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Sandeep Sahai

Thank you, Joon. I'm pleased to report that Q1 marked another quarter of strong execution and continued progress. Let me share some highlights that underscore our strong performance. Revenue for the quarter was $126.9 million, up 23.5% and year-on-year growth. ARR was $493.9 million, up 22.7% year-on-year.
Our adjusted EBITDA of $45.1 million was 35.5% of revenue and up 40% year-on-year. Gross margin was 78.9%, very close to our long-term target of 80%.
In today's environment, of heightened market complexity, our value proposition has never been more relevant. In times like these, institutional investors want to make ongoing adjustments to the global portfolios, which in turn requires a comprehensive view of their assets and the ability to perform advanced analysis at a much higher frequency. Managing investments through disconnected legacy systems is no longer merely inefficient. It has become an existential risk. Data silos across legacy platforms, slow decision-making the most critical risks and introduce unnecessary costs precisely when agility and transparency are most essential.
Take regulatory reporting next, conforming with the new NAIC mandate often requires extensive work. And most of the industry is in various stages of planning and execution. But most of Clearwater's clients are already compliant. We made changes to our platform in a timely manner. And it was immediately available to all our customers, and the effort required to comply was dramatically reduced.
The single instance multi-tenant model is simply superior.
This is the last quarterly call focused almost entirely on Clearwater before these acquisitions, and it is therefore a good time to take stock and reflect on what we have achieved over the past few years and what lies ahead. Looking back, it is clear to us that these enduring financials are not just a matter of chance. We have been focused on improving the quality of our business, very programmatically and methodically and have executed with rigor.
Let's start with revenue growth. We have grown 20% plus for each of the last six years. Our platform is clearly disruptive and a win rate of 80%, GRR of 98% plus, NPS of 60% plus our own testimony to that fact. Our single-instance multi-tenant platform with a single security master is simply the right technology to address the complex global portfolios that our clients have. We believe that all clients will migrate to this architecture in the days and years ahead and are confident in our competitive position versus the legacy platforms, most of our major competitors have.
But we did not stop there. We launched a large commercial contract restructuring program in 2022 that aims to dampen revenue downside in times of AUM decline, while still retaining a majority of the revenue upside when there is an AUM tailwind. This was again apparent in Q1 of this year. markets were very volatile, but ARR grew 22.7% year-on-year.
Looking back, growth and sustained growth powered by investment in innovation and the development of new functionality helped us become more responsive to clients while increasing TAM. Add to that superior client servicing and operations; and finally, a balanced commercial model and you get sustained durable growth. Looking ahead now, we believe that this playbook can be applied almost in its entirety to both Infusion and Beacon. The finance and legal teams have already been integrated under common leadership, and we will start work on this almost immediately.
Let's discuss gross margin and unit economics next. Firstly, the key to consistently improving both of these metrics starts with a focus on client satisfaction and ensuring consistency and reliability in our operations, essential ingredients to earning the trust of our clients and in delighting them. We use MBS and CSAT extensively to track and measure progress at a team level, at an industry level and at the company level. We use a metrics-driven approach to measure productivity and drive constant improvement. Not rocket science, but relentless execution is what sets us apart.
Second, and as importantly, we invest in technology to make our workflows and processes much more efficient. We developed a proprietary reconciliation to Helios to modernize how we aggregate and process daily investment data from custodians, clients asset managers and brokers. And given the single security master and single data ingestion system, we have led the charge on generative AI.
The financial expression of these programs have been very strong. Gross margin has grown from 75.1% in fiscal year 2022 and to 78.9% in Q1 of 2025, a 370 basis point improvement. We discussed gross margin improvement at our Investor Day conference in September 2023 and forecast of 50 bps per year improvement from 75.8% gross margin in the first half of 2023, just before the conference, we have grown gross margin by 300 basis points in less than two years, far exceeding the 100 bp improvement investors should have expected.
We have taken their technology and piloted the use of Helios to drive efficiency across infusions operations and the early signs are very positive. Similar improvement in client onboarding. A single security master has enabled us to reduce the average time to onboard a client to just 5.5 months. a remarkable achievement when you consider other similar platforms. Once again, we expect to bring these technologies and capabilities to infusion and beacon and drive meaningful gross margin improvement.
To facilitate this, all operations and client servicing teams have been brought under one common leadership and will be operating as one integrated team.
R&D and operations are increasingly seen as partners in growth. And we were very excited to have reached our NRR target of [115] at the end of 2024. A full year ahead of a January 2026 goal.
Finally then, let me discuss EBITDA expansion. Here again, we continue to meaningfully outpace the goals we set for ourselves. Q1 2025 generated 35.5% adjusted EBITDA, which was 420 basis points better than Q1 of 2024, which in turn was 470 basis points better than Q1 of 2023. That is extraordinary. And when you consider the organic growth we have been driving, while improving profitability, it should give you very high confidence in our ability to execute.
None of this would have been possible without the infectious passion, active collaboration and the striving for excellence that my partners in the leadership team have displayed over the last several years that we have been together.
Our entire team works tirelessly to be client advocates, and we have been fortunate to have built an extraordinary team across the globe. I could not be more thankful.
