Q4 2023 Enfusion Inc Earnings Call
Operator: Good morning, ladies and gentlemen. Thank you for standing by.
Good morning, ladies and gentlemen, thank you for standing by welcome to infusion <unk> fourth quarter and full year 2023 earnings conference call. At this time, all wise have been placed on mute to prevent any background noise. Following the speaker.
Operator: Welcome to Enfusion's fourth quarter earnings comp. At this time, all lines are being placed on mute to prevent any background noise.
Operator: Following the speaker's remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I'd now like to turn the call over to Bill Wright, Head of Investor Relations, to begin. Good morning, and thank you, Operator.
Some remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded.
Now like to turn the call over to Bill rate head of Investor relations to begin.
Good morning, and thank you operator, we welcome you to Infuse, Inc. Fourth quarter and full year 2023 earnings conference call hosting todays call are O'lague margin infusions, Chief Executive Officer, Brad Herring, Infusions, Chief Financial Officer, and Neil Pawar infusions newly appointed Chief.
Bill Wright: We welcome you to Enfusion's fourth quarter and full year 2023 Earnings Conference Call. Hosting today's call are Oleg Movchan, Enfusion's Chief Executive Officer, Brad Herring, Enfusion's Chief Financial Officer, and Neil Pawar, Enfusion's newly appointed Chief Operating Officer. Please note that our quarterly shareholder letter, which includes our quarterly financial results, has been posted to our investor relations website. I would like to remind you that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available in the Investor Relations section of our website. The actual results may differ materially from any forward-looking statements we make today.
Operating officer.
Please note our quarterly shareholder letter, which includes our quarterly financial results has been posted to our Investor Relations website.
We'd like to remind you that today's call may contain forward looking statements. These forward looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available in the Investor Relations section of our website actual results may differ materially from any forward looking statements we make today. These.
Bill Wright: These forward-looking statements speak only as of today, and the company does not assume any obligation or intent to update them following today's call, except as required by law. In addition, today's call may include non-GAAP measures. These measures should be considered as a supplement to and not as a substitute for GAAP financial measures.
Forward looking statements speak only as of today and the company does not assume any obligation or intent to update them. Following today's call except as required by law.
In addition, todays call may include non-GAAP measures. These measures should be considered as a supplement to and not as a substitute for GAAP financial measures.
Oleg Movchan: Reconciliation to the nearest gap measures can be found in today's quarterly shareholder letter, which is available on the company's website. With that, I'd like to turn the call over to Oleg. Good morning, and thank you for joining us today to discuss our results for the fourth quarter of 2020. I'm honored to be completing my first full year as Enfusion's CEO and thrilled to welcome Neil Pawar, our new Chief Operating Officer, to the Enfusion team. Neil joined us in November and brings a tremendous amount of operating experience along with breadth and depth of technology experience across financial services. In just the past three months, Neil's presence and enormous enthusiasm have been felt across our entire organization.
Conciliation to the nearest GAAP measures can be found in today's quarterly shareholder letter, which is available on the companys website with that I'd like to turn the call over to <unk> to begin.
Good morning, and thank you for joining us today to discuss our results in the fourth quarter of 2023.
I'm honored to be completed my first full year since you Didnt CEO and thrilled to welcome Neil <unk>, our new Chief operating officer to the infusion team.
Neil joined US in November and brings a tremendous amount of operating experience along with breadth and depth of technology experience across the financial services industry.
In just the past three months <unk> presence in enormous enthusiasm has been felt across our entire organization.
Oleg Movchan: We're sure Neil will be instrumental in helping us scale the business and expand our market footprint with global enterprises. As for the fourth quarter, I am pleased to announce that Enfusion's business achieved several milestones, and we saw the economic profile of our business continue to strengthen and become more profitable. While not immune to macro headwinds we have discussed in previous quarters, we have focused on controlling what we can under our rules.
Sure Neil will be instrumental in helping us scale, the business and expand our market footprints with global enterprise clients.
As for the fourth quarter I am pleased to announce that infusions business achieved several milestones and we're still the economic profile of our business continued to strengthen and become more predictable.
While not immune to macro headwinds we have discussed in previous quarters, we have focused on controlling what we can under our roof.
Oleg Movchan: To that end, we'll continue to enhance our world-class, end-to-end platform that empowers all workers. Enfusion is built with unparalleled technology, continued innovation, and relentless dedication to our clients. In doing so, we have and will continue to widen our economic base. Our strong financial results this quarter reflect discipline, strategy, execution, and cost. Several of our wins this quarter validate Enfusion's strategy as we continue to move up. We saw a combination of new client wins, as well as conversions from our biggest competitors across several time segments and geographies. Now, let me walk you through some of our key financial metrics in the forecast. Our economic trajectory inflected upward in Q4'23, as we reported $46.5 million in revenue, delivering 15% revenue growth year-over-year. Fourth quarter adjusted EBITDA totaled 9.8 million, translating into an adjusted EBITDA margin of 21%, representing a 436 basis points expansion compared to the same period a year ago.
So that and will continue to enhance our world class end to end platform that empowers all workflows and.
Infusion is built with unparalleled technology continued innovation and relentless dedication to our clients.
In doing so we have and will continue to widen our economic moat.
Our strong financial results this quarter reflect disciplined strategy execution and cost control.
Several of our wins this quarter validated <unk> strategy as we continue to move up market.
So a combination of new client wins as well as conversions from our biggest competitors across several time segments and geographies.
Now, let me walk you through some of our key financial metrics in the fourth quarter.
Our economic trajectory inflected upward in Q4, 'twenty three as we reported $46 $5 million in revenue delivering 15% revenue growth year over year.
Fourth quarter, adjusted EBITDA totaled $9 8 million translating into an adjusted EBITDA margin of 21%, representing a 436 basis points expansion compared to the same period a year ago.
Oleg Movchan: This outcome is attributable to a combination of disciplined expense control and proven scale. From a full year perspective, in 2023, we reported $174.5 million in revenue, delivering 16% growth year-over-year and $31.7 million in adjusted EBITDA. Also, expanding our adjusted EBITDA margins from 13% to 18%, an improvement of approximately 500 basis points compared to the previous year. Despite the challenging and turbulent industry backdrop throughout 2023, we saw growing momentum in Q4 that led to 45 new clients, our biggest quarterly client win since the second quarter of 2020. This brings our total client count to 865. A New Firm Reco- Our ACV increased to $219,000, another firm rate, representing the 1% quarter-over-quarter and 6% year-over-year group.
