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EI

Enfusion, Inc. (ENFN)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 revenue was $48.1M (+17.3% YoY) and adjusted EBITDA was $9.2M (19.1% margin), with margins above management’s 16–17% Q1 guide due to roughly 150 bps nonrecurring savings (~$0.6M) in receivables provisioning; GAAP EPS was -$0.01 and adjusted EPS was $0.06 .
  • ARR rose to $190.5M (+14% YoY) and NDR reached ~103% (102.9% reported, including a 60 bps headwind from the UBS–CS consolidation); ACV increased to a record $226K, driven by mix-shift upmarket and churn of smaller accounts .
  • New logo momentum continued (33 wins; 868 clients total); EMEA growth accelerated (+29% YoY) while APAC decelerated (+13% YoY), with onboarding satisfaction at 3‑year highs and 205 product enhancements pushed in quarter .
  • Full‑year guidance reiterated: revenue $200–$210M, adjusted EBITDA $40–$45M, FCF conversion 50–55%, and SBC $19–$20M; liquidity remained solid with ~$33M cash and a $100M undrawn revolver .
  • Near‑term stock reaction catalysts include margin outperformance versus guide and structural growth signals (ACV, ARR, NDR trajectory), partially offset by APAC macro and a shareholder investigation press release tied to a March 14 short report .

What Went Well and What Went Wrong

What Went Well

  • Land-and-expand upmarket: 33 new client wins, total clients 868; ACV rose to $226K (+3.2% QoQ, +7.8% YoY), with notable wins in credit and traditional asset managers (e.g., Foundation Credit; multinational $100B AUM credit manager) .
  • EMEA strength and onboarding excellence: EMEA revenue +29% YoY, with 44% of new clients outside the U.K.; onboarding satisfaction at 3‑year highs and accelerated onboarding driving faster revenue recognition .
  • Product velocity: 205 enhancements released across PMS/OEMS; Portfolio Workbench is winning/expanding accounts (e.g., Trium Capital; Utah Retirement Systems in Q4) and validates fit for larger clients .

What Went Wrong

  • Back‑book pressure: Q1 churn/downgrades modestly above normal seasonality (skewed to small clients), tempering NDR despite improvement; APAC growth slowed to +13% YoY vs 20% last year .
  • Free cash flow: Adjusted FCF was negative (-$1.2M) on timing of annual incentives paid in Q1, reducing conversion QoQ .
  • GAAP profitability: GAAP net income was -$0.8M (EPS -$0.01), heavily impacted by $7.0M SBC; margin outperformance benefited from a nonrecurring provision tailwind (~150 bps) unlikely to repeat .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Revenue ($USD Millions)$44.4 $46.5 $48.1
Gross Margin %67.3% 66.4% 66.3%
Adjusted Gross Margin %68.0% 66.9% 67.8%
Adjusted EBITDA ($USD Millions)$8.2 $9.8 $9.2
Adjusted EBITDA Margin %18.5% 21.1% 19.1%
GAAP Net Income ($USD Millions)$2.7 $0.9 -$0.8
GAAP Diluted EPS ($USD)$0.02 $0.01-$0.01
Adjusted Diluted EPS ($USD)N/A$0.04 $0.06

Segment Revenue Breakdown

Segment ($USD Millions)Q3 2023Q4 2023Q1 2024
Platform Subscriptions$40.86 $43.05$44.69
Managed Services$3.03 $3.06$3.18
Other$0.47 $0.38$0.19
Total$44.36 $46.49$48.05

Key KPIs

KPIQ3 2023Q4 2023Q1 2024
ARR ($USD Millions)$177.9 $185.1 $190.5
Net Dollar Retention (incl. involuntary)102.4% 102.1% 102.9%
Clients (#)842 865 868
Average Contract Value ($USD Thousands)$217 $219 $226

Versus Estimates

  • S&P Global consensus estimates were unavailable for ENFN this quarter due to a CIQ mapping issue; therefore, comparisons vs consensus cannot be provided. Note: S&P Global data unavailable for ENFN at this time.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024$200–$210M $200–$210M Maintained
Adjusted EBITDAFY 2024$40–$45M $40–$45M Maintained
FCF ConversionFY 202450–55% 50–55% Maintained
Stock‑Based CompensationFY 2024$19–$20M $19–$20M Maintained
Q1 Adjusted EBITDA Margin Guide vs ActualQ1 202416–17% 19.1% actual Raised vs guide (actual beat), aided ~150 bps nonrecurring