Before we move on, I'd like to highlight some of the notable strategic wins from Q1. [McNifison-7] TechLead, selected our PRISM solution to integrate the investment data into their snow flat cloud environment, supporting both immediate liquidity management needs and longer-term plans to consolidate the investment operations infrastructure. In Europe, we secured a pivotal win with a leading German insurance company, the first step in replacing a competitor's middle to back-office solution. This validates our expansion strategy and opens up significant market opportunity and TAM in Europe with potential replacements for firms managing over $5 trillion in AUM collectively.
A global asset manager expanded their partnership to include both LPx and MLx solutions to support their insurance clients book of record accounting and regulatory reporting needs. These wins demonstrate our ability to solve very complex operational challenges across diverse clients while also showing strong cross-sell momentum for our PRISM LPx and MLx solutions as well as our general capabilities.
Now though, let's look ahead. Our strategic acquisitions of Enfusion, Beacon and Bistro position us to deliver what the market has long demanded and what is increasingly necessary to manage a complex global portfolio. the industry's first fully cloud-native investment platform that seamlessly integrates the front, middle and back-office operations. By combining Clearwater's trusted middle-end back-office infrastructure with Enfusion's industry-leading front office platform Beacon's next-generation risk and quantitative analytics and Bistros visualization capabilities focused on alternative assets. We aim to eliminate the fragmentation that has plagued to our industry.
Our single-instance multi-tenant architecture is already disruptive in our industry. But what sets us apart now and in the future will be our ability to create a single security master and a single data plan for all asset classes, public and private. We believe that the business value of this will be completely transformative. Number one, the platform will provide a comprehensive global view of our clients' assets, public and private. This is incredibly hard to do when you think about LPs, mortgages, loans, private credit, derivatives, structured products, et cetera, along with equities and fixed income instruments.
Number two, drill down to understand real exposure to a company and industry or geography, and most importantly, across asset classes. You must know what is in every CLO, every MBS, every LP investments every real estate portfolio and so on and so forth to generally understand real exposure.
Number three, understand overall risk. Very tough to model because it is difficult to ensure that the assumptions are consistent across asset classes. Risks across asset classes, often compound and or cancel each other, making it important to understand overall risk model cash flows performance shock analysis and scenario review across your entire portfolio.
Number four, all of this will lead us to an event-driven platform where actions taken anywhere in the trade life cycle are immediately reflected across the front-to-back platform. Fully integrated, our platform will deliver this and will completely revolutionize the industry. Integration does not happen overnight, but gives us high confidence in the fact that all these platforms use modern cloud technologies and are operating at scale. Secondly, and perhaps more importantly, large sophisticated clients already use these platforms together with one stellar example being Blackstone building Bistro.
And while this vision is very exciting, we also want to deliver in the short and medium term. Given the complexity and time needed to launch new products, enter new markets and geographies, we have developed a road map for execution that has three phases. In Phase 1, the focus will be on maximizing the potential of each stand-alone business as it relates to their 2025 goals. We want the GTM and operations teams to do what they were doing before these acquisitions, but do it incrementally better. For Clearwater, the ability to provide industry-leading front office functionality, cutting-edge risk and market-leading alternative asset visualization should make the market proposition stronger and help growth incrementally.
For Beacon, they will have the ability to take their platform to over 1,400 Clearwater clients and over 900 Enfusion clients, and that should help them grow incrementally faster. For Enfusion, our joint ability to invest in R&D and GTM for both head funds and separately for asset management, and to take this solution to over 1,400 Clearwater clients should also help them drive incrementally higher growth.
Phase two consists of a robust cross-sell strategy across the combined organization. Building on the successful model we developed with our Wilshire cross-sell team, we are creating a dedicated organization to capitalize on the need for a comprehensive platform for investment management across our client base. This approach will not only drive revenue growth but also deliver enhanced value to our clients.
In the third phase, we are going to bring a long-term vision of one platform to [Fuchu]. The R&D, operations and GTM efforts to drive all these phases will start in earnest right away. This includes developing a single security master on a unified data plane that will form the foundation for the industry's most comprehensive front-to-back platform. This integration is our goal and its success will be built on the momentum we generate from our immediate focus on stand-alone growth and cross-selling initiatives. That's the strategic opportunity.
But on the financial side, we think these transactions create an extraordinary opportunity for shareholders. We have issued shares that led to dilution of approximately 15%, but have added a little over 50% in revenue though not at the same level of profitability, but we are very confident about our ability to execute and drive incrementally higher growth, higher gross margin and meaningfully improve profitability to get these businesses to financial metrics that are similar to ours. Taken together, all of these actions should power 20% growth, 50 basis point gross margin improvement and 200 basis point EBITDA expansion per year. all very consistent with our earlier guidance.
Finally, we began this chapter as one integrated team strengthened by the addition of executive and exceptional leadership and talent. I'm delighted to welcome Neal Pawar, former CEO of Enfusion; and Kirat Singh, former CEO of Beacon to our leadership team. Their expertise and vision will be invaluable as we execute on our ambitious road map. To the Enfusion and Beacon teams joining us, welcome to Clearwater.
And to all our employees, thank you for your unwavering dedication and collaborative spirit that have established Clearwater as a global leader. Together, we are doubling down on our commitment to innovation and operational excellence as we build the industry's most comprehensive cloud-native investment management platform. The future has never been brighter for our clients, our shareholders and our entire Clearwater team.
With that, I'll hand the call over to Jim to dive deeper into our financial results.

Jim Cox

Thanks, Sandeep. We delivered another excellent set of quarterly results in Q1 2025 and which continued the impressive trajectory that we enjoyed in 2024. We achieved revenue of $126.9 million, with year-over-year growth of 23.5%, which comfortably beat our guidance by $1.9 million and grew sequentially from Q4. This is impressive, as we noted in our earnings call last quarter that $3 million in incremental revenue from NAIC services originally expected to be recognized this quarter. was recognized last quarter in Q4.
Annualized recurring revenue, or ARR, at the end of Q1 was a record $493.9 million representing strong year-over-year increase of 22.7% from the $402.3 million in Q1 of the prior year.
Now let's turn to unit economics and profitability. Our robust margin expansion is anchored in our consistent incremental improvement in gross margin, which in Q1 was at a record high of 78.9%. For comparison, our gross margin was 76.5% for fiscal year 2023 when at our September 2023 Investor Day, we committed to improving gross margins by 50 basis points per year. In Q1, we are 240 basis points better. in 1.5 years, not five years as we committed.
This dramatic improvement was achieved, not with a silver bullet, but with grit, and the achievement of many efforts to incrementally improve both the economics and the efficiency of our operations.
Teams across operations, sales and development have collaborated across many programs. Each of these individual programs contributed to incremental improvements to achieve these results, and it is gratifying to see the team's successes reflected in our numbers. We've continued our stellar EBITDA margin expansion path by delivering $45.1 million in EBITDA in Q1, and with an impressive year-over-year growth rate of 40% and a record EBITDA margin of 35.5%.
Now I'm going to turn to GAAP results. We achieved a GAAP net income for the fifth quarter in a row with GAAP net income of $6.9 million in Q1. We have seen the scale of this business accrue, benefits to both shareholders and clients. For example, in the first quarter alone, we spent $37.4 million on R&D. This is more than double the amount we spent on R&D when we became public in 2021.
Yet as a percentage of revenue, R&D has become 21.6% of revenue on a non-GAAP basis. This reflects leverage of more than 320 basis points since we became public.
Free cash flow in Q1 was $23 million, which represents a year-over-year increase of 168% from our prior year's Q1 of $8.6 million. Total cash and cash equivalents at the end of Q1 was $282.9 million with net cash of $237.6 million.
Our net revenue retention rate was 114% in Q1, which was a step down from the prior quarter's NRR of 116%. As the AUM growth within our clients was less of a tailwind. However, the key elements to drive to NRR 115% remains strong with new product growth, low churn, and price increases remaining steady. In terms of gross revenue retention rate in Q1, it remained at a solid 98%.
In Q1, equity-based compensation and the related payroll taxes was $27.6 million, which represented 21.7% of Q1 revenue. This metric has become meaningfully lower as a percentage of revenue and as a percentage of EBITDA as we have scaled.
Before we turn to the future and guidance, please forgive me for a moment of reflection. When I joined Sandeep in 2019, I don't think either of us envisioned we would find ourselves in this moment today. between adding private investors in 2020 to going public in 2021 to navigating COVID and to all the inevitable market excitement in between. We and all of us at Clearwater have experienced so many changes. During this time, we've added so many great people along the way, and all of us have learned how to get better, time and again, even when we thought we were already pretty good.
There may have been exciting moments along the way, but none of them are more exciting than the opportunity that lies in front of us today.
We can give you our assurance that we will remain ever focused on clients and our employees and on our shareholders as we have been all along this journey. With these acquisitions completed, we can also assure shareholders that we will not pursue further M&A activities until the benefits of these acquisitions are truly apparent to investors, clients and employees. And we have sufficiently deleveraged the business.
Now let's turn to guidance. Q1 will be our last reporting quarter in which we are showing our historical business results as we closed the Enfusion transaction on April 21 and the Beacon transaction today. As a result, we have provided guidance for Q2 2025 for our historical business and summarized the expected contribution from the acquired businesses. For the entire year, we are providing combined consolidated guidance for the full year 2025. For everyone's context, Enfusion's preliminary revenue for Q1 2025 was $54.5 million as we expected, which is a 13% increase over Q1 of 2024.
For the second quarter of 2025, before considering the impact of Bistro, Enfusion and Beacon acquisitions, we expect revenue to be $129 million. representing a year-over-year growth rate of approximately 21%.
In addition, we expect a combined revenue contribution from the date of acquisition of Enfusion and Beacon of $45 million to the quarter and a total expected revenue of $174 million in the second quarter of 2025. This represents total year-over-year growth of approximately 63%.
In terms of adjusted EBITDA guidance for the second quarter of 2025 before considering the impact of the acquisitions, we expect EBITDA to be $45 million, representing an adjusted EBITDA margin of 35% or approximately 360 basis points higher than our prior year Q2. Additionally, we expect the acquired businesses to contribute approximately $8 million in EBITDA in Q2 at an EBITDA margin of 18%.
On a consolidated basis, the EBITDA margin is 30.5% or approximately 250 basis points higher than 2024. Additionally, in Q2, below EBITDA, we expect $6 million of onetime cash costs related to transition activities and $16 million of onetime equity-based compensation expense resulting from the double trigger of awards granted at the legacy companies. We expect interest expense for Q2 to be $15 million.
For the full year 2025, on a combined basis, we expect revenue to be between $720 million to $728 million, representing a year-over-year growth rate of approximately 59% to 61%. We also expect EBITDA to be $230 million to $235 million for the full year 2025, representing an adjusted EBITDA margin of approximately 32% for the year.
For the full year, although we are still finalizing our purchase accounting work, we currently expect depreciation and amortization expense to be in the range of $100 million to $120 million. We expect the combined company will have equity-based compensation expense of approximately $139 million including the $16 million of onetime costs I described in Q2. This equates to equity-based compensation expense of approximately 19% of revenue. This is slightly less than the 20% of revenue in Clearwater's initial full year guidance.
We expect net interest expense to be approximately $40 million for 2025. Share count for the year is expected to be approximately 303 million shares. And although we will pay a limited amount in cash taxes, we will continue to utilize a non-GAAP tax rate of 25% for 2025.
With that, I'll turn it over to Sandeep to provide some closing thoughts before questions.

Sandeep Sahai

Thank you, Jim. Before we open the call for questions, let me leave you with this thought. We are working backwards from a future where fragmented investment systems will be as obsolete as paper ledgers. A future with the world's most sophisticated investors will see, analyze and act on their entire portfolio. public and private, simple or complex through a single pill of glass in near real time.
Q1 strong results are meaningful and foundational for what we are building. which goes much beyond an integrated platform. We are eliminating an entire category of problems that the investment industry has accepted as unchangeable for over a decade. That's the future we see. That's the future we are building, and that's the future we will deliver.
Thank you.

Question and Answer Session

Operator

(Operator Instructions) Kevin McVeigh, UBS.

Kevin McVeigh

Great. And let me congratulate you. Obviously, transactions, but also the execution, I'd imagine there was a lot of focus on the deals and to be able to put the core numbers up really, really impressive. I think you gave a lot of really, really helpful context. As we're modeling, I don't know if this is for Jim or Sandeep, is there any way to think -- I know that 20% is longer term, but -- and 25% is pretty clear, but any sense of how we should think about '26 and '27 from just a top line perspective?
And then just the pacing of the margins.

Jim Cox

Sure thing, Kevin, this is Jim. I hope you're doing well. Thanks for that. Let me start it's okay with 2025, just so that everybody is grounded in the same because I know there's lots of moving pieces here. But simply the way we've done our 2025 guidance is this.
We've always said Clearwater grows 20%. We're committed to that rate. We also then said, "Hey, we're going to grow Beacon 20%, just like that. If you can see Enfusion in Q4 and in Q1 grew about 13%. And so those are the components that we used to come to our guidance.
Obviously, we will continue that longer-term commitment to the 20% top line growth remains. Sandeep described the three phases that we will step through as we're looking for an incremental improvement. And so I think as we look to those levels, we would expect that infusion business to move from that 13%, up a few percent each year as we drive to that 20% top line rate.
In addition, I think it's impressive when you look at 2025 and you look at the full year EBITDA guide, that we are able to grow that as a consolidated entity. And so I think when we talked about the acquisition in January, we talked about the incremental improvement in the Enfusion business EBITDA margin growing. And we've also always talked about consistently thinking about 200 basis points improvement in EBITDA margin in our business historically, and how that is our mantra. And I think we feel very comfortable with the idea that we can expand the larger kind of consolidated enterprise at that same EBITDA margin expansion over that period. Sandeep?

Sandeep Sahai

Yes. I would just add here, Kevin, that to be very specific about the infusion growth rate. I think we had said before the acquisition that is starting up at about 13%, and we expect to reaccelerate growth through 20% in two years. So obviously, the transaction just closed 10 days back. And so we expect to get some improvement this year, but very little.
We expect to see some real acceleration, if you will, in 2026. And by the time we get to Q2 of 2027, we expect that to be growing at the pace we grow. So just in terms of scaling it how this might go in the outer years, that's how we think about it.

Kevin McVeigh

That's very, very helpful, Sandeep. And I know you talked about kind of the three phases of the execution, the first one being the go-to-market of Beacon clients to Clearwater and Enfusion and then Enfusion of Clearwater, can you just remind us how does Bistro fit into that? And does that come across the same optionality of Beacon? Or just how do we think about Bistro within the mosaic of Beacon and infusion?

Sandeep Sahai

Yes. Thank you, Kevin. Simply put, when you think about Beacon, it is visualization of alternative assets. And I'm sure you'll agree that A lot of the inefficiency in the world in this world comes from processing and dealing with alternative assets. And so what Beacon will do is -- Bistro will do is provide that capability across asset management, hedge funds, insurance companies and other asset owners.
So we see that as a horizontal capability, which is applicable to all of the vertical markets we operate in. And while on that subject, Kevin, we think of Beacon almost is the same thing. The risks and analytics is not restricted to any one of these industries and we expect it will be a horizontal. We'll take it to the 1,400 clients of Clearwater, we will take it to the 900-plus clients of Enfusion and frankly, to their own market segments, which is energy and other areas.
So yes, we expect these two capabilities to be horizontal going forward.

