class D common stockholders	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)

	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Class A			Class D			Class A			Class D
Basic net loss attributable to Class A and Class D common stockholders
Numerator:
Allocation of net loss attributable to Clearwater Analytics, Inc.	$	(2,219	)	$	(6,095	)	$	(2,219	)	$	(6,095	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic(1)		47,366,089			130,083,755			47,366,089			130,083,755
Basic net loss per share attributable to Class and Class D common stockholders	$	(0.05	)	$	(0.05	)	$	(0.05	)	$	(0.05	)

(1)Weighted average number of shares of Class A and Class D common stock outstanding represents only the period from September 24, 2021 to September 30, 2021, which represents the period wherein we had outstanding Class A and Class D common stock.

	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Class A			Class D			Class A			Class D
Diluted net loss attributable to Class A and Class D common stockholders
Numerator:
Undistributed loss for basic computation	$	(2,219	)	$	(6,095	)	$	(2,219	)	$	(6,095	)
Reallocation of earnings as a result of conversion of Class B to Class A shares and conversion Class C to Class D shares		(522	)		(2,219	)		(522	)		(2,219	)
Reallocation of earnings as a result of conversion of Class D to Class A shares		(8,314	)		—			(8,314	)		—
Allocation of undistributed loss	$	(11,055	)	$	(8,314	)	$	(11,055	)	$	(8,314	)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		47,366,089			130,083,755			47,366,089			130,083,755
Add: weighted-average effect of dilutive securities exchangeable for Class A common stock:
Conversion of Class B stock to Class A stock, and conversion of Class C stock to Class D stock		11,151,110			47,377,587			11,151,110			47,377,587
Conversion of Class D to Class A common shares outstanding		177,461,342			—			177,461,342			—
Weighted average number of shares of Class A and Class D common stock outstanding - diluted		235,978,541			177,461,342			235,978,541			177,461,342
Diluted net loss per share attributable to Class A and Class D common stockholders	$	(0.05	)	$	(0.05	)	$	(0.05	)	$	(0.05	)

Schedule of Weighted-average Potentially Dilutive Securities Excluded from Diluted Net Loss Per Share

The following weighted-average potentially dilutive securities were evaluated under the treasury stock method for potentially dilutive effects and have been excluded from diluted net loss per share in the periods presented due to their anti-dilutive effect:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Stock options of Clearwater Analytics Holdings, Inc.		10,163,645		13,041,159		10,939,998		13,041,159
RSUs of Clearwater Analytics Holdings, Inc.		713,091		61,845		1,044,382		61,845
Employee stock purchase plans		11,536		—		7,187		—
Total		10,888,272		13,103,004		11,991,567		13,103,004

XML

Equity-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Summary of Stock Option Activity

The following table summarizes the stock option activity for the nine months ended September 30, 2022 (in thousands, except per share data):

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance - December 31, 2021		22,315,171		$	8.52
Granted		43,986			18.19
Exercised		(1,151,656	)		6.88
Forfeited		(941,296	)		10.48
Balance - September 30, 2022		20,266,205		$	8.54		7.57	$	169,187
Options vested - September 30, 2022		10,678,809		$	6.78			$	107,180

Summary of RSU Activity

During June 2021, the Company began to grant RSUs to employees. The summary of RSU activity for the nine months ended September 30, 2022 is as follows (in thousands, except per share data):

	Units Activity			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Unvested units as of December 31, 2021		6,070,668		$	—
Granted		1,426,336			19.21
Released		(573,235	)	—
Cancelled		(514,121	)	—
Unvested units as of September 30, 2022		6,409,648				$	107,618

Schedule of Assumptions Used to Calculate Fair Value of Options Granted

The following assumptions were used to calculate the fair value of options granted to employees on the date of grant using the Black-Scholes option-pricing model:

	Nine Months Ended September 30,
	2022			2021
Weighted-average grant date fair value per option	$	7.74		$	4.63
Fair value of units	$17.72 - $18.68			$12.40 - $23.89
Expected term (in years)		5.50		6.00 - 6.25
Expected volatility		44	%	40% - 42%
Risk-free interest rates	1.8% - 2.0%			0.6% - 1.3%

XML

Segment Information (Tables)

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Summary of Revenue Disaggregated by Geography

The following table presents the Company’s revenue disaggregated by geography, based on billing address of the customer (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
United States	$	65,420	$	59,445	$	189,307	$	166,765
Rest of World		11,132		5,044		31,432		15,494
Total revenue	$	76,552	$	64,489	$	220,739	$	182,259

