Thank you for joining, ladies and gentlemen, and thank you all for standing by. And welcome to the Clearwater Analytics Third Quarter 2023 Financial Results Conference Call. My name is Brita, and I will be your event specialist running today’s call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Thank you. And I would now like to welcome Joon Park, Head of Investor Relations. To begin today’s conference call.

Thank you. And welcome everyone to Clearwater Analytics’ third quarter 2023 financial results conference call. Joining me on the call today are Sandeep Sahai, Chief Executive Officer; and Jim Cox, Chief Financial Officer. After their remarks, we will open the call to a question-and-answer session. I would like to remind all participants that during this conference call any forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Expressions of future goals, intentions and expectations including in relation to business outlook, future financial and product performance and similar items including without limitation, expressions using the terminology may, will, can expect, and believe and expressions which reflect something other than historical facts are intended to identify forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our filings with the SEC. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call except as required by law. For more information, please refer to the cautionary statements included in our earnings press release. Lastly, all metrics discussed on this call are presented on a non-GAAP or adjusted basis and include the results of JUMP Technology. Since the acquisition on November 30, 2022, unless otherwise noted. A reconciliation to GAAP results can be found in the earnings press release that we have posted to our Investor Relations website. With that, I will turn the call over to our Chief Executive Officer, Sandeep Sahai.

Thanks, Joon, and thank you all for joining us. The very strong numbers in Q3 were the result of disciplined execution from our operations and onboarding team, strong and sustained product innovation from our engineering and product teams, and finally, our ability to focus on client success, with a genuine desire to partner for the long-term. Normally, I will provide a business summary in this opening section of the call. But given the financial outperformance in Q3, I have asked our Chief Officer Jim Cox to discuss the financials first.

Thanks, Sandeep, and thank you all for joining us. Sandeep is right, we had another strong quarter. On the heels of Q2 solid results at our impactful first Investor Day in September. I am happy to report strong results for Q3, where we beat guidance on top and bottomline once again. Revenue continued to reaccelerate, but the real highlight is our greater than 30% EBITDA margin for Q3. At our Investor Day, we announced our intent to expand EBITDA margins by 200 basis points in 2024 to approximately 29%. After our strong Q3 results, our current 2023 guidance implies full year EBITDA margins increasing to approximately 28%. Today, we intend to expand EBITDA margin by 200 basis points in 2024. So we expect our 2024 EBITDA margin will be approximately 30%. In effect, we believe these higher profitability levels will persist in the business going forward. Turning to revenue in the quarter. In Q3 2023 we delivered $94.7 million in revenue, which translates to 23.7% year-over-year revenue growth, driven by marquee client wins displacing our legacy competitors, continued expansion at our existing clients and continued to increase inefficiency of onboarding new clients by our operations team. In addition, clients continue to remain with us with a strong and consistent 98% gross retention. We have achieved 98% gross retention for 18 out of the last 19 prior quarters. Our net revenue retention rate continued to remain healthy at 108% as of September 30, 2023, which is higher than the prior year’s one or three. We continue to aspire to expand NRR to 115% or beyond, through upsell of new products and modules, that we are now offering our clients like, Clearwater LPx, MLx, Prism and our JUMP solution, and we expect our improve CTM and a difficult product to help us…

Thank you, Jim. I wanted to cover the three topics I laid out at the beginning of remarks, namely, disciplined execution, client success and product innovation. Disciplined execution and a focus on client success are very important to our business. At the highest level, we are excited to be executing ahead of the models we presented on Investor Day and these results were delivered before the R&D cost starts to normalize. The entire Clearwater team continues to be relentless and the urgency and precision with which are executed. The commercial model adjustment of last year, the highest ever NPS in the company’s history this past quarter and the sharp improvement in the time taken to onboard clients are examples of our ability to execute. It’s easy for us to see that 90% of the onboarding now happens within five months. But that is a truly extraordinary achievement. The reality is that systems like these can take several years to implement and the fact that we get customers on our platform invites within five months in a direct consequence of our single instance multi-tenant platform, our single security master and the relentless focus of our onboarding team. Which leads to the product innovation. The needs of the industry we serve continue to change and we continue to change in the future. But it’s our ability to adjust, execute and innovate, that allows us to deliver these results. The needs of the asset management industry continue to evolve and then now place relentless cost and growth pressures. Recognizing this change, we started to invest in Prism and our current solution makes us a partner for growth instead of a partner we could just replace that accounting platform. In many deals in recent quarters, we are now helping our asset management clients deliver…