Operator

Brian Schwartz, Oppenheimer.

Brian Schwartz

This afternoon. Sandeep, wondering if you can give us maybe a heads up on what you're seeing in terms of demand out there. Obviously, it seems like the macro impacted the business in 1Q. But what are you seeing now since the tariffs and the market turmoil took hold this month. And then with Jim, did you put in any potential macro risk into the guidance?
And then I have a follow-up.

Sandeep Sahai

Yes. Thank you for the question, Brian. So I don't think we saw very much in Q1. We literally in the day today, looked at April to see churn to see booking, to see items which may reflect a slowdown. But when you think about revenue, though, our revenue is very well protected from the downside.
So have the prices of asset class has gone down, generally speaking, I think that's true. But has the revenue gone down like it did in 2022 or any other time, not so.
So I think the overall revenue growth of the company was solid in Q1. I think we looked at Jon, we looked at hedge funds, we looked at each of these markets, obviously, Q1 is solid, what we are saying and Q1 is -- April is very preliminary, but we have seen nothing here which affects the revenue of the business. Obviously, earnings is a completely different story and earnings outpaced any kind of guidance we provided. And so that's how we think about Q1 and April, very preliminary. I don't know, Jim, what the second question.

Jim Cox

On the guidance, I think, its the framework that we just described as far as thinking about those businesses and the relative contributions of those based on the information that we have today. I would say on the margin, right, NRR is down slightly in Q1 from Q4. But all of the things that are entirely in our control, the churn, price increase, cross-sell of product, upsell was a little bit lighter, and that can be because asset growth is a little less and that tailwind of AUM was a little bit less as well to contrast from Q4 to Q1. But it was -- I would characterize it as less of a tailwind rather than a head.

Sandeep Sahai

I think that's a fair point, which I don't think has stressed enough was there was a tailwind and that helps revenue percent to 2%. And that tailwind just did not show up like we expected. And that's why we're always cautious about guidance because who knows what the tailwind is going to be but we are much better protected against headwinds, and that's what you saw in Q1 is there was -- prices went down, but guess what, the revenue growth was still totally solid. But is it down the percent compared to what it would have been with a good tailwind. Yes, I think that's fair.

Brian Schwartz

And the follow-up question I had was just on the consolidated guidance. I'm just thinking about how fast you can get going on achieving the top line and cost synergies. If I look at the consolidated guidance and just considering the acquired companies ARR, the upside that you did in Q1, it doesn't seem like you're baking in much synergies with these acquisitions. So the question is kind of coming back to how fast do you think you can get going on working to achieve both the top line and the cost synergies for the deal rationale?

Sandeep Sahai

Yes. Thank you, Brian. Look, I think there are two different things. One is revenue growth, which is what is really important, and we think we reaccelerate in two years. So that's number one.
On the cost side, I think we said we will improve gross margin 400 basis points in year one and another 400 basis points in year 2, and we will take out $20 million in cost synergy. Sitting as we do right now, we feel very, very confident that we can deliver on all of those three items. And so we see nothing having changed from the time we provided you with our thoughts about these acquisitions.
I do want to also add that many of these synergies related to G&A have already been acted on, and they were acted on earlier this week. And we expect them to play out over Q3 and Q4.

Operator

Michael Infante, Morgan Stanley.

Michael Infante

Jim, I just wanted to ask, if I run the pro rata calcs based on the acquisition close date of infusion and Beacon, even if I assume roughly even seasonality throughout the year. I'm getting to roughly $170 million of inorganic for the full year, if you sort of back that out from the midpoint getting to, call it, 23% organic for Clearwater, which seems a touch high in relation to the 2Q guide of 21%. Is there any nuance you would add just from a seasonality perspective for Enfusion or Beacon and/or or whether or not you're baking any cross-sell synergies into that number?

Jim Cox

Yes. I'm just grabbing my numbers to try and look, I have a little bit more in the inorganic than your one -- I think I heard you say $170 million. I'm just trying to pull up my numbers here. It's a little bit more than that, but that organic number sounds sounds consistent with what we were looking at, at the beginning of the year. And including the good Q1 that we have.
.

Sandeep Sahai

Yes. And Michael, I would just add that like we said, the first deal flows 10 days back, and the second one is literally posed in the morning today. These teams are going to be integrated immediately, because we do believe that risk can be sold harizontally, and you can sell even the front office horizontally to all of our client base, and you can sell Bistro horizontally. So we'll integrate them really quickly. At that point, it will be hard to tease out exactly what growth comes from where.
But we do feel that our guidance is solid. And obviously, the Clearwater numbers are very ground up. We do a very rigorous process. I think we spent a lot of time with Enfusion to make sure we understand it and the same with Beacon.
So it has been built ground up. And what it comes to is really if you model 20% or slightly better for both Beacon and Clearwater and your model is 13% for Enfusion, Well, that's where you will roughly come out.

Michael Infante

Got it. That's helpful. Sandy, I asked last quarter on infusion pricing. I wanted to ask the same question again. I know it's only been part of the company for nine days now.
But any incremental detail you could share just in terms of your conversations with customers and/or Neal Pawar just in terms of how you're thinking about pricing and contract structures and whether or not that might be playing into your assumptions for a few points of growth acceleration at Enfusion next year?

