Enfusion(ENFN) - 2021 Q4 - Annual Report

Part I Business Enfusion provides a unified, cloud-native SaaS platform for investment management, with 98.8% of 2021 revenue from recurring subscriptions and a focus on client expansion and innovation - Enfusion provides a unified, cloud-native SaaS solution for the investment management lifecycle, designed to eliminate technology and information barriers by using a single dataset as a source of truth[18][19] - As of December 31, 2021, Enfusion had a diverse global client base of 734 clients, with 57.6% in the Americas, 15.5% in EMEA, and 26.9% in APAC[43] - The company's revenue is primarily subscription-based, accounting for 98.8% of total revenues for the year ended December 31, 2021, with contracts typically for multi-year terms[47][48] - Growth strategies focus on broadening the client base, expanding relationships with existing clients, continuous innovation with weekly enhancements, geographic expansion, and selectively pursuing strategic acquisitions[50][51][52][53][55] - As of December 31, 2021, the company had 892 employees, with 267 based in the Americas and 625 internationally, including 481 in India[72] Risk Factors The company faces significant operational, financial, intellectual property, and regulatory risks, including challenges from rapid growth, security breaches, and international operations - The company's rapid growth makes it difficult to predict future operating results and manage expanding operations, which strains resources and personnel[88][95] - A security breach could lead to unauthorized access to sensitive client data, causing reputational harm, loss of clients, and significant financial and operational costs[104][106] - The business is highly dependent on third-party co-locate data centers and internet service providers; any disruption could significantly impact service delivery[120][121] - International operations, which accounted for approximately 34% of 2021 revenue, expose the company to various risks including regulatory changes, data privacy laws, and political or economic instability[144][145] - The termination of the Change in Control Bonus Plan will result in the issuance of a significant number of Class A common stock shares, causing substantial stock-based compensation expense ($268.5 million recognized at IPO) and dilution to existing stockholders[222][223] - The company is a holding company dependent on distributions from Enfusion Ltd. LLC to pay taxes, dividends, and make substantial payments under the Tax Receivable Agreement, which entitles Pre-IPO Owners to 85% of certain tax benefits[294][300][301] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[333] Properties The company maintains its headquarters in Chicago and leases eight additional international offices to support global operations - The company's headquarters are in Chicago, IL, with a lease expiring in 2025, and it maintains eight other international offices to support its global operations[334] Legal Proceedings The company is not currently a party to any material legal proceedings that would adversely affect its business or financial condition - The company is not presently a party to any material legal proceedings[336] Mine Safety Disclosures This item is not applicable to the company - Not applicable[337] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Enfusion's Class A common stock began trading on the NYSE in October 2021, with IPO proceeds used for debt repayment and general corporate purposes, and no cash dividends anticipated - Class A common stock has been listed on the NYSE under the symbol 'ENFN' since October 21, 2021, while Class B common stock is not listed or traded[339][340] - The company has never declared or paid cash dividends and intends to retain all available funds for future earnings[343] - Net proceeds from the IPO were approximately $259.7 million, used to repay $98.8 million in debt, satisfy $15.1 million in tax withholding obligations, purchase $87.8 million in Common Units from Pre-IPO unitholders, and retain $65.0 million for general corporate purposes[350][351] Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations In 2021, total revenues grew 40.4% to $111.7 million, but a net loss of $(282.2) million resulted from a $289.8 million stock-based compensation expense related to the IPO Key Financial and Operational Metrics (2021 vs. 2020) | Metric | 2021 | 2020 | Change | |---|---|---|---| | Total Revenues | $111.7M | $79.6M | +40.4% | | Net (Loss) Income | $(282.2)M | $4.1M | N/A | | Adjusted EBITDA | $22.9M | $25.3M | -9.5% | | Annual Recurring Revenue (ARR) | $127.1M | $93.4M | +36.1% | | Net Dollar Retention Rate | 115.0% | 119.6% | -4.6 p.p. | - The significant net loss in 2021 was primarily driven by a $289.8 million stock-based compensation expense, of which $268.5 million was recognized in Q4 2021 related to the IPO and termination of the former Change in Control Bonus Plan[386][418] - Following the IPO, the company repaid its outstanding term loan of approximately $98.8 million, leaving it with a $5.0 million revolving debt facility, which was undrawn as of year-end[424][435] - The company entered into a Tax Receivable Agreement (TRA) which obligates it to pay Pre-IPO owners 85% of the value of certain tax benefits realized; if all exchanges had occurred at year-end, the TRA liability would have been approximately $334.3 million[442] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate and foreign currency fluctuations, though neither is considered material as of December 31, 2021 - The company's market risk exposure is primarily from fluctuations in interest rates and foreign currency exchange rates[463] - As of December 31, 2021, the company did not have any borrowings outstanding under its revolving debt facility and does not believe it was exposed to material risks from changes in interest rates[464][466] - The company does not believe that a 10% change in the U.S. dollar's value relative to other currencies would have a material effect on its operating results[468] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for the fiscal year ended December 31, 2021, including balance sheets, statements of operations, cash flows, and accompanying notes Consolidated Balance Sheets As of December 31, 2021, total assets increased to $106.1 million, liabilities decreased to $8.6 million due to debt repayment, and equity turned positive to $97.4 million post-IPO Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | |---|---|---| | Assets | | | | Cash | $64,365 | $13,938 | | Total current assets | $89,678 | $28,911 | | Total assets | $106,085 | $39,099 | | Liabilities & Equity | | | | Total current liabilities | $8,106 | $10,650 | | Long-term debt, net | $0 | $96,063 | | Total liabilities | $8,644 | $107,143 | | Total Stockholders' Equity/ Members' deficit | $97,441 | $(233,559) | Consolidated Statements of Operations In 2021, total revenues grew 40.4% to $111.7 million, but a surge in operating expenses, mainly from stock-based compensation, led to a net loss of $(282.2) million Consolidated Statement of Operations Data (in thousands) | | 2021 | 2020 | 2019 | |---|---|---|---| | Total revenues | $111,700 | $79,565 | $59,027 | | Gross profit | $79,855 | $58,207 | $42,066 | | Total operating expenses | $355,739 | $52,133 | $28,197 | | (Loss) income from operations | $(275,884) | $6,074 | $13,869 | | Net (loss) income | $(282,242) | $4,061 | $12,656 | Consolidated Statements of Cash Flows In 2021, net cash used in operating activities was $(0.3) million, while financing activities provided $58.8 million, resulting in a net cash increase of $50.4 million Consolidated Cash Flow Data (in thousands) | | 2021 | 2020 | |---|---|---| | Net cash (used in) provided by operating activities | $(318) | $1,665 | | Net cash (used in) investing activities | $(8,014) | $(5,068) | | Net cash provided by financing activities | $58,849 | $11,559 | | Net increase in cash | $50,427 | $8,040 | Notes to Consolidated Financial Statements The notes detail accounting policies, IPO transactions, debt repayment, and significant stock-based compensation expenses, including the Tax Receivable Agreement and deferred tax asset valuation allowance - The Reorganization Transactions related to the IPO were accounted for as a reorganization of entities under common control, with assets and liabilities recognized at their historical carrying amounts[497][502] - In October 2021, the company used IPO proceeds to repay the entire $98.8 million aggregate principal amount of its term loan[577] - Total stock compensation expense for 2021 was $289.8 million, including $237.3 million for vested shares and $31.2 million for a profit-sharing agreement termination, both recognized on the IPO effectiveness date[599][604][611] - The company recorded a full valuation allowance of $124.5 million against its deferred tax assets as of December 31, 2021, determining it was not more likely than not that the assets would be realized[639] - As of December 31, 2021, no liability was recorded under the Tax Receivable Agreement because it was not probable that the company would realize the related tax benefits; if it were probable, the liability would have been $74.7 million[650] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting principles or financial disclosure - None[659] Controls and Procedures As of December 31, 2021, management concluded that disclosure controls and procedures were effective, with no material changes in internal controls during Q4 2021 - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective[660] - A management report on internal control over financial reporting is not included due to the transition period for newly public companies[661] Other Information The company reports no other information - None[664] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[665] Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[667] Executive Compensation Information regarding executive compensation is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[668] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[669] Certain Relationships and Related Transactions, and Director Independence Information regarding related party transactions and director independence is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[670] Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[671] Part IV Exhibits and Financial Statement Schedules This section lists documents filed as part of the Annual Report, noting the location of consolidated financial statements and the omission of schedules - The company's Consolidated Financial Statements are listed under Part II, Item 8[673] - All financial statement schedules are omitted because the required information is not applicable or is included elsewhere in the report[674] Form 10-K Summary The company provides no summary for this item - None[676]