Thanks Sandeep. Now let’s turn to guidance. Focusing on guidance for the fourth quarter of 2023, we expect revenue to be $98.5 million and we expect adjusted EBITDA to be $28 million or approximately 28% EBITDA margin. For the full year 2023 we have increased our revenue guidance to $367.6 million, which is an increase of $2.6 million from the midpoint of our prior guidance range and represents approximately 21% year-over-year growth. We have also increased our full year EBITDA guidance by $4 million from the prior quarter to $104 million for the full year 2023. That guidance represents EBITDA margins of 28% for the full year, an expansion of over 150 basis points over the full year 2022. With that, I will turn it over to Sandeep to provide some closing thoughts.

Thanks Jim. We have long said that we want to build a truly exceptional company. I am so happy to report that we are executing ahead of the plan we laid out at our Investor Day. We united in purpose with our clients to become better together and are incredibly excited about what lies ahead. With that, I will turn it over to the Operator for a live question-and-answer session.

Thank you. [Operator Instructions] The first question we have comes from Rishi Jaluria of RBC. You may proceed, Rishi.

Oh! Wonderful. Thanks guys so much for taking my questions. I wanted to start by asking a little bit about gen AI. Sandeep, when I was at Clearwater Connect, I definitely got a chance to see Clearwater GPT demoed, seems really impressive. Maybe can you talk about early feedback coming out of the conference and how we should be thinking about the roadmap of future use cases over, let’s call it, the next year based on that customer feedback and maybe monetization alongside that. Then I have got a quick follow-up for Jim.

Hey, Rishi. Thank you for the question here. Look, also thank you for coming over to Clearwater Connect. It was really good that you can talk to clients directly instead of always just listening to us. So look, about Chat GPT and gen AI in general here. So, firstly, we believe it is transformative and disruptive. I do think it can have significant and mostly positive impact on our business. As you know, we launched Clearwater GPT and then at Connect we showed a number of demos. And if you get to the next level, what we have done is, we have launched and funded five programs. Two of these programs are revenue generated. They are more about how do we increase revenue. One of them is insights, which we demonstrated, and the other one was how can customers talk to the data and really interact with the data themselves without sort of coming to us to understand what’s going on. We think both of these are potentially revenue generating. Two of those programs are efficiency related. So the first one is about improving reconciliation and data. And the second one is how do you improve onboarding and client servicing. And frankly, the fifth one is know we talk about an NDA, because it’s something we aren’t ready to discuss quite yet. And the point, Rishi, is that this is nothing which is going to take us six months and a year. We are going to -- we have already started to see some impact of that, frankly, on our financials and on our operating capability. So I would say that, do we expect it to continue to improve meaningfully in 2024? Yes, we do. We think it will have an impact. How much impact? I think that’s something we will have a better position to tell you when we provide guidance for next year. Jim, would you add anything or..

All right. Thanks, Sandeep. Sorry. Go ahead.

Go ahead, Rishi, please.

Yeah.

Okay. No. Thanks. Thanks. Maybe the quick follow-up for that -- on that for Jim related and you are giving this preliminary outlook on EBITDA margins for next year. Really happy to see that and nice to see you continuing to expand margins as you are investing. Alongside that though, I’d have to imagine there is some impact on your P&L from the investments you are making in generative AI, the cost, as well as I am sure there’s going to be more focus on driving adoption in the near-term before really focusing on monetization in a big way. Maybe can you walk us through what are you thinking about the impact of generative AI on margins for next year and how much, I guess, room are you leaving yourself to invest and what is really a big market opportunity and not wanting to over deliver on margins? Thanks.

Rishi, that’s a great question and the way you articulated it is exactly how Sandeep and all of us are thinking about it. So we have already started to see the benefits to a small degree of the gen AI tools that our teams are using it internally. And I think you can just see the expression of it partially in the gross margin expansion that you saw in Q3. That is not the entire reason for the gross margin expansion in Q3. It is only a very small subset of the client servicing team that is using those tools. But the results we are seeing from those are meaningful. And so I think that just gives us more confidence that 80% gross margin target that we think about in the longer term is extremely attainable. However, we want to balance that gross margin kind of targeting with kind of that incredible client service and focus on clients that we have. And so, we don’t want to lean too quickly into that. We want to make sure that we are delivering for them. And so what I would say is, as we think about the 200-basis-point expansion next year, which we talked about at Investor Day and we are reiterating here, even at our higher EBITDA numbers for 2023, there is very limited impact of gen AI within those margin numbers. And I think that what we want to do is exactly what you said. We want to maintain the optionality. We see a very clear path to delivering 200 basis points of margin expansion next year, while allowing us flexibility to attack the opportunities that we see ahead of us.

Yeah. If I can just add to that…

Yeah.

…just be very, very clear. Yeah. Just to be very, very clear. We are not optimizing for profitability. I think when we presented at Investor Day, the gross margin should grow simply because of Europe and Asia normalizing. And also, if you remember, R&D should come down not because we want it to come down, but because that one-time conversion to the cloud and the investment for Europe have been completed. So really we don’t think that we are optimizing for profitability. It’s just a consequence of the business we have. And if I can just, since you asked this great question for that, just to be a little bit more declarative, I do think we are investing in gen AI. We have a significant dedicated team which does just that, but we are already getting returns on it. Are we going to invest more? Yes. Are we going to be able to get results quicker? Yes. And that is the power of gen AI. It can deliver results in months and not in two years and three years. So, yes, we will invest more in gen AI and we are investing more in gen AI, but the efficiency we are getting is frankly there to see. So, yeah, that’s how we think about it.

Wonderful. Thank you so much, guys. I appreciate it.

We now have Ella Smith of JPMorgan. Your line is open.

Hi. This is Alex Smith on for Alexe Gogolev from JPMorgan. Thank you for taking my question. So, for my first question, I noticed that NRR dipped ever so slightly sequentially from 109% to 108%. Was hoping you could speak to what happened there?

Sure. Ella, this is Jim. Happy to take that. If you all recall, back in Q1, when were at 106%, I kind of said, hey, this is about where we are going to live in the high kind of single digits. And I think that if you heard me say when we got to Q2 and were at 109%, I said, maybe I only said this, boy, it just rounded up to 109%, all things being equal. And so I think we are just in the margin there. We are living in that space and -- of kind of where we thought we would live while we work to continue to build out the GTM function and the additional products and solutions and executing that to drive us towards that 115%. So we are continuing to work really hard to drive towards that aspirational 115% level. But this is not an easy task. It is a Herculean effort and I don’t think that, I think we will work through all of 2024 to continue to push on that. But I don’t think we will get there in 2024. But if I am still talking about moving to NRR 115% in 2026, I think, I will consider that a failure, frankly, on my part. So we are going to push hard, it’s a multiyear effort, we are very committed to it and we want to drive to it. This kind of quarter-to-quarter changes in the margin, I am very comfortable with. All the initiatives are still pointing in that direction.

That’s very helpful. Thank you so much, Jim. And for a follow-up, so listening to the Investor Day, which happened not too long ago in this call, a huge emphasis is obviously on your product developments and new product launches. It makes me think that you would expect a strong majority of your future growth to come from NRR expansion per client, as opposed to the number of clients expanding. Would you agree with that or not necessarily?

Yeah. This I think looks great -- oh, sorry, go ahead Sandeep?