XML

Income Taxes (Tables)

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Schedule of Provision for Income Taxes

The following table provides details of the provision for income taxes:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Loss before provision for income taxes	$	(2,602	)	$	(11,212	)	$	(3,769	)	$	(7,692	)
Provision for income taxes		424			216			959			536
Effective tax rate		(16.3	%)		(1.9	%)		(25.4	%)		(7.0	%)

XML

Organization and Description of Business - Additional Information (Details) $ / shares in Units, $ in Thousands		9 Months Ended
	Sep. 28, 2021 USD ($) $ / shares shares	Sep. 30, 2022 USD ($) Offices shares	Sep. 30, 2021 USD ($)	Dec. 31, 2021 shares
Subsidiary, Sale of Stock [Line Items]
Entity incorporation date of incorporation		May 18, 2021
Number of entities operating within U.S. | Offices		5
Proceeds from Issuance Initial Public Offering			$ 582,188
Proceeds from issuance of common stock, net of underwriters discount		$ 214	1,850
Repayment of borrowings		$ 2,063	$ 434,231
Previous Credit Agreement
Subsidiary, Sale of Stock [Line Items]
Repayment of borrowings	$ 437,400
CWAN Holdings, LLC
Subsidiary, Sale of Stock [Line Items]
Purchase of common units | shares	34,500,000
Percentage of Ownership		79.40%		75.30%
Percentage of continuing equity ownership interest		20.60%		24.70%
Class A
Subsidiary, Sale of Stock [Line Items]
Common stock, shares issued | shares		59,199,868		47,948,888
Class B
Subsidiary, Sale of Stock [Line Items]
Common stock, shares issued | shares	11,151,110	1,662,802		11,151,110
Class C
Subsidiary, Sale of Stock [Line Items]
Common stock, shares issued | shares	47,377,587	47,377,587		47,377,587
Common stock basis	one-to-one basis
Class D
Subsidiary, Sale of Stock [Line Items]
Common stock, shares issued | shares	130,083,755	130,083,755		130,083,755
Common stock basis	one-to-one basis
IPO
Subsidiary, Sale of Stock [Line Items]
Share price | $ / shares	$ 18.00
Proceeds from Issuance Initial Public Offering	$ 582,200
Proceeds from issuance of common stock, net of underwriters discount	38,800
Other offering expenses	$ 5,300
IPO | Class A
Subsidiary, Sale of Stock [Line Items]
Issuance of common stock | shares	34,500,000

XML

Organization and Description of Business - Summary of Classes of Common Stock (Details)	9 Months Ended
	Sep. 30, 2022
Class A Common Stock
Subsidiary, Sale of Stock [Line Items]
Votes per Share	1
Economic Rights	Yes
Class B Common Stock
Subsidiary, Sale of Stock [Line Items]
Votes per Share	1
Economic Rights	No
Class C Common Stock
Subsidiary, Sale of Stock [Line Items]
Votes per Share	10
Economic Rights	No
Class D Common Stock
Subsidiary, Sale of Stock [Line Items]
Votes per Share	10
Economic Rights	Yes

XML

Basis of Presentation and Summary of Significant Accounting Policies- Additional Information (Details) - ASU 2016-02 - USD ($) $ in Millions	Sep. 30, 2022	Jan. 01, 2022
Basis of Presentation and Summary of Significant Accounting Policies [Line Items]
Change in accounting principle, accounting standards update, adopted [true false]	true
Change in accounting principle, accounting standards update, adoption date	Jan. 01, 2022
Derecognize deferred rent liability		$ 1.5
Expected ROU asset		23.1
Expected lease liability		$ 24.6

XML

Revenue Recognition - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2022
Revenue from Contract with Customer [Abstract]
Deferred revenue recognized	$ 0.1	$ 0.4

XML

Revenue Recognition - Additional Information 1 (Details)	Sep. 30, 2022
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, expected timing of satisfaction, period	1 year

XML

Revenue Recognition - Summary of Revenue Disaggregated by Geography (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 76,552	$ 64,489	$ 220,739	$ 182,259
United States
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	65,420	59,445	189,307	166,765
Rest of World
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 11,132	$ 5,044	$ 31,432	$ 15,494