This outcome is attributable to a combination of disciplined expense control.
Prudent scales.
From a full year perspective in 'twenty to 'twenty, three we reported $174 $5 million in revenue.
Delivering 16% growth year over year, and $31 7 million and adjusted EBITDA.
<unk> also expanded our adjusted EBITDA margins from 13% to 18% an improvement of approximately 500 basis points compared to the previous year.
Despite a challenging and turbulent industry backdrop throughout 2023, we saw growing momentum in Q4 that led to 45 new client additions.
Biggest quarterly client win.
Since the second quarter of 2022.
This brings our total client count to 865 in.
A new firm of record.
Our HCV increased to $219000 another firm record, representing a 1% quarter over quarter and 6% year over year growth.
Oleg Movchan: Our progress upmarket continues to broaden our client base and has contributed to our continued ACV investment. Let me provide you with more details on our client wins. In the Americas, revenue grew 15% year over year, reflecting a combination of market share gains and wins for large and complex clients in competitive situations. This dynamic provides a more stable set of business economics going forward. One notable win this quarter, which I'm excited to share with you, is Utah Retirement Systems, or URS, a prominent pension plan that will move approximately $10 billion of internally managed AUM to the Enfusion platform instead of upgrading its legacy OMS. URS will utilize Enfusion's full front-to-back capability.
Our progress upmarket continues to broaden our client base and kept contributed to our continued <unk> increase.
Let me provide you with more details on our client wins this quarter.
In the Americas revenue grew 15% year over year, reflecting the combination of market share gains and wins for large and complex clients in competitive situations.
This dynamic provides a more stable set of business economics going forward.
One notable win this quarter, which I'm excited to share with you is Utah retirement systems or Urs, a prominent pension plan that will move approximately $10 billion of internally managed AUM to the infusion platform.
Instead of upgrading its legacy Oems Urs will utilize infusions full front to back capabilities.
Oleg Movchan: Additionally, URS will take advantage of our portfolio workbench, quarterly rebalancing, This is an exemplary strategic win for our business, particularly as we continue to grow in service pensions. We remain keenly focused on taking market share. I'm also thrilled to announce that EnfusionSign Mariner Investment, Brumman, Alternative Investment Manager. $7 billion AUM.
Additionally, <unk> will take advantage of our portfolio workbench tool for quarterly rebalanced and functionality.
This is an exemplary strategic win for all of our business, particularly as we continue to grow and service pension advisors.
We remain keenly focused on taking market share.
I'm also thrilled to announce that infusion signed Mariner investment group, a prominent alternative investment manager with $7 billion AUM.
Oh.
Oleg Movchan: Mariner will have 70 plus users utilizing our platform across trading, portfolio management, operations, and technology. Our team was able to design a well-suited solution that will consolidate and replace multiple pre-existing systems for management and provide one centralized view with increased automation for all trading teams involved. This is an exciting competitive win and another proof point validating our ability to support complex fund structures and multiple asset classes and strategies, as we continue to grow our presence in the multi-strategy. In Europe, Middle East, and Africa, revenue grew 24% year-over-year, reflecting our continued expansion in Europe.
Mariner will have 70, plus users utilizing our platform across trading portfolio management operations and technology.
Our team was able to design, a well suited solution that will consolidate and replace multiple preexisting systems to monitor and provide one centralized view with increased automation for all trading teams involved.
This is an exciting competitive win and another proof points validating our ability to support complex fund structures and multiple asset classes and strategies as we continue to grow our presence in the multi strategy space.
In Europe, Middle East and Africa revenue grew 24% year over year, reflecting our continued expansion in Europe.
Oleg Movchan: We signed our first asset manager in Belgium and a large multifamily office in Sweden. Both of these wins are additional confirmation that Enfusion is executing our global strategy to reach traditional managers and grow beyond the concentrated money centers in Europe, where we already have a dominant position, in the Asia-Pacific region. Revenue grew 7% year-over-year, which is an outstanding result given the regional capital outflows and a challenging geopolitical and economic background.
We signed our first asset manager in Belgium, and the large multifamily office in Sweden.
Both of these wins are additional confirmation that infusion is executing our global strategy to reach traditional managers and grow beyond the concentrated minus sensors in Europe, where we already have a dominant position.
In the Asia Pacific Region revenue grew 7% year over year, which is an outstanding result, given the regional capital outflows and a challenging geopolitical and economic backdrop.
Neil Pawar: Our growth in APEC was driven in part by a client conversion from an asset management arm of a large, Corporation headquartered in South Korea, who were able to take this business away from one of our biggest competitors. This client win is a testament to our focused product strategy, which has enabled us to displace established competitors upmarket. Edge and Alpha reflect our ability to listen to our clients' needs as they re-evaluate their tech stack and seek a single product with one data set or single source. This allowed the client to eliminate multiple modules as they looked to lower their total cost of ownership. At this time, I would like to introduce Neil Pawar, our new Chief Operating Officer, to provide updates on our platform capabilities and client services. Thank you, Oleg, and everyone at Enfusion for providing such a warm welcome to the club.
Our growth in APAC was driven in part by client conversion from an asset management arm of a large.
Corporation headquartered in South Korea.
But we're able to take this business away from one of our biggest competitors.
This client win is a testament to our focused product strategy, which has enabled us to displace established competitors upmarket.
As you know the incumbents reflect our ability to listen to our clients' needs as they reevaluate their tech stack and seek a single product with one dataset or single source of truth.
This allowed the client to eliminate multiple modules as they look to lower their total cost of ownership.
At this time I would like to introduce Neil Koehler, our new Chief operating officer to provide updates on our platform capabilities and client services.
You, all like and everyone that infusion for providing such a warm welcome to the fall.
