Enfusion(US:ENFN)2024-05-09 20:15Part I. FINANCIAL INFORMATION This section presents the unaudited interim financial statements, management's analysis of financial performance and condition, and disclosures on market risk and internal controls Item 1. Condensed Consolidated Interim Financial Statements (Unaudited) The unaudited condensed consolidated interim financial statements for the quarter ended March 31, 2024, show total revenues of $48.1 million, an increase from $41.0 million in the prior year period. The company reported a net loss of $0.8 million, a significant shift from a net income of $4.7 million in Q1 2023. Total assets increased slightly to $111.0 million, and total stockholders' equity grew to $82.6 million. Cash flow from operations was positive at $1.5 million, though cash and cash equivalents decreased overall by $2.7 million during the quarter Condensed Consolidated Interim Balance Sheets As of March 31, 2024, the company's balance sheet shows total assets of $111.0 million, a slight increase from $109.0 million at year-end 2023. Total liabilities decreased to $28.3 million from $31.5 million, while total stockholders' equity increased to $82.6 million from $77.5 million over the same period | Balance Sheet Highlights | March 31, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $32,894 | $35,604 | | Total current assets | $70,923 | $69,852 | | Total assets | $110,963 | $108,972 | | Total current liabilities | $17,406 | $20,309 | | Total liabilities | $28,337 | $31,490 | | Total stockholders' equity | $82,626 | $77,482 | Condensed Consolidated Interim Statements of Operations For the three months ended March 31, 2024, total revenues grew 17.3% year-over-year to $48.1 million. However, a significant 43.5% increase in operating expenses led to a loss from operations of $1.1 million, compared to an income of $4.7 million in the prior-year period. Consequently, the company reported a net loss of $0.8 million, with a basic and diluted EPS of ($0.01) | Income Statement Highlights (in thousands) | Q1 2024 | Q1 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 | | Net (loss) income per Class A share (Basic & Diluted) | $(0.01) | $0.04 | Condensed Consolidated Interim Statements of Cash Flows For the first quarter of 2024, net cash provided by operating activities was $1.5 million. Net cash used in investing activities was $2.7 million, primarily for software development and equipment purchases. Financing activities used $1.4 million, mainly for withholding tax payments on stock-based compensation. Overall, cash and cash equivalents decreased by $2.7 million to end the period at $32.9 million | Cash Flow Summary (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 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 and cash equivalents | $(2,710) | $(7,947) | | Cash and cash equivalents, end of period | $32,894 | $54,598 | Notes to Condensed Consolidated Interim Financial Statements The notes detail the company's accounting policies and financial components. Key points include the company's SaaS business model, revenue recognition standards where implementation services are not considered distinct, and revenue disaggregation by geography. The notes also cover the establishment of a new $100 million credit facility, a significant year-over-year increase in stock-based compensation expense, and subsequent events involving share exchanges - Enfusion is a provider of SaaS solutions for the investment management industry, headquartered in Chicago with a global presence. As of March 31, 2024, Enfusion, Inc. owned 70.2% of Enfusion Ltd. LLC2628 - The company's revenue is primarily from platform subscriptions and managed services, recognized ratably over the contract term. Implementation services are not considered distinct performance obligations and their fees are also recognized ratably4248 | Revenue by Geography (Q1 2024) | Amount (in thousands) | Percent | | :--- | :--- | :--- | | Americas | $29,728 | 61.9% | | Europe, Middle East, and Africa (EMEA) | $7,597 | 15.8% | | Asia Pacific (APAC) | $10,727 | 22.3% | | Total revenues | $48,052 | 100.0% | - In September 2023, the company entered a new $100 million senior secured revolving loan facility. As of March 31, 2024, there were no outstanding borrowings under this agreement5864 - Stock-based compensation expense increased significantly to $7.0 million in Q1 2024 from a benefit of ($1.1) million in Q1 2023. The increase was largely due to $3.6 million in fully vested shares granted under the Annual Bonus Incentive Plan73 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 17.3% revenue growth in Q1 2024 to strong performance in platform subscriptions from both new clients and upsells. The increase in cost of revenues and operating expenses, which led to a net loss, was primarily driven by higher payroll, market data costs, and a substantial rise in stock-based compensation. The company maintains a solid liquidity position with $32.9 million in cash and $100 million available under its credit facility, which is deemed sufficient for at least the next 12 months Results of Operations Total revenue increased by $7.1 million (17.3%) YoY, driven by a 17.6% growth in Platform subscriptions. Gross profit grew by 15.2%, but gross margin slightly declined to 66.3% from 67.5% due to increased costs. Operating expenses surged by 43.5%, primarily due to a $10.0 million increase, with stock-based compensation being a major contributor across all expense categories, leading to an operating loss | Revenue Breakdown (in thousands) | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Platform subscriptions | $44,689 | $37,998 | $6,691 | 17.6% | | Managed services | $3,177 | $2,744 | $433 | 15.8% | | Total revenues | $48,052 | $40,971 | $7,081 | 17.3% | - The increase in platform subscription revenue was driven by $5.0 million from upsells and increased users, $3.9 million from new clients, and $1.6 million from the full-period impact of prior contracts, offset by $3.0 million in churn and $1.3 million in downgrades120 - Cost of revenues increased by 21.6% to $16.2 million, driven by higher payroll ($0.9M), market data ($0.6M), hosting costs ($0.5M), amortization ($0.5M), and stock-based compensation ($0.4M). This led to a gross margin decrease from 67.5% to 66.3%124125 - Total operating expenses increased by $10.0 million (43.5%), largely due to higher stock-based compensation. G&A expenses rose by $5.7 million, Sales & Marketing by $2.1 million, and Technology & Development by $2.2 million128129132133 Liquidity and Capital Resources The company's liquidity is primarily funded through client collections and financing. As of March 31, 2024, Enfusion had $32.9 million in cash and cash equivalents and full access to its $100.0 million revolving credit facility. Net cash from operations was $1.5 million for the quarter. Management believes current liquidity is sufficient for at least the next 12 months - As of March 31, 2024, the company had cash and cash equivalents of $32.9 million and $100.0 million in available borrowing capacity under its Credit Agreement136 | Cash Flow Summary (in thousands) | Q1 2024 | Q1 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) | - Cash used in financing activities decreased significantly YoY, from $6.4 million in Q1 2023 to $1.4 million in Q1 2024, primarily because payments for withholding taxes on stock-based compensation were much lower ($1.3M vs $7.6M)144145 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes to its market risk during the quarter ended March 31, 2024. It refers to the disclosures in its Annual Report on Form 10-K for the year ended December 31, 2023 - There have been no material changes to the company's market risk during the first quarter of 2024165 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of March 31, 2024. No material changes to internal control over financial reporting were identified during the quarter - Based on an evaluation as of the end of the reporting period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level167 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls168 Part II. OTHER INFORMATION This section addresses legal proceedings, updates on risk factors, details on equity security sales, and other relevant corporate information Item 1. Legal Proceedings The company reports that it is not currently a party to any legal proceedings that would be expected to have a material adverse effect on its business, financial condition, or operations - The company is not presently a party to any legal proceedings that would have a material adverse effect on its business170 Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023171 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities and no issuer purchases of its equity securities during the reporting period - There were no recent sales of unregistered securities or issuer purchases of equity securities during the quarter172173 Item 5. Other Information The company disclosed that none of its directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2024 - During the first quarter of 2024, no directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements176