Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Enfusion Inc (ENFN, Financial) reported a solid Q2 2024 with $49.5 million in revenue, representing a 16% year-over-year growth.
- The company signed 39 new clients in Q2 2024, up from 33 in the previous quarter, bringing the total client count to 879.
- Client onboarding satisfaction scores remained at three-year highs, indicating strong customer satisfaction.
- Enfusion Inc (ENFN) achieved an adjusted EBITDA of $10.1 million, translating into a healthy adjusted EBITDA margin of 20.5%.
- The company is expanding its market share in the institutional asset management segment, with notable client wins in the insurance and banking sectors.
Negative Points
- Revenue growth rate slowed down slightly from the previous quarter, primarily due to the performance of the back book.
- The company saw a moderation in customers' willingness to bring on additional seat and connection counts, tempering growth from the existing customer base.
- Net Dollar Retention (NDR) was 103%, flat sequentially, impacted by lower customer upsells.
- Geopolitical and macroeconomic headwinds in the Asia Pacific region persisted, affecting growth in that area.
- The company faces ongoing challenges in the competitive landscape, particularly in the private market segment.
Q & A Highlights
Q: Oleg and Neal, can you frame the impact of recent product enhancements like the Portfolio Workbench and cash laddering on win rates and ACV?
A: Neal Pawar (COO): These enhancements are crucial for institutional asset managers. The Portfolio Workbench, integrated with the OMS, allows seamless front-to-back operations, improving our pipeline of asset management opportunities. Oleg Movchan (CEO): This integration drives front book economics by highlighting the benefits of our OMS, making it a significant factor in increasing our footprint.
Q: Brad, can you elaborate on the favorable trends in churn and its impact on the back book?
A: Bradley Herring (CFO): Churn has normalized to expected levels, but the upsell component remains a focus. While churn impacts the back book, the primary concern is the slower pace of customer upsells.
Q: Can you provide color on the overall services ecosystem and the role of partnerships as you move upmarket?
A: Oleg Movchan (CEO): We're in advanced stages of discussions with consultants and third-party integrators who play key roles in system selection and onboarding for institutional clients. These relationships are crucial for our success in the upmarket segment.
Q: What investments are you making to scale teams in the EMEA region and capitalize on growth opportunities?
A: Neal Pawar (COO): We've been adding specialized product managers in OEMS and compliance to ensure our product fits various geographies. This helps us interact effectively with clients during onboarding and evaluation.
Q: Can you discuss the cross-sell motion in the back book and how it impacts NDR?
A: Neal Pawar (COO): We're emphasizing partnerships with compliance, reporting, and TCA providers to offer seamless integration for clients. Bradley Herring (CFO): Macro factors also affect the back book, particularly in seat and connection counts. We're monitoring this closely.
Q: How do you think about demand in light of potential interest rate changes and market volatility?
A: Oleg Movchan (CEO): While short-term volatility may impact demand, Enfusion's low beta business model and cost-effective solutions make us resilient. We expect continued revaluation of old systems, benefiting our upmarket motion.
Q: What are the most attractive levers to drive NDR higher over the next 12 months?
A: Bradley Herring (CFO): Cross-sell opportunities in OEMS, managed services, and analytics, along with revisiting pricing, will drive NDR. The roll-off of the CS-UBS impact will also positively affect NDR.
Q: Can you clarify the back-book guidance for 2024, especially regarding churn and organic growth?
A: Bradley Herring (CFO): Churn is expected to be in the 3% to 5% range. We're targeting 7% to 10% organic growth, but we're closely monitoring the upsell component in the back half of the year.
Q: Are there specific efficiency projects expected to drive EBITDA margin expansion in the second half?
A: Neal Pawar (COO): We're focusing on self-service tools, allowing clients to manage activities themselves, which improves efficiency. Bradley Herring (CFO): These efforts will manifest in gross margins and scale benefits in G&A functions.
Q: How do you expect the mix of new fund launches and conversions to trend in the second half?
A: Oleg Movchan (CEO): We expect more conversions as we move upmarket, with larger clients typically having existing infrastructure. Bradley Herring (CFO): On an ARR basis, conversions are more significant due to the size of these clients.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