XML

Fair Value Measurements - Summary of Financial Assets Measured at Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Assets, Fair Value Disclosure [Abstract]
Total assets measured at fair value	$ 287,873	$ 248,744
Money market funds
Assets, Fair Value Disclosure [Abstract]
Cash and cash equivalents	284,873	248,744
Certificates Of Deposit
Assets, Fair Value Disclosure [Abstract]
Short-term investments	3,000
Level 1
Assets, Fair Value Disclosure [Abstract]
Total assets measured at fair value	284,873	248,744
Level 1 | Money market funds
Assets, Fair Value Disclosure [Abstract]
Cash and cash equivalents	284,873	$ 248,744
Level 2
Assets, Fair Value Disclosure [Abstract]
Total assets measured at fair value	3,000
Level 2 | Certificates Of Deposit
Assets, Fair Value Disclosure [Abstract]
Short-term investments	$ 3,000

XML

Fair Value Measurements - Additional Information (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Fair Value Disclosures [Abstract]
Fair value assets transferred between levels	$ 0	$ 0
Fair value Liabilities transferred between levels	$ 0	$ 0

XML

Supplemental Consolidated Balance Sheet Information - Schedule of Accounts Receivable, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Receivables [Abstract]
Unbilled accounts receivable	$ 27,696	$ 27,086
Billed accounts receivable	37,640	23,227
Allowance for doubtful accounts and reserves	(95)	(123)
Accounts receivable, net	$ 65,241	$ 50,190

XML

Supplemental Consolidated Balance Sheet Information - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid expenses	$ 10,233	$ 11,722
Deferred contract costs, current portion	3,867	3,573
Other current assets	2,282	1,256
Prepaid expense and other current assets	$ 16,382	$ 16,551

XML

Supplemental Consolidated Balance Sheet Information - Additional Information - (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Balance Sheet Related Disclosures [Abstract]
Depreciation and amortization expense	$ 1,400	$ 800	$ 3,499	$ 2,204
Accumulated depreciation and amortization	$ 15,500		$ 15,500		$ 12,200

XML

Supplemental Consolidated Balance Sheet Information - Schedule of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Accounts Payable and Accrued Liabilities, Current [Abstract]
Accrued bonus	$ 6,652	$ 8,295
Accrued interest	424	9
Accrued benefits and retirement	4,866	4,368
Accrued vendor liabilities	4,819	4,756
Accrued commissions	2,217	2,350
Deferred revenue	1,293	795
Income tax payable	1,114	771
Accrued sales tax exposure	969	1,444
Tax distributions payable to Continuing Equity Owners	112	169
Deferred rent		1,514
Other current liabilities	3,279	2,561
Accrued expenses and other liabilities	$ 25,745	$ 27,032

XML

Leases - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Lessee, Lease, Description [Line Items]
Lessee, operating lease, renewal term	5 years		5 years
Finance leases	$ 0		$ 0
Operating lease cost	$ 1,900,000		$ 5,200,000
Operating lease initial term			12 months
Rent expense		$ 1,000,000.0		$ 2,700,000
Minimum
Lessee, Lease, Description [Line Items]
Lease, operating lease term	1 year		1 year
Maximum
Lessee, Lease, Description [Line Items]
Lease, operating lease term	10 years		10 years

XML

Leases - Schedule of Future Minimum Lease Payments under Non-cancellable Leases (Details) $ in Thousands	Dec. 31, 2021 USD ($)
Leases [Abstract]
2022	$ 3,927
2023	3,843
2024	3,649
2025	3,434
2026	3,007
Thereafter	809
Total minimum lease payments	$ 18,669

XML

Leases - Schedule of Future Minimum Lease Payments under Non-cancellable Operating Leases (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Leases [Abstract]
2022 (remaining three months)	$ 1,602
2023	5,940
2024	5,555
2025	5,486
2026	4,839
Thereafter	1,190
Total future minimum lease payments	24,612
Less: Imputed interest	(1,858)
Present value of future minimum lease payments	22,754
Less: Current portion of operating lease liability	(5,343)
Operating lease liabilities - noncurrent	$ 17,411

XML

Leases - Schedule of Supplemental Information for Non-cancellable Operating Leases (Details) - USD ($) $ in Thousands		9 Months Ended
	Jan. 01, 2022	Sep. 30, 2022
Leases [Abstract]
Weighted average remaining lease term		4 years 3 months 14 days
Weighted average discount rate		3.77%
Cash paid for amounts included in the measurement of lease liabilities		$ 1,534
Noncash right-of-use assets obtained in exchange for operating lease obligations	$ 23,100	$ 26,027