Sandeep Sahai

Yes. Thank you, Michael. Listen, I had a whole paragraph for you. We go to the script, I actually don't spend a whole gap making sure I addressed your point. But listen, what I would tell you is this, one is super high receptivity at Enfusion to come up with a commercial model which is similar to what we have done.
So that's question number one. So if we talk about Neal Pawar and his desire to build a more stable commercial model, Sky high. So that's number one. Number two, what we did was we took the entire finance organization and the legal organization, which drives these initiatives from all three businesses and brought it under Jim right away, mean that transition has already occurred.
And the point being, let's go out and drive that centrally and sort of purposefully. But I do want to caution on one thing. The last time we did it, we went through a 4-month exercise to build a model, which is going to work and endure. What we don't want to do is get 8% this year and then 2% next year. We don't want to do that.
We want a consistent 4% to 5% growth from price, which I think is durable. But if you grow price 8% to 9%, I don't think it's durable.
And so we want to build the model correctly. So do we think it adds to growth in Q2 and Q3, we don't. Do we think it might add to booking in Q4? Yes. Do we think it will add to revenue in Q4?
I don't think so. So would you see impact in 2026? Yes, we do believe that. But this is a big initiative for us. We want to get the commercial model right.
We don't want this constant movement up and down. We have done it before. We think it can be executed. And I've got to tell you, the Enfusion team is completely behind that.

Operator

Rishi Jaluria, RBC.

Rishi Jaluria

Nice to see the deals close. Maybe one for you, Jim and one for you, Sandeep. Jim, just to kind of go back to the numbers. It sounds like you're supporting the idea that organic growth or core Clearwater growth will remain above 20%. Just can you give us a sense for what would the inorganic contribution?
I know Bistro is immaterial, but from Beacon and Enfusion for the year, just so we can all align our numbers? Because if I just take kind of your Q2 guide and then consensus for Q3 and Q4, I'm going to come up with a number that's much lower than 20% organic. So maybe just can you walk us through that? And then I've got a follow-up for Sandeep.

Jim Cox

Sure. So I think what we said was there was $45 million of combined contribution, right, in -- and that's basically 2/3 of the second quarter, right? So if you lay that out, you can then expand that into Q3 and Q4. So take the pro rata from the intra-quarter into a full quarter and start to look at that in those areas.

Sandeep Sahai

Yes, Rishi, I think if you look at parking revenues, Rishi. Yes. I was just going to say, if you look at the revenue for 2024 for Clearwater and for Enfusion, that's obviously fully publicly available. And we've given you a guidance of what Beacon was, you just take those metrics and say 20% growth for Clearwater 20% growth for Beacon in the 13-ish percent growth for infusion. And that's the guide.
I think the quarterly thing will shake out a little bit because we're not in that book today. Like I said, one deal closed in the morning today. So the quarterly may move up and down a little bit, but I do think at a full year level, we feel really good about our guide here.

Rishi Jaluria

Okay. Got it. No, that's helpful. And then Sandeep, for you. One of the things that I think gets me really excited about the Enfusion deal, along with everything else that you stated is really the ability for Clearwater over time to get deeper into equities, right?
And it feels like especially given your large asset manager customer base, it feels like a big opportunity that you can go after. Maybe can you walk us through kind of your road map over time? I understand it's not going to happen this year, probably not going to happen next year, but for you to really get deeper on the equities book of portfolio, especially for your largest asset management clients and maybe what that can look like in terms of a growth driver for now the combined Clearwater?

Sandeep Sahai

Thank you, Rishi. Yes, that's a big piece, right, Rishi. When you think about the work infusion does, it's a very different profile from what we do. We think about what head funds trade in and what asset managers trade in, you're right, equity is a much bigger component than in the general accounts of insurance companies. So we get that expertise where the technological needs are very different.
It's near real time, it is very low latency. So the technology and the platform requirements are also different.
What this does for us is it brings all the intellectual property you need under one roof. But that doesn't mean it's done. What it does mean is all of these are cloud-native modern technologies under one roof. Do clients already use it together. Lots of clients use it together today.
So people have Clearwater and Enfusion, Clearwater and Beacon and so on and so forth. So even without us being together clients have been able to pull this together. So we feel very confident about that.
The final vision, though, is can you create a single security master which is across all asset classes and across all functionality. If you do that, I believe that's a holy grail of investment management tech. Single data ingestion system, single aggregation system, single reconciliation system, but a singular data -- singular security master, which is used by the front office is used by risk, is used for regulatory reporting, is used for accounting that I feel we have a legitimate and more than legitimate right to try. And all the intellectual property, while not integrated, is under one roof.
Now we don't want to get over excited about trying to take all of our energy and put it behind that. And that's why we had that 3-phase approach of less sell things incrementally and better. So we protect and do well in 2025 and then in the medium term, cross-sell much more aggressively and therefore, improve '25 and '26. But yes, we do expect after that for this full front-to-back platform. And if we can get there I think it will completely revolutionize how people think about investment management technology.

Operator

Andrew Schmidt, Citi.