Neil Pawar: Before we discuss services, a few investors have asked what led me to join Enfusion. After a career as CIO of some very large, successful, buy-side firms, I observed firsthand the trend of SaaS eating into the on-premise enterprise software space. When you look at the total cost of ownership of an enterprise platform, a client spends at least as much as the license fee on operating and supporting the platform in their data center. Enfusion was designed as a multi-tenanted fast platform from day one and has since onboarded over 860 diverse buy-side clients. After a few decades of seeing our industry rely on legacy on-premise systems, I'm excited to have joined the leadership team that is steering Enfusion's modern SaaS platform. Looking beyond our recent success in client wins, our service team has been laser focused on providing our clients with a smooth implementation, hitting critical time deadlines.
Before we discuss service a few investors have asked what led me to join infusion.
After our Korea as CIO of some very large successful buy side firms.
The first patents the trend of SaaS eating into the on premise enterprise software space.
When you look at the total cost of ownership of an enterprise platform our client spends at least as much as the license fee on operating and supporting the platform in their data center.
Infusion was designed as a multi tenanted SaaS platform from day, one and since then has on boarded over 860 diverse buy side clients.
After a few decades of seeing our industry rely on legacy on premise systems I'm excited to have joined the leadership team that is steering infusions modern SaaS platform.
Looking beyond our recent success in client wins, our service team has been laser focused on providing our clients with a smooth implementation hitting critical time deadlines.
Neil Pawar: While smaller clients have continued to be onboarded in record time, as we move up market and sign larger and more complex clients, the onboarding process has had to become more tailored. Through our integration toolkit and APIs, we establish a software and data partnership with our clients. This creates an electronic and also sticky relationship, which facilitates the ability, once landed, to further expand our relationship.
While smaller clients have continued to be onboard it in record time, as we move up market and sign larger and more complex clients the on boarding process.
<unk>.
Through our integration toolkit and API.
We established our software and data partnership with our clients. This creates an electronic I'd also sticky relationships.
Which facilitates the ability once landed to further expands our relationship.
Neil Pawar: On this note, during the fourth quarter, we successfully completed the second phase of implementation for a hybrid asset manager with over $30 billion in AUM, allowing the client to go live and do so on time. This is a great example of the kind of customer we want. Since it illustrates our ability to serve a complex cross-section of our industry, this particular client, Kane Anderson, invests in a variety of assets, ranging from equities to more complex instruments like bank debt. And obviously, our ability to support all the asset classes they invest in was critical to winning their business. In this case, we initially onboarded our Order Management System, or OMS.
On this note during the fourth quarter, we successfully completed the second phase of implementation for a hybrid asset manager with over $30 billion AUM, allowing the client to go live and do so on time.
This is a great example of the kind of customer we want since illustrates our ability to serve the complex cross section of our industry.
This particular clients Kayne Anderson invest in a variety of assets ranging from equities to more complex instruments like bank debts.
And obviously our ability to support all the asset classes. They invest in was critical to winning their business.
In this case, we had initially on boarded our order management system or Oems and then after <unk> was complete we then expanded to accounting.
Neil Pawar: And then, after OMS was complete, we then expanded to accounting. This is a good example of our ability to land and expand, made possible thanks to Enfusion's shared investment book of record, or iBOR. As with many of our clients, we've helped them lower costs, as well as operational risk, by replacing multiple vendors with a single platform and eliminating manual work, like having to reconcile those different systems, which helps deliver on the lower total cost of ownership I described earlier. The beauty of multi-tenanted SAS models is that clients never again have to handle system upgrades.
This is a good example of our ability to land and expands made possible. Thanks to infusion shared investment book of records or eyeball.
As with many of our clients, we've helped them lower costs as well as operational risk by replacing multiple vendors with a single platform and eliminated manual look like having to reconcile those different systems.
<unk> helps deliver on the lower total cost of ownership I described earlier.
The beauty of multi tenanted SaaS models is the clients never again have to handle system upgrades.
Neil Pawar: Clients of on-premise vendor software are often 18 to 24 months behind version. Enfusion releases its software weekly. Those weekly releases ensure every single one of our clients benefits from features we are adding to the platform. For example, in this last quarter, we rolled out 247 new features across our portfolio management and order management. Moving to product, our recent rollout of Portfolio Workbench, which we announced in the third quarter of 2023, has already driven new business. To recap, Portfolio Workbench's functionality enables investment managers to seamlessly rebalance their portfolios across multiple strategies and investment vehicles.
<unk> of on premise vendor software are often 18 to 24 months behind versions infusion releases of software weekly.
Those weekly releases ensure every single one of our clients benefits from features we are adding to the platform.
For example in this last quarter, we rolled out 247, new features across our portfolio management and order management systems.
Shifting to products.
Our recent rollout of portfolio work patents, which we announced in the third quarter of 2023 has already driven new business.
To recap.
Full year Workbenches functionality enables investment manages to seamlessly rebalanced their portfolios across multiple strategies and investment vehicles.
Neil Pawar: It also provides our clients with the ability to leverage in-grid portfolio editing and works in concert with our order management functionality. Through this new functionality, portfolio managers can test pre-trade compliance rules and model upcoming subscriptions and redemptions across multiple investment vehicles, all within one user interface, without concerns about data integrity. Portfolio Workbench was a key product innovation that allowed us to win the UCAR retirement systems account in the fourth quarter. The continual focus on innovation is a core value of Enfusion, and it empowers us to compete on a global basis and strengthens our competitive edge. And now I will turn it back to Oleg to discuss market dynamics. Thank you, Neil.
It also provides our clients with the ability to leverage in grid portfolio editing and works in concert with our order management functionality.
Through this new functionality portfolio managers can test pre trade compliance rules and model upcoming subscriptions and redemptions across multiple investment vehicles, all within one user interface without concerns about data integrity.
Portfolio Workbench was a key product innovation that has allowed us to win the Utah retirement systems accounts in the fourth quarter.
The continual focus on innovation is a core value with infusion that empowers us to compete on a global basis and strengthens our competitive edge.
And now I will turn it back to OLED to discuss market dynamics.
Thank you Neil I now want to share with you some market dynamics were observed over the last few months.
Oleg Movchan: I now want to share with you some market dynamics we've observed over the last few months. Despite a very modest pick-up in hedge fund launches in the past several months, we delivered 45 new client additions, our largest client win in six months. This quarter demonstrates our diminishing dependency on hedge fund launches as we diversify across market segments and regions. Although larger and more complex investment managers have longer onboarding.