XML

Leases - Schedule of Supplemental Information for Non-cancellable Operating Leases (Parenthetical) (Details) - USD ($) $ in Thousands		9 Months Ended
	Jan. 01, 2022	Sep. 30, 2022
Lessee, Lease, Description [Line Items]
Noncash right-of-use assets obtained in exchange for operating lease obligations	$ 23,100	$ 26,027
Noncash right-of-use assets obtained in exchange for operating lease obligations during period		3,500
Noncash reduction related to remeasurement of existing lease		$ 600

XML

Non-controlling Interest - Schedule of Ownership of Non-controlling Interest (Details) - CWAN Holdings, LLC - shares	Sep. 30, 2022	Dec. 31, 2021
Non-controlling Interest [Line Items]
Non-controlling shares interest held by parent	189,283,623	178,032,643
Ownership shares by noncontrolling owners	49,040,389	58,528,697
Total shares economic interest ownership	238,324,012	236,561,340
Percentage of Ownership	79.40%	75.30%
Percentage of continuing equity ownership interest	20.60%	24.70%
Total economic interest ownership percentage	100.00%	100.00%

XML

Loss Per Share - Schedule of Computation of Basic and Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended							9 Months Ended
		Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021		Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2022	Sep. 30, 2021
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net loss		$ (3,026)	$ (2,230)	$ 528	$ (11,428)		$ (211)	$ 3,411	$ (4,728)	$ (8,228)
Less: Net income (loss) attributable to CWAN Holdings prior to the Transactions					(371)					2,829
Less: Net income (loss) attributable to non-controlling interests		(52)			(2,742)				277	(2,742)
Net loss attributable to Clearwater Analytics Holdings, Inc. - basic		(2,974)			(8,314)				(5,005)	(8,314)
Reallocation of net income (loss) attributable to non-controlling interests from the assumed exchange of Class B and Class C stock for Class A and Class D stock		(52)			(2,742)				277	(2,742)
Net loss attributable to Clearwater Analytics Holdings, Inc. - diluted		(3,026)			(11,056)				(4,728)	(11,056)
Numerator:
Allocation of net loss attributable to Clearwater Analytics, Inc.		$ (2,974)			$ (8,314)				$ (5,005)	$ (8,314)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		187,824,531			177,449,844				184,026,378	177,449,844
Basic net loss per share attributable to Class A and Class D common stockholders	[1]	$ (0.02)			$ (0.05)				$ (0.03)	$ (0.05)
Denominator:
Weighted Average Number of Shares Outstanding, Basic		187,824,531			177,449,844				184,026,378	177,449,844
Add: weighted-average effect of dilutive securities exchangeable for Class A common stock:
Weighted average number of shares of Class A and Class D common stock outstanding - diluted		237,869,291			235,978,541				237,441,224	235,978,541
Diluted net loss per share attributable to Class A and Class D common stockholders	[1]	$ (0.01)			$ (0.05)				$ (0.02)	$ (0.05)
Class A
Numerator:
Allocation of net loss attributable to Clearwater Analytics, Inc.		$ (914)			$ (2,219)				$ (1,467)	$ (2,219)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		57,740,776			47,366,089	[2]			53,942,623	47,366,089	[2]
Basic net loss per share attributable to Class A and Class D common stockholders		$ (0.02)			$ (0.05)				$ (0.03)	$ (0.05)
Numerator:
Undistributed loss for basic computation		$ (914)			$ (2,219)				$ (1,467)	$ (2,219)
Reallocation of earnings as a result of conversion of Class B to Class A shares and conversion Class C to Class D shares		146			(522)				273	(522)
Reallocation of earnings as a result of conversion of Class D to Class A shares		(2,258)			(8,314)				(3,534)	(8,314)
Allocation of undistributed loss		$ (3,026)			$ (11,055)				$ (4,728)	$ (11,055)
Denominator:
Weighted Average Number of Shares Outstanding, Basic		57,740,776			47,366,089	[2]			53,942,623	47,366,089	[2]
Add: weighted-average effect of dilutive securities exchangeable for Class A common stock:
Conversion of Class B stock to Class A stock, and conversion of Class C stock to Class D stock		2,667,173			11,151,110				6,037,259	11,151,110
Conversion of Class D to Class A common shares outstanding		177,461,342			177,461,342				177,461,342	177,461,342
Weighted average number of shares of Class A and Class D common stock outstanding - diluted		237,869,291			235,978,541				237,441,224	235,978,541
Diluted net loss per share attributable to Class A and Class D common stockholders		$ (0.01)			$ (0.05)				$ (0.02)	$ (0.05)
Class D
Numerator:
Allocation of net loss attributable to Clearwater Analytics, Inc.		$ (2,060)			$ (6,095)				$ (3,538)	$ (6,095)
Denominator:
Weighted average number of shares of Class A and Class D common stock outstanding - basic		130,083,755			130,083,755	[2]			130,083,755	130,083,755	[2]
Basic net loss per share attributable to Class A and Class D common stockholders		$ (0.02)			$ (0.05)				$ (0.03)	$ (0.05)
Numerator:
Undistributed loss for basic computation		$ (2,060)			$ (6,095)				$ (3,538)	$ (6,095)
Reallocation of earnings as a result of conversion of Class B to Class A shares and conversion Class C to Class D shares		(198)			(2,219)				4	(2,219)
Allocation of undistributed loss		$ (2,258)			$ (8,314)				$ (3,534)	$ (8,314)
Denominator:
Weighted Average Number of Shares Outstanding, Basic		130,083,755			130,083,755	[2]			130,083,755	130,083,755	[2]
Add: weighted-average effect of dilutive securities exchangeable for Class A common stock:
Conversion of Class B stock to Class A stock, and conversion of Class C stock to Class D stock		47,377,587			47,377,587				47,377,587	47,377,587
Weighted average number of shares of Class A and Class D common stock outstanding - diluted		177,461,342			177,461,342				177,461,342	177,461,342
Diluted net loss per share attributable to Class A and Class D common stockholders		$ (0.01)			$ (0.05)				$ (0.02)	$ (0.05)