Andrew Schmidt

And Jim, thank you for all the details, and it's good to hear the progress report card here. Maybe you just dig into Enfusion for a moment and just the hedge fund end market. If you could just talk a little bit about what you're seeing in the market. This kind of taps on to a prior question around just the environment. But what you're seeing in the hedge fund end market in terms of just client health, hedge fund starts and things like that?
And then perhaps a correlator to that, Sandeep, you mentioned Phase one some tactical blocking and tackling, current run rate of business plus some improvements. I would you go put some finer points on what those sort of near-term improvements you can make in the Enfusion business, that would be helpful.

Jim Cox

Sure. So maybe just for context, just to be transparent with everybody. If you go back to Q1 of 2024, Enfusion had about $4 million of churn in Q2. They had between $3.5 million and $4 million in Q3. They had $3 million in Q4.
They had $2.5 million of churn. And in Q1, they had $3 million of churn. So again, looking at a full quarter basis, that profile is identical. I'd also say we just checked in to see how April looked and April looks I would say, consistent with the normal pattern. And so we haven't seen anything with regard to that.
I think the things to think about with Enfusion and a real focus for the team that they are increasingly becoming more and more successful with is not only winning in the new hedge fund market, but hedge fund conversions. And when we dig under the covers and look at some of the good work that they did in Q1, there are a number of hedge fund conversions as well that went through in that quarter.

Sandeep Sahai

Andrew, I would just add that, if you look at the work Neal Pawar and his team have done, they migrated away from very small hedge funds. And frankly, if you look at the volatility, it comes from the very small hedge funds. They come in and out of the market. So I think the migration makes the business somewhat stickier, which is why you've seen the churn level off completely.
Now just like you, we have been looking also and trying to see what does Q1 look like? What does April look like and it's completely consistent with everything they saw in 2024. So we feel we're very watchful but we don't see anything yet, which would say to us that something has changed or something is trending in a certain way.
So the question I think -- the other question was, what can we do to help Enfusion grow incrementally faster? And -- the most simple thing is Clearwater obviously has 1,400 clients. Many of them need a front office system and a middle office system, most people would agree Enfusion is best-in-class. And so could you take that and sell it to those clients, I think that would increase their growth incrementally? Is that x percent is hard to tell today.
But yes, that we see as a major component of growth. That's one.
The second thing is Enfusion has traditionally invested a lot lower in R&D, and they always have to make a choice. Do you invest in hedge funds or you invest in asset managers. But what Clearwater will be able to do right away is pool our resources, the resources we were deploying behind asset management pull them together, put it under the joint leadership of Neal Pawar. And I think that will help quite dramatically their bandwidth to focus incrementally on growth. And so we expect them to grow faster.
Does it happen tomorrow? No? But we do think, like we said, we expect that in two years, they should be at the growth rate of 20%, and we absolutely expect to meet that. Thank you.

Andrew Schmidt

That's extremely helpful. Maybe just ask about the new foundation, the single security master, obviously, hugely beneficial, an important part of this, the process here. If you could talk about just the R&D intensity associated with building that out? And then on the flip side, when you do get that live in the future, can you deprecate technology assets and drive a higher level of scale when we think about that new combined security master?

Sandeep Sahai

Yes. Thank you. So I would just say, yes, yes, and very loudly so I think those are exactly right. But I do think that we should just consider for a second what the architecture of Clearwater is. It is a single security master system today.
Then you're going to ask yourself, what's the architecture of Enfusion. And it is a single security master a different security master but architecturally a single security master. And then you got to think about Beacon.
So the benefit we have is each of these systems are architected as a single security master. Use the same security master for front office applications for OEMS and PMS and then risk and then accounting and the regulatory reporting. And what you do is you completely get rid of this notion of reconciliation. And all of us on the call know that. We have teams after teams after teams of people reconciling within an asset class between front office, middle office, middle office and back office and it goes on and on.
And then you put in other asset classes and other countries and best of luck, reconcile and reconcile and reconcile.
So I think the single security master would completely change the game of how people think about investment management technology. So we are very excited about it. We think that architecturally, we are set up to do it, but it doesn't mean it gets done in six months. I think it takes time.
One last point on the R&D. We have -- the joint integrated company has 1,000 people in R&D. And so we think there's a lot of synergy there, but we don't expect at a dollar level to reduce R&D expense, but we do expect us to be able to fund these initiatives without adding too much of cost.

Operator

Alexei Gogolev, JPMorgan.

Eleanor Smith

This is Eleanor on for Alexei. So first, I was hoping to like everyone else on the call asked about the infusion acquisition, which brings significant equities exposure to you. Do you intend to manage this new risk as it relates to your pricing?

Sandeep Sahai

Yes, thank you for the question. But we think a lot about AUM when you talk about just Clearwater, Enfusion doesn't price like that at all. So they aren't subject, I think, to the vagaries of the market growing 5% up and 5% down. But I do think that the commercial model needs to be report. It's in the commercial model -- we don't think it's best-in-class right now.
I think the Enfusion platform is completely best-in-class, and there's really no reason they shouldn't have a commercial model, which is best-in-class. But we do expect to launch that effort very quickly, but we do think it takes us four months before we go to the market with it. And then it will take a little bit of time to get people to convert to it but we will switch all new clients to that new commercial model right away. And I think clients will like it. I don't expect clients to be resistant to it because we hope it aligns to how they run their business.
So look, we feel it is a journey, but it's a journey we've been on before. So we feel pretty confident about it.

Jim Cox

And Al, if I can refer you to the deck we put out when we closed the Enfusion transaction. I think you'll see the client segments within that deck. And I think something that was really compelling to me and, frankly, probably should have understood it, but it really popped out at me was after the consolidation, all right, we have about half of our revenues, our asset owners and half are asset managers. And of those asset managers, 23% are hedge funds. So it's about -- it's less than 1/4 of our exposure across all that to hedge funds.
And yet, we still have that incredible blend of both asset owners and asset managers. And I think it uniquely positions us from a financial stability perspective, but also from a strategic perspective, when we think about being able to see both sides of the market.

Eleanor Smith

That's really clear. And as a really quick follow-up, I want to ask about to -- how is that embedded in your guidance? And how do you think about its forward growth or opportunities since you acquired it as a no revenue asset?

Jim Cox

Yes, thank you for reminding everybody of that. It was an asset acquisition, and there aren't revenues associated with it. Sandeep described how it is a horizontal it is provided as a horizontal use case. And so I think as we continue to build that out, we'll look for evolution there.

Sandeep Sahai

Yes, I would just say a little bit there aren't any good solutions in the market, which is -- goes across alternative assets, other complex assets. I mean there really isn't a platform, which you can look at private credit and private debt in all of these asset classes together. And when we think about the biggest player in the world in this area, it's Blackstone and they built it, but they built it using some of the technology of Clearwater and some of the technology of Beacon and they developed on top of that to build something which could be used by their desks across the company. So I think it is a very unique asset.
And for us to build it would have taken a long time. But more importantly, our access to that domain expertise would be really hard to get. -- mean they use it on a daily basis. So we are going to stay abreast of everything that happens in that market. And I think that alternative assets is such a big part of the whole story.
-- that it will really help accelerate growth for all three companies, including Clearwater, Enfusion and.

Operator

Dylan Becker, William Blair.

Dylan Becker

Sandeep, Jim. I'll just ask one for the sake of time. you kind of hinted at it, but Sandeep, you guys have obviously undergone kind of a similar transition throughout the core Clearwater business over the last five years and outexecuted or outperformed kind of expectations there. I guess I wonder how that kind of breeds confidence in your ability to run the same playbook. And if there are any parallels that you would make as kind of the starting point we look at today relative to where Clearwater was five years or so ago.

Sandeep Sahai

Yes. I think -- thank you for the question, Dylan. Everything we have seen until now, super high confidence. We have moved very quickly to integrate all the operations under Subi Sethi as our new Chief Operating Officer. And we should be able to play the exact playbook again.
And if you think about and look at the integrated margin and how we got from there back to where we are today, we think we can pay -- we can just execute on that same playbook. The advantage this time will be two things. One is, the technology of Helios already exists, so you don't have to build it, and we know how to drive it. So our level of confidence in driving gross margin improvement is really high. Our ability to execute on the synergy is really high.
And so we believe that we will do what we have guided to or spoken about at the time of acquisition, super high confidence in that.

Operator

Michael Turrin, Wells Fargo.

David Unger

It's David on for Michael Turrin. Just one from us. I think we all know that Clearwater has a very strong win rate. and revenue per quota-carrying rep metrics. Just wondering how should we think about whether rates and sales efficiency as you work through the integration going forward?

Sandeep Sahai

Yes. I would just say that if you look at the launches of hedge funds and you look at the conversion, infusion win rates are really high. They are a really disruptive platform. And when people go out and look for the platform, I think they are the platform of choice. Now I think as we get into the business more, I think we will evaluate where exactly their losses, where did they lose, why did the news.
So I think a little bit early for us today to say what do we think about the long-term trend there. But obviously, they've been a public company and they have gone very, very consistently. So look, we feel really confident about it, but I don't think we are really in a position today to be able to dive into all of it. I don't know, Jim, will add.

Jim Cox

(inaudible) our experience has taught us that cross-selling. We have great win rates. -- cross-selling win rates are even higher. And I think that's not a controversial thing across all businesses. And this the combination -- the strategic combination of all of these firms together, enable that cross-sell motion much more strongly than we had two weeks ago.
.

Operator

Yun Kim, Loop Capital Markets.

Yun Kim

For the sake of time, I'll just ask one quick question to Jen. For modeling Enfusion business, I think it will help us if you can give us some insights into what the renewal seasonality is like within that business? Is it heavily geared towards Q4, which implies that some of the uptick in revenue should come in Q4, whether that is linearly through Q4?

Jim Cox

That's right. That's right. Two triggers within their business is, one is there's an annual element to it in the renewal cycle and as more of their business was won in the fourth quarter, year-over-year-over-year, there's more business in Q4. They also had a cadence where at the beginning of the year, they would make certain changes. And so that Q4, Q1 time frame is a step change.
.

Operator

At this time, there are no more questions for in queue. (Operator Instructions).

Sandeep Sahai

Just want to say just thank you for your continued interest, and we look forward to meeting many of you over the next few days and weeks and on the next call in about a quarter from now. Thank you. Take care.

Operator

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