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EI

Enfusion, Inc. (ENFN)·Q2 2024 Earnings Summary

Executive Summary

  • Solid Q2: revenue $49.5M (+15.8% y/y) with adjusted EBITDA $10.1M (20.5% margin) and net income $2.5M (5.2% margin); sequential revenue increased from $48.1M in Q1 to $49.5M in Q2 .
  • Mix: front book accelerated to drive most growth (14.8 pts), but back book upsell moderated (1.0 pt), keeping total y/y growth at 15.8%; management reiterated FY24 guidance (revenue $200–$210M, adjusted EBITDA $40–$45M, FCF conversion 50–55%) .
  • Up‑market proof points: 39 new wins, including Strategic Global Advisors ($3B AUM/AUA), a U.S. life/health insurer ($2B internal AUM), and an asset management arm of a top‑10 Chinese bank; ACV reached a record $228K; EMEA revenue +28% y/y; APAC +10% y/y despite headwinds .
  • Product momentum: Portfolio Workbench enhancements (multi‑model rebalancing, optimizer integration, mobile) and fully integrated cash ladder were highlighted as competitive differentiators; 267 software enhancements released in Q2 .
  • Potential stock catalysts: maintained guidance amid macro volatility; accelerating front‑book and institutional wins; improving gross margins; watch for back‑book upsell recovery and NDR trajectory (targeting 106–107% by late 2024/early 2025) .

What Went Well and What Went Wrong

  • What Went Well

    • Strong top-line and profitability: revenue $49.5M (+16% y/y) and adjusted EBITDA $10.1M (20.5% margin), with adjusted gross margin up to 68.5% .
    • Up‑market client wins: “We signed 39 new clients… including a U.S. health and life insurer (~$2B AUM) and an asset management division of one of the largest banks in China” .
    • Product velocity: “In Q2 2024, we released a total of 267 software enhancements… Portfolio Workbench… cash ladder… fully integrated into our front‑to‑back platform” .

  • What Went Wrong

    • Back‑book upsell moderation: “We did see a moderation in our customers’ willingness to bring on additional seat and connection counts,” limiting back‑book contribution to +1 pt in Q2 .
    • APAC macro/geopolitical headwinds persist; APAC growth slowed vs prior year’s trend (Q2 +10% y/y vs 14% last year), though diversification helped .
    • NDR timing risk: NDR was 103% and management still targets 106–107%, but timing could slip into early 2025 given tempered upsell environment .

Financial Results

MetricQ4 2023Q1 2024Q2 2024
Revenue ($M)$46.5 $48.1 $49.5
Gross Profit ($M)$30.9 $31.9 $33.5
Gross Margin (%)66.4% 66.3% 67.7%
Adjusted Gross Profit ($M)$31.1 $32.6 $33.9
Adjusted Gross Margin (%)66.9% 67.8% 68.5%
Net Income ($M)$0.9 -$0.8 $2.5
Net Income Margin (%)1.9% -1.6% 5.2%
Adjusted EBITDA ($M)$9.8 $9.2 $10.1
Adjusted EBITDA Margin (%)21.1% 19.1% 20.5%
Diluted EPS (GAAP)$0.01 -$0.01 $0.02
Adjusted Diluted EPS$0.04 $0.06 $0.05
Operating Cash Flow ($M)$6.6 $1.5 $7.3
OCF Margin (%)14.2% 3.2% 14.8%
Adjusted Free Cash Flow ($M)$4.3 -$1.2 $4.6

Revenue breakdown

Revenue Detail ($M)Q4 2023Q1 2024Q2 2024
Platform subscriptions$43.054 $44.689 $45.794
Managed services$3.056 $3.177 $3.223
Other$0.376 $0.186 $0.438
Total Revenue$46.486 $48.052 $49.455

KPIs

KPIQ4 2023Q1 2024Q2 2024
ARR ($M)$185.1 $190.5 $195.7
Net Dollar Retention (%)102.1% 102.9% 103.0%
Clients865 868 879
Average Contract Value ($K)$219 $226 $228
Front‑book growth contribution (y/y pts)13.4 14.2 14.8
Back‑book growth contribution (y/y pts)1.3 3.1 1.0
Total revenue growth y/y (%)14.7% 17.3% 15.8%

Non‑GAAP and adjustments

  • Stock‑based compensation in Q2: $4.101M; other non‑recurring items: $0.354M; these impact adjusted EBITDA and adjusted EPS reconciliations .
  • Q2 adjusted EPS $0.05 computed from adjusted net income $6.579M on fully diluted share count; GAAP diluted EPS $0.02 on ~129M average diluted shares referenced on the call .