Despite a very modest pickup in catch one launches the past several months, we delivered 45, new client additions our largest client win in six quarters.
This quarter demonstrates our diminishing dependence on hedge fund launch dynamics as we diversify across market segments and regions.
Although a larger and more complex investment managers have longer onboarding cycles.
Oleg Movchan: Our SAS Native architecture fosters collaboration with our clients and provides a framework driving more predictable and timely onboarding, especially as investment firms experience additional cost pressure. We are seeing tailwinds for our business. Industry players are seeking our best-in-class software platforms to lower their total cost of ownership and increase operational efficiency. This is our suite. We have proven that our SAS Native architecture is a sustainable, competitive advantage, providing a natural platform on which workflows are powered by the same data set in software versus our competitors' on-premise or satellite models.
Our SaaS native architecture fosters collaboration with our clients and provides a framework driving more predictable and timely onboarding processes.
As investment firms experienced additional cost pressures, we still tailwind for our business this quarter with.
We see the industry players seeking our best in class software platforms to lower their total cost of ownership and increase operational efficiency.
This is our sweet spot.
We have proven that our SaaS native architecture is a sustainable competitive advantage, providing a natural platform and which workloads are powered by the same dataset in software versus our competitors on prem or satellite models.
Oleg Movchan: Accordingly, we anticipate that our overall composition of client wins will continue to shift more towards conversion. Looking ahead to 2024, our key focus will be product innovation for our clients, strengthening our bond with our partners, continuing to be a destination for world-class talent, and creating superior value for our shareholders. We see the company positioned to take market share and expand geographically. Reporting strong growth in 2023 with expanding operating margins has given us the flexibility to invest in our business, talent, and partners. Our key focus areas for 2024 include executing our product roadmap by expanding our platform functionality and delivering new capabilities and workflows for our clients with a specific focus on traditional asset management. Provide existing clients with the highest customer service, See you in there! Achieve another 100% success rate for new client implementation.
Accordingly, we anticipate that our overall composition of client wins, we will continue to shift more towards conversions this year.
Looking ahead to 2024, our Q focus will be product innovation for our clients strengthening our bond with our partners continuing to be a destination for world class talent and creating superior value for our shareholders.
We see the company positioned to take market share and expand geographically.
Reported strong growth in 2023 with expanding operating margins has given us the flexibility to invest in our business talent and partnerships.
Our key focus areas for 2024, who will be.
Execute on our product roadmap by expanding our platform functionality and deliver new capabilities in the workflows for our clients with specific focus on traditional asset managers.
Provide existing clients with the highest customer service exceeding the expectations.
You have another 100% success rate for new client implementations.
Oleg Movchan: Investing in Technology Capabilities, Supporting Our Account Management, and Managed Services. We continue to create value for our clients, scale our business, and improve our efficiency. Keep a sharp focus on non-critical expenses so we can continue expanding our adjusted EBITDA margin, while deploying capital into our platform and product for business growth. In conclusion, we're excited by our results in the fourth quarter and the full year.
Invest in technology capabilities supporting our account management and managed service teams. So we continue to create value for our clients scale, our business and improve our efficiency.
Keep a sharp focus on noncritical expenses. So we can continue to expanding our adjusted EBITDA margins, while deploying capital into our platform and product to support business growth.
In conclusion, we're excited by our results in the fourth quarter and the full year.
Oleg Movchan: We see the economic profile of the company continuing to strengthen. As revenues grow and margins expand, while we simultaneously reinvest in the company. As you may be aware from our press release, the company will be hosting an Investor Day in Fort Lauderdale, Florida, next Tuesday, March 19. The event will feature presentations from our executive team and provide an overview of Enfusion's fully integrated investment technology platform, current and future market position, and Growth Outlook over the medium term. The formal presentations will be followed by question and answer sessions hosted by members of our management team. Advanced registration is required, and in-person attendance is by invitation only.
We see the economic profile of the company continuing to strengthen as revenues grow and margins expand while we simultaneously reinvest in the business.
As you may be aware from our press release, the company will be hosting an investor day in Fort Lauderdale, Florida next Tuesday March 19.
The event will feature presentations from our executive team and provide an overview of infusions fully integrated investment technology platform current and future market positioning and growth outlook over the medium term.
The formal presentations will be followed by a question and answer sessions hosted by members of our management team.
Advanced registration is required and in person attendance is by invitation only.
Bradley Herring: Individuals who have not received an invitation but would like to attend, can request an invitation from the investor relations section of our website. Discussion materials will be made available on our website. We hope to see you all at our Investor Day on March 9th. I will now turn the call over to Brad to discuss our financial results. Thanks, Oleg, and thank you, everyone, for joining us today.
Individuals who have not received an invitation.
But would like to attend can request an invitation on the Investor Relations section of our website.
Discussion materials will be made available on our website.
We hope to see you all at our Investor Day on March 19th.
I will now turn the call over to Brad to discuss our financials.
Thanks, Alex and thank you everyone for joining us today on behalf of the entire management team here at infusion, we're excited to announce yet another quarter of market leading growth combined with significant margin expansion.
Bradley Herring: On behalf of the entire management team here at Enfusion, we're excited to announce yet another quarter of market-leading growth combined with significant margin. For the fourth quarter, we generated revenue of $46.5 million, an increase of 15% over the same quarter last year. A particular note is the fact that our revenue growth has reversed the trend of the past several quarters, with our Q4 growth rate exceeding our Q3 growth rate by 140 basis points. This change is due to accelerated client activations from a strong front book and the improving trends in the back book that I've discussed previously. Just to clarify, we define the front book as our ability to book and onboard new logos, while the back book represents our ability to organically grow our existing clients.
For the fourth quarter, we generated revenue of $46 5 million, an increase of 15% over the same quarter last year.
A particular note is the fact that our revenue growth has reversed the trend of the past several quarters with our Q4 growth rate exceeding our Q3 growth rate by 140 basis points.
This change is due to accelerated client activations from a strong front book and the improving trends in the back book that I've discussed previously.
Just to clarify we defined the front book is our ability to book and onboard new logos, while the back book represents our ability to organically grow our existing client base.