Go ahead, Jim.

I will start and then you go, sorry. I would say that, we have. So that is one path, right? So what is so great about adding NRR 115% to this level and all of the product development is that is yet another path of going back to the base to get that. But the truth is we have many, many different paths to drive 20% plus growth. We have geographic expansion, right? We have these new products, but they are also opening up adjacencies and additional market opportunities for new clients, as well as our existing clients. And yes, at -- we talk a lot about going back to base because it’s a relatively new muscle for us, but it’s just yet another one of those options. So if we have five or six different options to drive that growth, it just makes it a more durable, resilient and strong business. Sandeep what would you add?

No. I think that’s exactly right, Ella. I don’t think you can sort of take these pieces, and say, ah, if this is going to get to 14 or 15, then new logos is going to go down. That’s not the way we think about it. What we do think about is, how do we put many irons in the fire? And some will work and some won’t work, and as -- some will be good in one quarter and another will be good in another quarter. But we want to provide resiliency in our growth. And so, like Jim laid out, there are five things. There’s geography. The second one is markets and market adjacencies. The third one is these products and new products we are developing. Fourth one is the commercial model we have made changes to and that will help. And finally, at some point there’s going to be an AUM tailwind. We have not had an AUM tailwind this year. Last year obviously hurt us. But at some point the value of assets will start to grow. Is it going to be 2%, 3%? Yes. And that’s what we would expect, but we obviously can’t forecast that and we don’t expect that. We don’t build it into our business model except to note that, yes, that would be another lever of growth we might expect in the outer years. So, yeah, it’s not about one versus the other. We want to work on all of these sort of simultaneously.

Great. Thank you so much, Jim and Sandeep.

Thank you.

The next question comes from the line of James Faucette of Morgan Stanley. You may proceed with your question.

Hi. It’s Michael Infante on for James. Nice results here. I just wanted to ask on NRR growth versus revenue growth. It looks like NRR is growing 19.4% in the quarter, probably, a touch lower on an organic basis, but you are seeing revenue growth that’s close to 24%. I know you have spoken about the delta between ARR growth and revenue growth ultimately compressing in 2024, but can you sort of unpack what’s driving that delta right now?

Yeah. Sure. I think that’s -- sure, I think that as you are onboarding clients, you can get some catch-up in revenue there that then plays through. So maybe just let me back up for a second, say, we are very rigorous and conservative in our approach for the revenue that we describe as recurring revenue. And so we have lots of new products and we have lots of things within our clients, which we are -- which we believe will be recurring in nature, but we do not put them into ARR at that bucket, Michael, and so that’s a little bit of the delta there. ARR continues to -- I agree with you that in the long-term those two will trend together. But let’s say that we choose to commercialize something in a non-recurring way. We would have -- at some point in the future, we would have a delta in that going forward. So I think they are very close to each other and so I think that’s -- when you start looking at last 12 months and those sorts of information, they are trending pretty consistently.

Makes sense. And I wanted to follow up just on some of the strategic commentary you made. Obviously record cash balance and pretty impressive free cash flow generation in the quarter. Seems like M&A is very much on the table. I guess, how are you thinking about the types of assets or geographies you would be targeting? I guess the reason I ask is, it seems like driving towards that 115% NRR is sort of the guidepost and M&A may not necessarily sort of aid in that goal. But I am curious how you are thinking about both of those vectors?

I think…

[Inaudible] there is obviously. Jim, you go first, sorry, let’s coordinator the question.

