Enfusion(ENFN) - 2024 Q1 - Quarterly Results

Introduction & Business Overview This section outlines Enfusion's Q1 2024 performance, strategic mission, market opportunities, and competitive advantages Letter to Shareholders (Q1 2024 Highlights) The CEO reported strong Q1 2024 performance with accelerated revenue growth, expanded adjusted EBITDA margins, increased client acquisition, and higher Average Contract Value - Revenue grew 17.3% year-over-year in Q1, an acceleration of 255 basis points sequentially[7] - Secured 33 new client wins in Q1, up from 27 in Q1 2023, with increased geographic penetration, especially in Europe (44% of new accounts outside the UK vs. 27% in Q1 2023)[7] - Average Contract Value (ACV) increased sequentially from $219,000 to $226,000, representing 7.9% year-over-year growth[7] - Product and service investments are driving performance, with accelerated client onboarding times and the highest client onboarding satisfaction scores in three years[7] Company Mission and Strategy Enfusion's mission is to power all investment workflows through its technology, innovation, and client focus, creating a "single source of truth" via its unique SaaS architecture - The company's mission is to power investment workflows with unparalleled technology, relentless innovation, and a dedicated client focus[8] - Core strategic pillars include: front-to-back capabilities, multi-tenant SaaS architecture, continuous innovation, exceptional client experience, a seasoned team, and a durable financial profile[9] - The SaaS platform enables collaboration across various client personas, including Portfolio Managers, Risk, Compliance, and Operations, by providing a single, unified data framework[10] Market Opportunity and Product Enfusion identifies a total addressable market (TAM) of $25 billion, with a focus on disrupting traditional asset managers and asset owners through its evolving front-to-back office solutions Total Addressable Market (TAM) Breakdown | Segment | Estimated TAM | | :--- | :--- | | Equity Hedge Funds | $1.2B | | Non-Equity Hedge Funds | $1.3B | | Private Equity & Credit | $7.2B | | Traditional Asset Managers & Asset Owners | $15.3B | | Total | $25B | - The company's product roadmap for 2024 includes enhancing its OEMS & Compliance, Managed Services, Portfolio Management Solutions, and Back-office capabilities to achieve global institutional scale[12] Competitive Advantage Enfusion's competitive advantage arises from macro market trends like fee compression and SaaS adoption, combined with its foundational multi-tenant SaaS architecture - Key macro trends benefiting Enfusion include active management fee compression, the electronification of markets, and the enterprise adoption of SaaS models[13] - Enfusion's historical strength lies in its multi-tenant SaaS architecture, built from day one, which provides a trailblazing technology foundation for future growth[13] Financial & Operational Performance This section details Enfusion's Q1 2024 financial results, including revenue, profitability trends, and key operating metrics Q1 2024 Key Financial Highlights In Q1 2024, Enfusion reported total revenue of $48.1 million, a 17.3% year-over-year increase, achieving an adjusted EBITDA of $9.2 million with a 19.1% margin Q1 2024 Financial Summary | Metric | Value ($ in millions) | Margin / Growth | | :--- | :--- | :--- | | Total Revenue | $48.1 | 17.3% YoY Growth | | Gross Profit | $31.9 | 66.3% Gross Margin | | Adjusted Gross Profit | $32.6 | 67.8% Adjusted Gross Margin | | Net Income | ($0.8) | (1.6%) Net Margin | | Adjusted EBITDA | $9.2 | 19.1% Adjusted EBITDA Margin | | Operating Cash Flow | $1.5 | 3.2% OCF Margin | Revenue and Profitability Trends Enfusion demonstrated consistent sequential revenue growth, reaching $48.1 million in Q1 2024, while Adjusted EBITDA significantly increased from $5.7 million in Q1 2023 to $9.2 million in Q1 2024 Revenue Trend (Q1 2023 - Q1 2024) | Quarter | Revenue ($M) | | :--- | :--- | | 1Q23 | $41.0 | | 2Q23 | $42.7 | | 3Q23 | $44.4 | | 4Q23 | $46.5 | | 1Q24 | $48.1 | Adjusted EBITDA Trend (Q1 2023 - Q1 2024) | Quarter | Adjusted EBITDA ($M) | | :--- | :--- | | 1Q23 | $5.7 | | 2Q23 | $8.0 | | 3Q23 | $8.2 | | 4Q23 | $9.8 | | 1Q24 | $9.2 | - Operating cash flow was $1.5 million in Q1 2024, a decrease from $12.1 million in Q3 2023 and $6.6 million in Q4 2023[25] Key Operating Metrics As of Q1 2024, Annual Recurring Revenue (ARR) grew 14.1% year-over-year to $190.5 million, with the client base expanding to 868 and Average Contract Value (ACV) rising to $226,000 Key Operating Metrics (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | YoY Growth | | :--- | :--- | :--- | :--- | | ARR | $190.5 M | $167.0 M | 14.1% | | Clients | 868 | 813 | 6.8% | | Avg Contract Value | $226 K | $210 K | 7.8% | | Net Dollar Retention Rate | 101.7% | 106.0% | -4.3% | Financial Statements This section presents Enfusion's consolidated balance sheets, statements of operations, and cash flows for the relevant periods Consolidated Balance Sheets As of March 31, 2024, Enfusion reported total assets of $111.0 million and total liabilities of $28.3 million, with cash and cash equivalents at $32.9 million and total stockholders' equity at $82.6 million Balance Sheet Summary (As of March 31, 2024) | Account | Amount ($ thousands) | | :--- | :--- | | Assets | | | Cash and cash equivalents | $32,894 | | Total current assets | $70,923 | | Total assets | $110,963 | | Liabilities & Equity | | | Total current liabilities | $17,406 | | Total liabilities | $28,337 | | Total stockholders' equity | $82,626 | Consolidated Statements of Operations For the three months ended March 31, 2024, Enfusion's total revenues increased to $48.1 million, but a significant rise in operating expenses led to a net loss of $0.8 million, or ($0.01) per share Statement of Operations (Three Months Ended March 31) | Metric ($ thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Total revenues | $48,052 | $40,971 | | Gross profit | $31,878 | $27,669 | | Total operating expenses | $32,991 | $22,990 | | (Loss) income from operations | ($1,113) | $4,679 | | Net (loss) income | ($761) | $4,694 | | Diluted EPS | ($0.01) | $0.04 | Consolidated Statements of Cash Flows For Q1 2024, net cash provided by operating activities was $1.5 million, while net cash used in investing activities was $2.7 million, resulting in a net decrease in cash of $2.7 million and an ending balance of $32.9 million Cash Flow Summary (Three Months Ended March 31) | Cash Flow Activity ($ thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,533 | $924 | | Net cash used in investing activities | ($2,748) | ($2,550) | | Net cash used in financing activities | ($1,373) | ($6,353) | | Net decrease in cash | ($2,710) | ($7,947) | | Cash at end of period | $32,894 | $54,595 | Appendix: Non-GAAP Reconciliations & Definitions This appendix provides detailed reconciliations of GAAP to non-GAAP financial measures and defines key business metrics Non-GAAP Reconciliations The appendix provides detailed reconciliations of GAAP to non-GAAP financial measures, showing adjustments from GAAP Gross Profit, Net Loss, and Operating Cash Flow to their respective adjusted non-GAAP counterparts Q1 2024 GAAP to Non-GAAP Reconciliation Summary ($ thousands) | Measure | GAAP Value | Non-GAAP Value | | :--- | :--- | :--- | | Gross Profit | $31,878 | $32,595 (Adjusted) | | Net (Loss) Income | ($761) | $9,179 (Adjusted EBITDA) | | Net Cash from Operations | $1,533 | ($1,215) (Adjusted FCF) | | Net (Loss) Income | ($761) | $5,915 (Adjusted Net Income) | - The primary adjustments to reconcile net income to adjusted EBITDA in Q1 2024 were stock-based compensation expense ($7.0 million) and depreciation & amortization ($2.7 million)[36] Definitions of Non-GAAP Measures and Key Metrics This section defines the non-GAAP financial measures and key business metrics used in the presentation, including Annual Recurring Revenue (ARR), Net Dollar Retention Rate, and Average Contract Value (ACV) - Adjusted EBITDA: Defined as earnings before interest, taxes, depreciation, and amortization, adjusted for stock-based compensation, foreign currency effects, and certain non-recurring items[43] - Annual Recurring Revenue (ARR): Calculated by annualizing platform subscriptions and managed services revenues recognized in the last month of the measurement period[47] - Net Dollar Retention Rate: Calculated by dividing the Current Period ARR from a cohort of clients by the Prior Period ARR from the same cohort twelve months earlier. It includes expansion, contraction, and voluntary attrition[48][49]