Bradley Herring: We'll be discussing that delineation deeper at our Investor Day discussion next week. It's worth commenting that Q4 bookings were the highest we've seen in four quarters, with 65% of those bookings coming from conversions. Fourth quarter ARR was $185.1 million, up 12% year-over-year, and 4% higher than what we reported in the third quarter.
We will be discussing that delineation deeper at our Investor day discussion next week.
It's worth commenting that Q4 bookings were the highest we've seen in four quarters with 65% of those bookings coming from conversions.
Fourth quarter, <unk> was $185 $1 million up 12% year over year, and 4% higher than what we reported in the third quarter.
Starting this quarter, we're simplifying our discussions around in Dr. While historically, we've discussed a fully impacted in Dr and in India are excluding in voluntary churn. We've made the decision to report only our fully impacted in Dr going forward.
Bradley Herring: Starting this quarter, we're simplifying our discussions around NDR. While historically we've discussed a fully impacted NDR and an NDR excluding involuntary churn, we've made the decision to report only our fully impacted NDR going forward. The thought process behind this change is that churn, regardless of whether it's voluntary or involuntary, affects our revenue streams the same way. That said, our NDR for the quarter, including all churn, was 102%.
Salt process behind this change is that churn regardless of whether it's voluntary or involuntary.
<unk> of our revenue streams to same way.
That said, our <unk> for the quarter, including all churn was 102%.
This is flat to what we reported last quarter, but it's worth noting that our Q4 in Dr was negatively impacted by nearly one full percentage point from the consolidation of UBS and credit Suisse as customers dropped duplicative broker connections.
Bradley Herring: This is flat to what we reported last quarter, but it's worth noting that our Q4 NDR was negatively impacted by nearly one full percentage from the consolidation of UBS and Credit Suisse, as customers drop duplicative brokers. The impact of this consolidation will be a headwind for NDR through Q3 of this year. For other items inside of NDR, upsells remain above the lows we saw in the second quarter while churn rates continue to decline. With respect to targets for NDR, I've mentioned previously that our target for NDR excluding involuntary churn was 110%. With our revised view of providing NDR with any source of churn included, we are setting a 12-month target for NDR at 106 to 107% Our reported adjusted gross profit increased by 13% year-over-year to $31 million.
The impact of this consolidation will be a headwind for <unk> through Q3 of this year.
For other items inside of India are up sales remain above the lows we saw in the second quarter, while churn rates continue to decline.
With respect to targets for in Dr. I've mentioned previously that our target for <unk>, excluding involuntary churn was 110%.
With our revised view of providing <unk> with any source of churn included we are setting a 12 month target for India or to 106% to 107%.
Flying an additional four to 500 basis points of upside as these measures returned to normal levels.
Our reported adjusted gross profit increased by 13% year over year to $31 million.
This represents an adjusted gross margin in the quarter of 67%.
Q4 was negatively impacted by some nonrecurring incentive payments made to our support and Onboarding teams related to the accelerated revenues from new client Onboarding that I mentioned earlier.
The impact of these payments was just under one percentage points of gross margin in the quarter.
Bradley Herring: This represents an adjusted growth margin of 67%. Q4 was negatively impacted by some non-recurring incentive payments made to our support and onboarding teams related to the accelerated revenues from new client onboardings that I mentioned earlier. The impact of these payments was just under one percentage point of gross margin in the quarter. Adjusted EBITDA for the quarter was $9.8 million, up 45% compared to Q4 of last year.
Adjusted EBITDA for the quarter was $9 8 million up 45% compared to Q4 of last year.
This represents an adjusted EBITDA margin of 21%, which is up over 430 basis points from the same period a year ago.
The improvement was due to improved scale across our SG&A functions as well as some targeted cost reductions that were implemented throughout 2023.
For the quarter, we generated adjusted free cash flow of $4 $3 million compared to $5 8 million in the same period a year ago.
This brings our total adjusted free cash flow for the year to nearly $16 million, representing a 50% conversion rate against adjusted EBITDA.
Bradley Herring: This represents an adjusted even margin of 21%, which is up over 430 basis points from the same period a year ago. The improvement was due to improved scale across our SG&A functions, as well as some targeted cost reductions that were implemented throughout 2023. For the quarter, we generated adjusted free cash flow of $4.3 million compared to $5.8 million in the same period a year ago.
That compares to $6 2 million of adjusted free cash flow in 2022, and adjusted free cash flow conversion of 32% for the same year.
GAAP net income for the quarter was $900000 compared to 800000 in the same period last year.
Against our fully diluted share count of $127 8 million shares our current quarter net income results in a GAAP EPS of <unk>.
Bradley Herring: This brings our total adjusted free cash flow for the year to nearly $16 million, representing a 50% conversion rate against adjusted EBIT. That compares to $6.2 million of adjusted free cash flow in 2022, an adjusted free cash flow conversion of 32% for the same year. Gap net income for the quarter was $900,000 compared to $800,000 in the same period last year.
On an adjusted net income basis, this equates to <unk> per share of non-GAAP EPS.
We do not have anything significant to report with respect to the quarter over quarter changes in our balance sheet. Our capital structure. We ended the quarter with approximately $35 6 million in cash and cash equivalents with no outstanding debt.
As we discussed last quarter, we've recently secured a revolving line of credit totaling $100 million, but as of yearend, we had not taken a draw against those funds.
Now I'll move on to guidance for this year.
Bradley Herring: Against our fully diluted share count of 127.8 million shares, our current quarter net income results in a gap EPS of one cent. On an adjusted net income basis, this equates to $0.04 per share of non-GAAP EPS. We do not have anything significant to report with respect to the quarterly changes in our balance sheet or capital structure. We ended the quarter with approximately $35.6 million in cash and cash equivalents, with no outstanding debt.
For 2024, we anticipate revenues to fall between 200 and $210 million at the midpoint that represents a growth rate of 17, 5%, which is 280 basis points higher than where we exited Q4 of 2023.
This revenue guide assumes a macro environment consistent with where we exited Q4 of 2023.
We anticipate adjusted EBITDA to fall between 40, and $45 million, representing an adjusted EBITDA margin at the midpoint of 21%, which.
Which is approximately 250 basis points higher than what we reported for the full year 2023.