Okay, it looks like both of us are going to talk. So look, I think, that there are two things here. One is we obviously have $302 million of cash and that’s significant because you never had that much cash on our balance sheet. But what’s also useful is that we were -- we continue to generate cash on a quarterly basis. Now, the first step we took, it was buying JUMP last year. And frankly we wanted it to play out a little bit. When you acquire something, as you know, it takes a little while for the company, the first acquisition in its history to sort of play out and I think we are very happy with the result and therefore we will be aggressive on M&A. But it’s not being done for a purpose. There’s no real purpose. It’s not like we have to hit a certain gross margin target or a certain EBITDA target or a certain revenue target. What we do care about, as we have said before, is can it help us expand functionality. Can it help us bring in products we can take to our current clients and go sell to them or can we expand geographically? So I think it has got to be in service of one of those three things. And obviously, Michael, we want a bar to be high. These are really nice financials, the balance sheet is quite pristine and so therefore we want to be cautious, but we don’t want to be defensive. And so if you haven’t seen anything till now, it was because we did JUMP last year we wanted to make sure we had the right muscle and the right systems to have them integrated in the right way and then we will continue to act on this. So we are excited about it. We are excited about what that potential opportunities that open for us.

That’s great. Thank you both.

Thank you.

We now have Michael Turrin of Wells Fargo.

Great. Thanks very much. Hey. It’s David Unger for Michael Turrin tonight. Just one from me, so this is a refreshing call and software land today for sure. I know we have kind of touched upon this, but can you guys talk more broadly on the demand environment for the industry? Just talking about proving out the ROI in a more constrained budget environment. And guys, just maybe going back to that beautiful slide you had in the Investor Day, the 4 bps of tech investment management spent and referenced versus just playing the 1 bp today? Thanks.

So, yes, I could just talk about that specifically, if you think about how we go from the 1 bp to the 3 bps to the 4 bps, pardon me, and you think about what is incorporated in that. And so we think of that as risk, as performance and middle office, and really components that complete the investment cycle instead of just investment accounting. And so when Jim was talking about investing in new products and ideas, it is about that. It’s in service of expanding that 1 bp into the 4 bp. Now, I just want to make sure you understand, we already do risk, we already do performance, we already do these things, but what we are building is displacement quality software where a standalone client may be able to buy risk from us directly just for that capability. So that’s the difference. We have focused always on what’s needed for investment accounting, and our aspiration, as we said at Investor Day, is to move towards the investment management process the whole lifecycle. So that’s how we think about it. I don’t know, Jim, you would add anything to that or not? We obviously have the whole section around back to base, which is about products you can take to a current client base, and that is obviously more important, if you will, because that helps us grow faster and finally disruptors. So nothing has changed in the last seven weeks. We still believe that, hey, it’s back to base, it’s adjacencies, which is the 1 bp to 4 bp, and finally, it is the disruptor products we can come up with.

Yeah. Sandeep that’s right on.

Yeah.

That the only thing I’d add. I think you were also asking, hey, what’s the overall demand environment like vis-à-vis what you are hearing from perhaps other software companies? And I would say, we are in a replacement market. And what you heard from Sandeep in his prepared remarks was example after example, after example of where we are meaningfully, better and different, and there is pain out there and it is a known market. And so I think that’s why we see such resiliency in the demand that we see is that pain is not getting any less. And the more examples we have of solving that pain, the more likely it is that more clients will recommend us to their friends who will become our prospects and we move forward from that.

Thank you.

We now have Peter Heckmann of D.A. Davidson. Your line is now open, Peter.

Hey. Good afternoon. Thanks for taking the question. I wanted to see if you could talk about some of the competitive response you might be seeing in the marketplace. I really appreciated some of the examples you gave of long implementation cycles, some failed into out migrations. But in terms of, do you see some of those legacy competitors mounting a competitive response? If so, what is it? And do you think that can be successful at all in helping them retain some of that business?