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023, Q4 2023)Current Period (Q1 2024)Trend
Portfolio Workbench, product roadmapLaunched Workbench; product wins; 247 features in Q4 205 enhancements in Q1; Workbench expanding clients (Trium) and aiding larger deals; pricing model becoming more granular for premium features Accelerating adoption and monetization
Regional mixEMEA +24% YoY; APAC +7% YoY in Q4 EMEA +29% YoY; APAC +13% YoY, slower vs last year; 44% of EMEA wins outside U.K. EMEA reacceleration; APAC caution
Back‑book dynamics (NDR, churn)NDR including involuntary was 102% in Q4; UBS‑CS headwind ~70 bps NDR ~103% (reported 102.9%); UBS‑CS headwind ~60 bps; churn/downgrades slightly elevated seasonally, skewed to small clients Improving, but watching churn mix
Onboarding efficiencyFaster onboarding; predictable activations; land‑and‑expand strategy Onboarding satisfaction at 3‑year highs; faster recognition; average implementations 7–9 months; lower switching time/cost vs on‑prem Sustained focus; improving KPIs
Macro/geopoliticsDiversification across regions and segments APAC capital outflows from China/HK to Singapore/Middle East/Australia; evaluating Dubai Mixed; APAC headwinds offset by EMEA strength
Liquidity/Capital allocation$35.6M cash; $100M revolver secured ~$33M cash; $100M revolver undrawn; investment pace tuned to product roadmap Stable liquidity; invest in product

Management Commentary

  • “We reported $48.1 million in revenue, delivering 17.3% year‑over‑year growth. First quarter adjusted EBITDA totaled $9.2 million, translating into an adjusted EBITDA margin of 19.1%.”
  • “Client onboarding satisfaction scores are at 3‑year highs... Getting clients up and running faster... we’re able to recognize revenue more quickly.”
  • “ARR was $190.5 million... Our NDR for the quarter was 103%... Q1 churn and downgrades came in slightly higher than normal seasonality... skewed to small clients.”
  • “EMEA revenue grew 29% year‑over‑year... 44% of new clients came from outside the U.K.”
  • “We rolled out 205 enhancements and features across our portfolio management and order management systems.”
  • “We reiterate full year guidance: revenues $200–$210M, adjusted EBITDA $40–$45M, and free cash conversion 50% to 55%.”

Q&A Highlights

  • Sales resource allocation: Prioritizing Europe and North America to support upmarket shift; APAC investment modest given macro .
  • Guide framing: Profitability outperformance aided by nonrecurring items; cautious given early‑year churn/downgrades; confidence in full‑year range .
  • ACV dynamics: ACV uplift from larger accounts and churn of very small clients; focus on growing higher‑ACV cohort .
  • Partnerships: Deep integrations (e.g., FundApps, Backstop) extend capability without bespoke builds; accelerates value delivery .
  • Switching costs/time: SaaS benefits vs on‑prem (no hardware procurement); average implementation 7–9 months, working to reduce .
  • Seasonality: Front‑book bookings more back‑half weighted, but revenue recognition smoother due to longer onboarding cycles .
  • NDR outlook: Targeting 106–107% by year‑end as upsells normalize and churn stabilizes; UBS‑CS headwind fades by Q4 .

Estimates Context

  • S&P Global consensus estimates were unavailable for ENFN due to a mapping issue, so we cannot provide comparisons vs Street for Q1 2024. Management’s margin outcome (19.1% adjusted EBITDA) exceeded the 16–17% guide framed last quarter, aided by ~150 bps nonrecurring savings .
  • With ARR up 14% YoY, ACV at $226K, and NDR trending toward 106–107% targets, Street models may need to reflect stronger profitability cadence and sustained growth mix upmarket, while incorporating management’s caution on back‑book seasonality and APAC macro .

Key Takeaways for Investors

  • Mix shift upmarket is visible in ACV records and larger client wins, supporting more durable revenue and future NDR expansion; watch conversion vs launch mix through 2024 .
  • Margin execution is ahead of intra‑quarter expectations; adjust for the nonrecurring receivables provision benefit (~150 bps) when annualizing .
  • EMEA is providing a growth offset to APAC macro headwinds; geographic diversification is a stabilizer for the model .
  • Product velocity (205 enhancements) and Portfolio Workbench are strengthening competitive positioning and aiding both land‑and‑expand and pricing granularity over time .
  • Back‑book health is improving but still mixed: small‑client churn elevated in Q1; management still targets NDR 106–107% by year‑end as churn normalizes and upsells rebound .
  • Liquidity is solid (~$33M cash; $100M revolver undrawn) to support organic/product investments and potential tuck‑ins, especially in private markets adjacencies .
  • Overhang risk: April 12 shareholder investigation press release referencing a March 14 short report; monitor disclosures and audit/tax lines; no change to guidance reported .