Bradley Herring: As we discussed last quarter, we recently secured a revolving line of credit totaling $100 million. However, as of year end, we had not taken a draw against those funds. Now I'll move on to guidance for this year and 2024. We anticipate revenues to fall between $200 and $210 million. At the midpoint, that represents a growth rate of 17.5 percent, which is 280 basis points higher than where we exited Q4 of 2023. This revenue guide assumes a macro environment consistent with where we exited Q4 of 2023. We anticipate adjusted EBITDA to fall between $40 and $45 million, representing an adjusted EBITDA margin at the midpoint of 21%, which is approximately 250 basis points higher than what we reported for the full year 2023.
The primary reason for the year over year expansion is related to the increasing scale benefits across our SG&A functions offset by investments in our product and technology capabilities.
We anticipate our adjusted EBITDA margins will follow the same seasonal cadence that we experienced in 2023.
This factors in the timing of certain expense considerations, such as the implementation of our annual merit increases and the timing of audit and tax fees.
To be very prescriptive on this point, but the margin guide for Q1 of 2024 would start with our printed margins in Q1 of 2023 of 14% and add two to 300 basis points of annual improvement to get to our Q1 2020 for expectation of 16% to 17%.
We continue to remain confident in our ability to expand free cash conversion into 2024 guiding to a full year conversion rate of between 50 and 55%.
There are also a few tactical items I want to pass along first Modeler should expect our stock based compensation for the year to fall between 19% and $20 million.
Bradley Herring: The primary reason for the year-over-year expansion is related to the increasing scale benefits across our SG&A functions, offset by investments in our product and technology capabilities. We anticipate our adjusted EBITDA margins will follow the same seasonal cadence that we experienced in 2023. This factor in the timing of certain expense considerations, such as the implementation of our annual merit increases and the timing of audit and tax.
The increase over 2023 stock based compensation of $8 million is largely due to forfeitures in the first half of 2023 as well as implementation of a revised incentive plan for 2024.
Second going forward will be breaking out the capitalized software as a separate line item on our cash flow statement. The objective is to give additional visibility into our product R&D efforts that fall outside of our income statement.
With that said, we'd like to open up the call to questions. Operator. Please go ahead.
The floor is now open for your questions to ask a question at this time simply press the star followed by the number one on your telephone keypad.
Bradley Herring: To be very prescriptive on this point, a margin guide for Q1 of 2024 would start with our printed margins in Q1 of 2023 of 14% and add 200 to 300 basis points of annual improvement to get to a Q1 2024 expectation of 16 to 17%. We continue to remain confident in our ability to expand free cash conversion into 2024, guiding to a full-year conversion rate of between 50 and 55%. There are also a few tactical items I want to pass along.
We will now take a moment to compile our roster.
Okay.
Our first question comes from the line of James Fawcett with Morgan Stanley. Please go ahead.
Hi, Ron and smartphone Fan-tan for James Thanks for taking our question.
I appreciate your commentary about the business, obviously being less indexed to the new fund formation backdrop than historical but how are you thinking about the new fund formation pipeline in 'twenty four it seems like net net things are a lot healthier than they have been over the prior two years. So I'm curious what you guys are seeing both in terms of magnitude.
As well as the composition of the pipeline. Thanks.
Bradley Herring: First, modelers should expect our stock-based compensation for the year to fall between $19 and $20 million. The increase over 2023 stock-based compensation of $8 million is largely due to forfeitures in the first half of 2023, as well as the implementation of a revised incentive plan for 2024. Second, going forward, we'll be breaking out the capitalized software as a separate line item on our cash flow statement. The objective is to give additional visibility into our product R&D efforts that fall outside of our income. With that said, we'd like to open up the call to questions. Operator, please go ahead. The floor is now open to your questions. To ask a question at this time, simply press the star followed by the number one on your telephone keypad.
Of course, thank you for the question.
Basically it's a relatively balanced picture things are easier I think capital is flowing back to the hedge funds, but also we're seeing the launches over the multi manager multi strategy platforms.
As you know we have a relatively healthy market share in that space and we can keep watching this space.
Again as you can see from our wins in the composition of the net client adds.
We keep protect an outdoor from hedge funds in general and hedge fund launches in particular, but.
We keep our eyes squarely enterprise as far as traditional asset managers are concerned and of course keep winning the business upstream with respect to more complex.
Larger hedge fund managers, taking business away from our competition.
Got it that's helpful and then Brad maybe just a quick follow up for you if I if I have the numbers correct I think the outlook implies incremental adjusted EBITDA margins in the mid <unk> range, which is a touch lighter than recent results.
Operator: We'll now take a moment to compile our raw data. Our first question comes from the line of James Faucette with Morgan Stanley. Please go ahead. Hi, everyone. It's Michael Infantan for James.
We're generally in that 40% to 55% range as you alluded to some product investments that you guys are making but how should we be thinking about.
Oleg Movchan: Thanks for taking our question. Oleg, I appreciate your commentary about the business obviously being less in depth to the new fund formation backdrop than historical. But how are you thinking about the new fund formation pipeline in 24? It seems like, net-net, things are a lot healthier than they have been over the prior two years. So I'm curious what you guys are seeing, both in terms of magnitude and the composition of the pipeline. Thanks.
That sounds like Youre, making a share or whether or not that's just a function I was starting the year conservative way. Thanks.
Thanks, Mike I think there's two pieces of that one is that's why we range it to give us some latitude with Neil coming in we spent a lot of time looking at our product roadmap. So we wanted to give us some room if there are some incremental.
Incremental investments, we want to make this year.
So that number could dip a little bit but at the same time, if we think we've got opportunities to expand margins.
Pushed some of those investments out we'll do that as well. So that's why we range those but your math and your numbers are correct that the low end of that range is probably in the 35 range, it's probably more like 45 on the high end.
Got it that's helpful. Thanks, guys.
Oleg Movchan: Of course, thank you for the question. Basically, it's a relatively balanced picture. Things are easier.
Thanks Mark.
Okay.
Our next question comes from the line of Dylan Becker with William Blair. Please go ahead.
Oleg Movchan: I think capital is flowing back to hedge funds, but we're also seeing launches on the multi-manager, multi-strategy platforms. As you know, we have a relatively healthy market share in that space, and we keep watching the space. Again, as you can see from our wins and the composition of the net client ads, we keep protecting our TOR from hedge funds in general and hedge fund launches in particular, but we keep our eyes squarely on the prize as far as traditional asset managers are concerned, and, of course, keep winning business upstream with respect to more complex, larger hedge fund managers taking business away from our competition.
Nice job here.
Maybe starting with with all AG and maybe Neil as well too you guys talked about kind of improving that onboarding efficiency. So I wonder how you think about that balance between the multi tenancy benefits and standardizing processes moving faster more efficient from a go live perspective, maybe versus some of the customization that's require.
And some of those larger asset managers and going deeper from a product functionality perspective does one have to hinder the other or can it be something.
That helps fuel that product innovation and things that you can product guys further in the future.
Bradley Herring: That's helpful. And then Brad, maybe just a quick follow up for you. If I have the numbers correct, I think the outlook implies incremental adjusted EBITDA margins in the mid-30s range, which is a touch lighter than recent results, which, you know, we're generally in that 40 to 55% range. You obviously alluded to some product investments that you guys are making, but how should we be thinking about the investments that you're making this year or whether or not that's just a function of starting the year conservative Thanks. Thanks, Mike. I think there are two pieces to that.
Yes.
Thank you so much for the question I am pretty sure Neil and I would answer it the same way so we'll let them let can.
Yes, so John Thanks for the question look I think when we when we're onboarding new clients.
Obviously.
To the extent that there are clients that have features that they won added into the system. This is the beauty of doing weekly releases and so we're constantly adding those new capabilities to the platform, allowing clients to get onboard much quicker and of course any of those new features that we add immediately get circulated all released to all of our client.
Bradley Herring: One is that's why we ranged it, you know, to give us some latitude. You know, with Neil coming in, we spent a lot of time looking at our product roadmap, so we wanted to give us some room if there were some incremental investments we wanted to make this year. So that number could dip a little bit, but at the same time, if we think we've got opportunities to expand margins and push some of those investments out, we'll do that as well. So that's why we range those, but your math and your numbers are correct that below that range, it's probably in the 35 range. It's probably more like 45 on the high end.
At the same time and so not only are we helping accelerate the on boarding of individual clients, but we're also rolling out new feature simultaneously. So the remaining clients who are on the platform.
Got it yeah that makes perfect sense, and then Brad sticking.
Kind of what the idea on the outlook here it sounds like nice momentum in the aggregate base, new logos are accelerating churn stabilizing deal sizes, increasing is that the right way of kind of Contextualize, Inc.
Bradley Herring: Got it. That's helpful. Thanks, guys. Thanks. Our next question comes from the line of Dylan Becker with William Blair. Please go ahead. Nice job here.
Aggregate business momentum and how that kind of fueled the outlook for for acceleration here into 2024.
Neil Pawar: Starting with Oleg and maybe Neil as well, you guys talked about kind of improving that onboarding efficiency. So I wonder how you think about that balance between the multi-tenancy benefits and standardizing processes, moving faster and more efficient from a go-live perspective, maybe versus some of the customization that's required in some of those larger asset managers and going deeper from a product functionality perspective. Does one have to hinder the other, or can it be something that helps fuel product innovation and things that you can productize further? Dylan, thank you so much for the question. I'm pretty sure Neil and I would answer it the same way, so we'll let him have it.
Thanks, Matt.
He is doing I think the nice thing for us is.
If you look at all of the momentum drivers on our revenue. They are all going in the right direction right. Our front book looks really good we talked about that over the last couple of quarters.
A tough macro actually helps us from a front book perspective, we've talked about the trends improving in the back book we're seeing.
Downgrades have dropped off considerably.
The upsells are picking back up churn is certainly decreasing from where it was in those Q2 levels. So it's not any one big driver that's pushing our momentum momentum into 2024, it's actually all three of those components contributing positively and I will.
I'll also add that.
Diversifying geographically so whenever we see weakness in one area of the world are.
One sector, we see that's lagged and picked up somewhere else, which allows for additional stability.
Great. Thanks, guys appreciate it.
And just real quick will talk some more about that at Investor Day next week, we're going to Peel that back a little bit deeper.
Yes.
Neil Pawar: Yeah, so Dylan, thanks for the question. Look, I think when we're onboarding new clients, obviously, you know, to the extent that there are clients that have features that they want added to the system, this is the beauty of doing weekly releases. And so we're constantly adding new capabilities to the platform, allowing clients to get onboard much quicker. And, of course, any of those new features that we add immediately get circulated or released to all of our clients at the same time. So not only are we helping accelerate the onboarding of an individual client, but we're also rolling out new features simultaneously to the remaining clients who are on the platform. Got it. Yeah, that makes perfect sense.
Our next question comes from the line of Parker Lane with Stifel. Please go ahead.
Hi, This is Matthew kicker for Parker. Thanks for taking my questions to start you talked about guiding to $106, 7% net dollar retention in context of the 2024 guide can you talk about what is driving that increase and what went in to come into that number one with any churn baked into the guide.
Thank you.
Yes, sure we will go into this actually a little bit more next week, but to give a little bit of flavor for the improvements coming from a couple of areas. One is our net organic growth. Yes, we did see a pretty decent fall off in that number for 2023, especially the first half of the year when the macro kind of came unwound a bit we saw customers.
Bradley Herring: And then Brad, thinking kind of with the idea on the outlook here, it sounds like nice momentum in the aggregate base. New logos are accelerating, insurance stabilizing, deal size is increasing. Is that the right way of kind of contextualizing the aggregate business momentum and how that kind of fuels the outlook for acceleration here into 2024? No, thanks.
Very hesitant to add seats as their back books grew.
Internally, we also saw a fair amount of downgrades in 2023 as customers, we're kind of resetting their cost structures, we've seen both of those trends reverse.
Towards the end of 2023, and we're expecting those trends to continue into 2024 to return somewhat back to more normal levels as to where they were back in the 'twenty, one and 'twenty two levels with respect to churn.
Oleg Movchan: It absolutely is, Dylan. I think the nice thing for us is, you know, if you look at all of the momentum drivers for our revenue, they're all going in the right direction, right? Our front book looks really good. We talked about that over the last couple of quarters that a tough macro actually helps us from a front book perspective. We've talked about the trends improving the back book. We're seeing, you know, downgrades have dropped off considerably.