[1] Basic and diluted net loss per share of Class A and Class D common stock is applicable only for the periods after the IPO and related transactions (as defined in Note 1 to the Unaudited Condensed Consolidated Financial Statements). See Note 8 for the number of shares used in the computation of net loss per share of Class A and Class D common stock and the basis for the computation of net loss per share.

[2] Weighted average number of shares of Class A and Class D common stock outstanding represents only the period from September 24, 2021 to September 30, 2021, which represents the period wherein we had outstanding Class A and Class D common stock.

XML

Loss Per Share - Schedule of Weighted-average Potentially Dilutive Securities Excluded from Diluted Net Loss Per Share (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive impact	10,888,272	13,103,004	11,991,567	13,103,004
Stock options of Clearwater Analytics Holdings, Inc.
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive impact	10,163,645	13,041,159	10,939,998	13,041,159
RSUs of Clearwater Analytics Holdings, Inc.
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive impact	713,091	61,845	1,044,382	61,845
Employee stock purchase plans
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive impact	11,536		7,187

XML

Equity-Based Compensation - Additional Information (Details) - USD ($)		1 Months Ended	3 Months Ended	9 Months Ended
	May 31, 2022	Sep. 30, 2021	Jun. 30, 2022	Sep. 30, 2022	Jan. 01, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Weighted-average grant date fair value				$ 7.74
Total unrecognized compensation expense				$ 51,400,000
Weighted-average period to recognize expense				2 years 3 months 18 days
Dividend yield				0.00%
Employees based contribution elections offering period end date	May 31, 2022
Common Stock | Class A Common Stock
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares issued to employees			200,220
2021 Plan | Common Stock
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of shares authorized for issuance				57,197,804
2021 Employee Stock Purchase Plan
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Purchase price as percentage of lower of fair market value as of beginning or end of offering period		85.00%
Maximum percentage of employee payroll deduction for stock purchase		10.00%
Maximum value of shares eligible to purchase during offering period		$ 25,000
Unrecognized equity-based compensation expense	$ 300,000
ESPP payroll contributions				$ 1,400,000
Shares issued to employees	200,220
2021 Employee Stock Purchase Plan | Class A Common Stock
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Common stock were initially reserved for issuance					5,837,791
Offering periods scheduled start date		--06-01
Offering periods scheduled end date		--12-01
RSUs
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Weighted-average period to recognize expense				2 years 10 months 24 days
Unrecognized equity-based compensation expense				$ 88,500,000