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
Medium‑term: Annual Revenue Growth2025–2027—20–22% No change
Medium‑term: Annual Adj. EBITDA Margin Expansion2025–2027—200–400 bps No change
Medium‑term: Annual FCF Conversion Expansion2025–2027—300–500 bps No change

Management notes:

  • FY24 stock‑based compensation expected $19–$20M (about one‑third in Q1) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’23, Q1’24)Current Period (Q2’24)Trend
Up‑market strategy (institutional AM, insurance, banks)Q4: positioning for long‑only and credit; stronger EMEA; URS win . Q1: Investor Day strategy; ACV up; global expansion .Wins: U.S. insurer ($2B AUM), SGA ($3B AUM/AUA), asset management arm of top‑10 Chinese bank; 39 new clients; ACV record $228K .Strengthening
Regional performanceQ4: EMEA +24.4% y/y; APAC +7.4% y/y; Americas +15.3% y/y . Q1: EMEA expansion with more non‑UK wins .EMEA +28% y/y; APAC +10% y/y with diversification; Americas +15% y/y; NZ first client .Improving breadth
Product innovationQ4: Portfolio Workbench driving wins . Q1: PW enabled wins (Trium); onboarding faster; satisfaction 3‑yr high .PW enhancements (multi‑model, optimizer, mobile), integrated cash ladder; 267 Q2 releases .Accelerating
Back‑book dynamics & NDRQ1: NDR 102.9%; target 106–107% .NDR 103%; churn normalized; upsell tempered; UBS/CS -60 bps headwind; target 106–107% could slip to early 2025 .Mixed: churn better, upsell softer
Macro/volatility & demandQ4: navigating macro; poised for growth . Q1: solid start; Investor Day detailed plan .Management sees low‑beta profile; down‑cycle can favor Enfusion’s lower TCO; monitoring upsell amid volatility .Resilient

Management Commentary

  • “Our economic trajectory remained on track in Q2 ’24 with $49.5 million in revenue… adjusted EBITDA margin of 20.5%” — CEO Oleg Movchan .
  • “We signed 39 new clients in Q2 2024… 64% of our wins in the second quarter were launches… expecting higher percentage of conversions in the back half of 2024” — CEO .
  • “The newest [Portfolio Workbench] version adds support for rebalancing across multiple models… and innovative mobile functionality… fully integrated… front‑to‑back platform” — COO Neal Pawar .
  • “Our adjusted gross margin… up 125 bps y/y… due to continued scale benefits… along with lower hosting costs” — CFO Brad Herring .
  • “We are again confirming our initial full year guidance… revenues $200–$210M, adjusted EBITDA $40–$45M, free cash conversion 50–55%” — CFO .

Q&A Highlights

  • Product enhancements and win rates: Integrated Portfolio Workbench with OMS is “table stakes” for institutional AM, improving pipeline and ACV via seamless workflows .
  • Back‑book drivers: Churn has largely normalized; upsell (seats/connections) is the main swing factor; impact is diffuse (no geographic or client concentration) .
  • Partnerships/SIs: Enfusion is deepening relationships with consultants and integrators as it moves up‑market; partnerships to enable near‑seamless cross‑sell (compliance, reporting, TCA) .
  • Guidance approach: Maintained FY24 ranges given macro volatility; will revisit as visibility improves; front‑book tailwind building while back‑book remains variable .
  • Margin expansion levers: Self‑service initiatives reduce manual tasks and improve gross margin; SG&A scale benefits persist into H2 .

Estimates Context

  • S&P Global consensus estimates for Q2 2024 could not be retrieved for ENFN due to missing mapping in the S&P Global dataset; as a result, we cannot present consensus or beat/miss analysis for revenue or EPS this quarter (S&P Global data unavailable).
  • The company does not provide quarterly guidance; FY24 guidance was reiterated (revenue $200–$210M; adjusted EBITDA $40–$45M; FCF conversion 50–55%) .

Key Takeaways for Investors

  • Front‑book momentum is strong and broad‑based, with 39 new logos, rising ACV ($228K), and institutional proof points across insurance, traditional AM, and banking; this supports durable growth into H2 and 2025 .
  • Back‑book upsell is the key watch item; churn is normalizing, but lower seat/connection additions tempered NDR to 103% (UBS/CS -60 bps headwind); timing to 106–107% could slip into early 2025 if upsell remains muted .
  • Operating leverage is showing up: adjusted gross margin reached 68.5% and adjusted EBITDA margin 20.5%, aided by scale and lower hosting/D&O costs; self‑service initiatives should further help margins .
  • Geographic diversification is working: EMEA +28% y/y with broader ex‑UK contribution; APAC remains resilient with mix shift beyond hedge funds despite macro headwinds .
  • Product differentiation continues: Portfolio Workbench and integrated cash ladder enhance decision analytics and strengthen OMS pull‑through, improving win rates and cross‑sell potential .
  • FY24 guidance maintained despite volatility; medium‑term targets (20–22% revenue CAGR; annual margin and FCF conversion expansion) stay intact, framing the Rule‑of‑40 aspiration .
  • Near‑term stock drivers: sustained front‑book wins (especially conversions), signs of back‑book upsell reacceleration, and ongoing margin expansion; risk is a prolonged upsell pause in a volatile macro .

Notes on sources:

  • Primary source documents include the Q2 2024 8‑K with Exhibit 99.1 shareholder letter (financial statements, non‑GAAP reconciliations, KPIs, and guidance) , and the Q2 2024 earnings call transcript for qualitative context and select KPIs –.
  • Prior quarters for trend analysis: Q1 2024 8‑K with Exhibit 99.1 – and Q4 2023 8‑K with Exhibit 99.1 –.