Peter, thank you. Thanks for the question. This is -- I wish I had prompted you with this question. But look, Q3 was very exciting. I think when we spoke about a year back, a year and a half back, there was a lot of conversation about competitors launching cloud versions of their product. And I think if you go back and see, listen to what we said, we said, yes, but that doesn’t change the underlying technology or the inability of the various pieces and components of working together like our software does, right? And in Q3 we really got many several million dollar deals to actually prove that point. And so the first one that we talked about was cloud version of a product, been two years, been implementing it, haven’t had success and you talk to the client and they are saying, hey, we have to talk to five different groups. Yeah, because there are five different products behind it and Clearwater is one integrated product. So you won that. We won another one where there was a promise of a product two years back. So look, we feel really good about it. We feel a little bit validated in what we have been saying. And obviously, all of you understand technology. Well, it’s not quite that easy. You can just take pieces of a technology and re-architect all of them and make them all work with each other. Clearwater on the other hand, our platform was built ground up to work end-to-end seamlessly. So look, we feel like our competitive position, if anything, is a little bit stronger and I do think as we get more proof points, it becomes easier for us to go to our prospects, and say, don’t talk to us. Why don’t you go talk to these five clients and see what they have to say? So we feel really good about where we are right now. But as I am sure you heard from us right now, we are not resting. It’s not like we are saying we are going to stop innovating. We are going to stop investing in R&D. None of that. We expect to continue to innovate and continue to deepen our competitive mode. Jim, would you add anything to that?

No.

That’s great to hear. That’s very helpful. And just in terms of JUMP, just following up on there, I guess, versus your expectations when you announce the deal, I guess, how -- and you -- I know you have announced several deals in several different countries. But generally, how would you characterize the response from either current customers or non-JUMP, non-Clearwater customers in other markets, in terms of the feature functionality of the software, I guess, today are you thinking you need a little bit more investment or perhaps there’s a little bit more feature functionality than you thought?

Yeah. Sure. So I can literally give you the report card on the JUMP integration. So, look, the first was, JUMP ability to compete in the French market against largest players. So there were a lot of large players who would not buy from JUMP because they were much smaller company. So that’s clear, net positive. There’s no confusion there. We are seeing more momentum in the French market. The second one was ability to sell front-to-back in North America. We have seen several early wins, but I do think we need to invest more in the GTM in the coming year to take those proof points and then take it across the market. So is that all proven out, is that all? No. Are the early wins exactly the kind of wins we wanted to get? Yes. And so I feel good about it, but I would say, we have to invest dollars on the GTM next year to take it to a much broader market here in North America and take it aggressively. The third thing was, ability to sell JUMP front office along with Clearwater platform -- along with the Clearwater platform. And so that is very promising. So we -- I think we announced a deal in the last quarter and a number of customers want that optionality from us is that you do our accounting already once you do the front office and the middle office. So we feel good about it. Is there more work there? Yes, there is. As you get to the U.S. and you sort of are trying to integrate them, I think, there is some work there. And finally, the last one was our ability to sell Unit Linked Funds. Really impressive, it’s really impressive. Just the technology and the reception in the market in Europe has been really high quality. So I would say at this point, I am happy with the progress we are making. Have we seen the benefits we want from this? Not quite yet. Is there more investment to go in the American market? Yes. In North America, that is true. Is there much more in Europe? Not really. So that’s how I would sum it. I think we are happy with the progress, but there is work to do.

Okay. Okay. That’s helpful. I appreciate. I will get back in the queue.

Thank you so much.

Thank you. We now have Gabriela Borges of Goldman Sachs.

Good afternoon. Thank you. Jim, I wanted to follow up on the earlier question on the demand environment, recognizing that it’s too early for 2024 guidance. In the past, you have given some helpful color on how bookings momentum today can help you predict revenue. T plus one, T plus two quarters out. So with that context, are you seeing anything interesting in the bookings environment that would lead you to think that you can accelerate revenue organically into 2024? How does the environment compare to, let’s say, this time last year, as you think about the puts and takes to budget, planning and revenue guidance for 2024? Thank you.

Thanks, Gabriela. So I think we feel very strong, and if you look at the last couple of quarters and the momentum that we have seen there, I think that would align. And just you heard the commentary that Sandeep provided. We feel really optimistic about the opportunities in 2024. Now, Q4 is a very big quarter and we want to deliver on that, and we are really excited about the pipe and the opportunities that are there. But as Sandeep always likes to say, we have a lot of work to do and I think we feel very confident about kind of the durability and the reliability of this growth across all of these markets and see a lot of momentum.

Good stuff. And my follow-up…

The other thing just compared to 2022…

Yeah. Please.

Yeah. If you look at 2022, clearly, it’s much better than that. The demand environment right now, if we just compare it to 2022, clearly it is much better than that. Does it mean that we all super satisfied about it? No. Was the booking in quarter three sort of what we expected? Absolutely. Was it a little bit better? A little bit. But was it meaningfully better? No, it is not. So I think it is what we expected and Q4 is another quarter. We continue to monitor it. We obviously listen to other analysts calls and we also listen to what our competitors are saying. So we look pretty aggressively at how people are doing. But I do think if we just talk about our pipeline and you look at our pipeline growth, it is at the highest it’s ever been. So I don’t feel worried about our pipeline. Obviously, our job is to sort of convert them with the right frequency and urgency.

Thank you for the call. My follow-up is on the replacement cycle dynamic in your market. As you think about the factors that drive replacement cycles, some of them are within your control and some of them are not. So maybe just remind us what are the one or two or three biggest factors within your control that allow you to catalyze a replacement when you have a sales executive engaging with the customer? Thank you.

Yeah. I think that, if you think about it a little bit narrowly, like replacement of an accounting engine, I think you will get the wrong answer. So I think if you think about the asset management industry, for example. If you think about Clearwater as someone who goes in and replaces an accounting engine and therefore the replacement cycle, then I think it’s a very different answer. But we don’t do that. Most of our win and our growth over the last year and a half has been on helping our asset managers grow faster. So there’s a big difference. Is that in replacement? No, it is not. What we are doing is we are helping clients get better client reporting, get better analytics, and therefore, driving more AUM to them. We are helping them win mandates that drives more AUM to them. How are we helping them win mandate? Much better reporting. A comprehensive view versus the old Excel view. So I feel like replacement cycle, of course we concern ourselves with replacing when the opportunity arises. But I don’t think we wait for that. I do think if you went to the asset management industry and said, what’s your problem? Two things I need to find ways to grow my AUM, number one. And number two, I need to manage costs and become more efficient. We solve both of those, not necessarily only by replacing their accounting engine, right? So that’s one. I think the same thing on the asset owner side. If you look at the asset owner side, there is a cycle of replacement which we are. If they get to that stage, we win a very large portion of the time. We would win 80% of the time we write this proposal here. But we don’t wait for it. So what is their pain point? Well, the pain point is alternative assets. And therefore you have seen us talk nonstop about our investments in LPx and then we backed it up with LPx Clarity. Then went into MLx. So I don’t think we look at the market and say, okay, what is the replacement cycle, what’s the JUMP balls, and therefore, what can I get? Because that’s something which we can catalyze a little bit, but we can’t control. But can we control identifying the right pain points our clients have and going out and addressing that aggressively? Yes. And that’s what leads to growth. It’s not like the replacement cycle has become better and therefore we are growing. We just don’t think like that.

That makes sense. Thank you.

Thank you.

You now have Dylan Becker of William Blair. Your line is open.

Hey guys. Nice job here. And maybe, Sandeep, kind of just digging into the customer conference here, right? I know we have kind of highlighted the intend integration now having kind of the front and back office solutions. But maybe a big takeaway we kind of came away from the conference was around that insights, opportunity, and obviously, AI and automation have been at the forefront here. But what are you hearing and seeing from customers? What were your big takeaways around the ability to drive kind of that level of intelligence through that connected platform, seems like obviously a big driver of kind of what the NRR opportunity ends up looking like, but we would love to hear kind of what you heard from the event?