XML

Equity-Based Compensation - Summary of Stock Option Activity (Details) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($) $ / shares shares
Share-Based Payment Arrangement [Abstract]
Stock Options, Balance - December 31, 2021 | shares	22,315,171
Stock Options, Granted | shares	43,986
Stock Options, Exercised | shares	(1,151,656)
Stock Options, Forfeited | shares	(941,296)
Stock Options, Balance - September 30, 2022 | shares	20,266,205
Stock Options, Options vested - September 30, 2022 | shares	10,678,809
Weighted Average Exercise Price, Balance - December 31, 2021 | $ / shares	$ 8.52
Weighted Average Exercise Price, Granted | $ / shares	18.19
Weighted Average Exercise Price, Exercised | $ / shares	6.88
Weighted Average Exercise Price, Forfeited | $ / shares	10.48
Weighted Average Exercise Price, Balance - September 30, 2022 | $ / shares	8.54
Weighted Average Exercise Price, Options vested - September 30, 2022 | $ / shares	$ 6.78
Weighted Average Remaining Contractual Life (Years)	7 years 6 months 25 days
Aggregate Intrinsic Value, Balance - June 30, 2022 | $	$ 169,187
Aggregate Intrinsic Value, Options vested - June 30, 2022 | $	$ 107,180

XML

Equity-Based Compensation - Summary of RSU Activity (Details) - RSUs $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($) $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Units Activity, Unvested units as of December 31, 2021	6,070,668
Units Activity, Granted	1,426,336
Units Activity, Released	(573,235)
Units Activity, Cancelled	(514,121)
Units Activity, Unvested units as of September 30, 2022	6,409,648
Weighted Average Grant Date Fair Value, Granted | $ / shares	$ 19.21
Aggregate Intrinsic Value, Unvested units as of September 30, 2022 | $	$ 107,618

XML

Equity-Based Compensation - Schedule of Assumptions Used to Calculate Fair Value of Options Granted (Details) - $ / shares	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Weighted-average grant date fair value per option	$ 7.74	$ 4.63
Expected term (in years)	5 years 6 months
Expected volatility	44.00%
Risk-free interest rates, minimum	1.80%	0.60%
Risk-free interest rates, maximum	2.00%	1.30%
Minimum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Fair value of units	$ 17.72	$ 12.40
Expected term (in years)		6 years
Expected volatility		40.00%
Maximum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Fair value of units	$ 18.68	$ 23.89
Expected term (in years)		6 years 3 months
Expected volatility		42.00%

XML

Segment Information - Summary of Revenue Disaggregated by Geography (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 76,552	$ 64,489	$ 220,739	$ 182,259
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	65,420	59,445	189,307	166,765
Rest of World
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 11,132	$ 5,044	$ 31,432	$ 15,494

XML

Income Taxes - Schedule of Provision for Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Tax Disclosure [Abstract]
Loss before provision for income taxes	$ (2,602)	$ (11,212)	$ (3,769)	$ (7,692)
Provision for income taxes	$ 424	$ 216	$ 959	$ 536
Effective tax rate	(16.30%)	(1.90%)	(25.40%)	(7.00%)

XML

Income Taxes - Additional Information (Details) - USD ($)		9 Months Ended
	Sep. 28, 2021	Sep. 30, 2022
Income Tax Disclosure [Abstract]
Percentage of estimated tax benefits to be realized	85.00%
Percentage of expected remaining tax benefits to be realized	15.00%
Estimated future tax benefit related to ownership exchanges		$ 410,000,000
Estimated future tax benefit related to ownership exchanges associated to TRA liability		348,000,000
Tax receivable agreement liability		5,700,000
TRA liability related to future years		$ 0

XML

Commitments and Contingencies (Additional Information) (Details) - JUMP Technology € in Millions, shares in Millions	Sep. 29, 2022 EUR (€) Employee shares
Purchase Commitment, Excluding Long-Term Commitment [Line Items]
Purchase price of acquisition | €	€ 75
Number of customers across Europe	70
Number of employees	100
Maximum
Purchase Commitment, Excluding Long-Term Commitment [Line Items]
Restricted stock units to be earned over four years from grant date | shares	3.8

XML

Transactions with Related Parties - Additional Information (Details) - Principal Equity Owners - USD ($) $ in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	Jan. 31, 2021	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Related Party Transaction [Line Items]
Payment relation to management fees	$ 9.6
Management fee		$ 0.6	$ 0.6	$ 1.8	$ 1.7
Prepaid management fees amortized period				4 years