Company: CWAN
Filing Date: 2025-02-26
Form Type: 10-K
Source: 0001628280-25-008169
Chunk: 79

Company: Clearwater Analytics Holdings, Inc.
Filing Date: 2025-02-26
Form: 10-K
Item: Item 7
Chunk 79
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 technical merits of the position, and (2) for those tax positions that meet the more likely than not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. We consider many factors when evaluating our uncertain tax positions, which involve significant judgment and may require periodic adjustments. The resolution of these uncertain tax positions in a manner inconsistent with management’s expectations could have a material impact on our consolidated financial statements. We recognize interest and penalties related to uncertain tax positions as a component of our provision for (benefit from) income taxes. Accrued interest and penalties are included with the related tax liability.

Tax Receivable Agreement

In connection with the IPO and related transactions, we entered into a TRA that, prior to the TRA Amendment,  provided for the payment by us of 85% of the amount of any tax benefits that we actually realized, or in some cases were deemed to realize, from any redemptions or exchanges of CWAN Holdings units.

We have historically accounted for amounts payable under the TRA in two parts. The first was to accrue the TRA liability that has been incurred as of the balance sheet date. The second was to record the TRA liability related to all future years that was probable and reasonably estimable. We determined the amount that was probable and reasonably estimable by mirroring the net deferred tax asset balance such that the TRA liability was 85% of the net deferred tax asset balance.

On November 4, 2024, the Company entered into the TRA Amendment, which amended the TRA to provide for one-time settlement payments in a gross amount of approximately $72.5 million, inclusive of approximately $69.2 million to be paid to the TRA Parties (net of the TRA Bonus Payments) and approximately $3.3 million TRA Bonus Payments to be paid to certain executive officers of the Company (collectively, the “TRA Settlement Payments”), plus approximately $6.5 million in third-party expenses. Upon the payment of the TRA Settlement Payments, the TRA Parties will have no further rights to receive payments (past, current, or future) under the TRA, and the Company will have no further payment obligations (past, current, or future) to the TRA Parties under the TRA. Most of the TRA Settlement Payments were made in December 2024. The remaining TRA Settlement Payments are expected to be made in the