Yeah. Absolutely. So first is, it’s really exciting, but doesn’t show up in our revenue quite yet. So that is something which you will hear me internally go on about is, saying, this is every customer we talk to is really interested. It feels like they have been waiting for a product like this and haven’t had it. And I think this technology allows them to get insights in a competitive peer benchmarking and therefore where they should invest. But since -- what I could say is, we do think it will start to produce revenue in 2024 and we do think it becomes a real engine of growth after that. But today it doesn’t. If you ask me about level of excitement from our client base, it is very high. We were able to demo things to our current clients and prospects and it was high. But we also demoed some things under NDA to more limited clients, if you will, and it is quite spectacular what feedback we have got. It just needs to convert to revenue, I am hoping quicker than what everyone tells me.

Totally fair. And I know another kind of sub-segment too. Obviously, you guys have had historical strength and is in that insurance vertical. I wonder to what extent are you guys seeing and hearing from customers too, how that hardening environment, the ability for these guys to start taking rates the levels that we are seeing there is unlocking not only capacity but also kind of incremental willingness to spend. I know international is a component of that as well, but how that’s maybe freed up some of the budgetary allocation on that side as well? Thanks.

Yeah. I think that on the asset owners -- go ahead, Jim. First, Jim, you answer. Go for it.

Sorry, sorry. Sorry, Sandeep. So I think that -- I think you are right that, that could be another contributor. All we do know is that our pipelines are large and larger and getting larger and so I assume that is a contributing factor to it. We don’t know the specific details behind that, but obviously, the healthier a client base is, the more interested they are investing, expanding, growing their business and thinking about that. And so I think that’s a rational point of view, but the truth is we just see it through pipelines.

Sure. Okay. Totally fair. Thanks guys.

Thank you.

We have our final question on the line from Brian Schwartz of Oppenheimer.

Hi. Thanks for taking my questions today. Sandeep, just wanted to ask if you could shed a little light on the business activity that you are seeing geographically between North America and EMEA. It sounds like you had a really good quarter in the APAC, but just hoping you can shed light how those two geographies are doing. Then I have a follow-up for Jim.

What I would say is just on a factual basis. We have been in North America much more predictably and I would still say that Europe is still a little bit lumpy. Our coverage around Europe is not as good as North America, especially when you think about Continental Europe. So are the deals more lumpy? Yes. North America is just much more predictable on what’s going to happen. You can look at the whole dam and you can say, okay, so many will come to market and this is what we think will win. So I think we are much more predictable here. Asia is the same way and that’s why we announced Asia, because we don’t expect it. And when you got this, we are like, wow, this is really impressive that it got done in such a short time in Asia. So, yeah, I would just say, much more predictable in North America, somewhat lumpy in Asia, but in Europe and pretty sporadic in Asia. Now we are investing in sales teams in each of these locations. As you know, we stood up sales and pre-sales teams in each of these markets at the beginning of this year. But it takes time and that’s how I think about the booking right now.

Thank you. And then, Jim, the question I have for you was just on the sales and marketing expense in 3Q. It went down sequentially and that’s a change from the seasonal trend that we have seen from the business. And so I was wondering if you could provide some color on that and did you spend all that you wanted to spend on sales and marketing in the quarter? Thanks.

Well, boy, if our Chief Marketing Officer, Susan, heard that, she would say, oh, let’s double down, let’s double down. We did have, if you recall, in Q2, we had our European client, which is smaller than the U.S. client, conference, which was in Q3. And I think last year we had more of those European events in Q3 as a kind of relative marketing spend. But I think you are right that typically we would pick up with the client conference in Q3. I think we will see that trend continue -- sorry, the sales and marketing expense, I think, you will see that trend up in Q4 vis-à-vis Q3.

Thank you for taking my questions.

Thanks so much.

Thank you.

Thank you. I’d like to hand it back to our CEO, Sandeep, for any final remarks.

Yes. I just wanted to thank all of you. I wanted to thank you for coming out on Investor Day and listening to us talk about our company. I want to thank you for all of you being on this call here today. Look, we are very committed to trying to build a really special company and earn your trust, so that when we say something, we execute on it and we deliver to what you expect. So thank you all and we really appreciate your time.

Thank you for joining today’s call. Our conference call has now concluded. Please have a lovely rest of your day and you may now disconnect your lines.