<unk> story, we did see churn pickup in the middle part of 2023.
Subsequently, we've seen those churn numbers fall off again as you get into the back half of 2020 for normal churn for us will run in the 4% to 5%, but keep in mind about three to three and a half of that is in voluntary it's just hedge funds, either not funding or not launching or coming unwanted unwound and not not redeploying those funds.
So we'll talk about that more next week, but when you look at our India. Our improvement improvement, we feel pretty confident given the trends, we're seeing especially on that organic growth element.
Bradley Herring: The upsells are picking back up, and churn is certainly decreasing from where it was at those Q2 levels. So it's not any one big driver that's pushing our momentum into 2024. It's actually all three of those components contributing positively. And Dylan, I'll also add that, you know, we keep diversifying geographically. So whenever we see weakness in one area of the world or one sector, we see that flag being picked up somewhere else, which allows for additional stability.
And churn is contributing to that as well. So all three of those are going to help us and just one more addition to that.
The quality of the book is we're seeing quality of the book is.
Big.
Increasing very steadily and thats a function of our disciplined go to market strategy. We've spent a lot of time with clients.
Making sure we do understand what theyre looking for creating solutions being very targeted with our onboarding process.
Bradley Herring: Great, thanks guys, appreciate it. And just real quick, we'll talk some more about that at Investor Day next week. We're going to peel that back a little bit deeper.
At the end of the day when clients do go live, but there was a really tight alignment between our technology team product team support team to make sure that the clients are satisfied and as a result stay longer with us.
Operator: Our next question comes from the line of Parker Lane. Please go ahead. This is Matthew Kickert for Parker.
Okay that makes sense and secondly is great quarter with new customer wins is there anything that you did differently as a company with the go to market separately to drive these additional lens or is it purely better macro and a better mix of opera solutions.
Bradley Herring: Thanks for taking my questions. So to start, you talked about guiding to 106 to 107% net dollar retention in the context of the 2024 guide. Can you talk about what is driving that increase and what went into coming up with that number, along with any churn baked into the guide? Thank you. Yeah, sure. We'll go into this actually a little bit more next week, but to give you a little bit of a flavor for it, the improvements coming from a couple of areas. One is our net organic growth. You know, we did see a pretty decent fall off in that number for 2023, especially in the first half of the year when the macro kind of came unwound a bit. We saw customers very hesitant to add seats as their books grew internally.
We just just kept fresh and we didn't do much much differently. This time I would began stress. The fact that we are being very purposeful in how we think about business on a global basis.
As we've highlighted.
In our prepared remarks, we're winning business in all areas of the world.
South Korea in Belgium in Australia in Singapore, and just thinking about how we how we're kind of positioning the business. We are following the capital capital is more or less flowing out of minus sensors, such as Hong Kong and London and were kind of deploying all of our.
Bradley Herring: We also saw a fair amount of downgrades in 2023 as customers were kind of resetting their cost structures. We've seen both of those trends reverse toward the end of 2023, and we're expecting those trends to continue into 2024 to return somewhat back to more normal levels as to where they were back in the 21 and 22 levels. With respect to churn, it's a similar story. We did see churn pick up in the middle part of 2023, and subsequently, we've seen those churn numbers fall off again as you get into the back half of 2024. You know, normal churn for us will run in the four to five percent, but keep in mind about three to three and a half of that is involuntary. It's just hedge funds either not funding or not launching or coming unwound and not redeploying those funds.
<unk> is years away from from the Olson rebalancing to book and kind of positioning of the product in position on the platform.
For market to understand what we're doing.
Filling up those those gifts and so nothing really changed we're seeing balanced in flow both from launches in from conversions.
Just keep executing one what we set out to do over the last couple of years.
Terrific. Thank you.
Our next question comes from the line of <unk> Syed Gogo <unk> with Jpmorgan. Please go ahead.
Hello, everyone.
With that first.
Ill ask you to provide an update on the dynamics that you saw in the U S.
We've seen a pickup in Americas, but could you maybe elaborate what was the growth in U S. Only.
Maybe broadly how much of that growth came from the retirement system.
Well you used a retirement system. We've just the recent client wins so it's.
Not reflected in our revenue for 'twenty three but the book of business in the U S is pretty healthy.
Bradley Herring: So we'll talk about that more next week. But when you look at our NDR improvement, we feel pretty confident given the trends we're seeing, especially on that organic growth element. And Churn is contributing to that as well. So all three of those are gonna help us. And just one more addition to that.
First of all.
I would like to acknowledge that there is some consolidation going on in the hedge fund space as the large multi manager multi strategy clients.
Keep looking for scale and keep looking for talent.
On the other hand.
We are our numbers show we're not.
First of all this phenomenon is not happening at the scale.
Oleg Movchan: You know, the quality of the book is, we're seeing the quality of the book increasing very steadily, and that's a function of our disciplined go-to-market strategy. We spend a lot of time with clients making sure we understand what they're looking for, creating solutions, and being very targeted with our onboarding process. And at the end of the day, when clients do go live, there's a really tight alignment between our technology team, product team, and support team to make sure that the clients are satisfied and, as a result, stay longer with us. Okay, that makes sense.
That is material to the industry not that we see in second this phenomenon doesn't impact.
Infusion that much and so from that perspective, the balance between launches and conversions conversions for us is pretty healthy.
Our bookings.
We don't discuss them, but as far as our portfolio of revenue mix and bookings mix, it's still very well diversified. So there's we don't see any lumpiness in.
In that.
And that.
From that perspective, if that's what you're asking for.
Okay.
Okay. Thank you and in terms of the platform revenue growth, which was below 14% for the second quarter Anoro.
Oleg Movchan: And secondly, a great quarter with new customer wins. Is there anything that you did differently as a company with the go to market specifically to drive these additional wins or the purely better macro and a better mix of offered solutions? We just kept pressing.
With your increased efforts moving upmarket do you anticipate greater share of managed services in your 2024 guidance of 17, 5% at the midpoint.
But we don't so.
We think amendments about managed services today is it's really.
Oleg Movchan: We didn't do much differently this time. I would again stress the fact that we are being very purposeful in how we think about business on a global basis. As we highlighted in our prepared remarks, we're winning business in all areas of the world, you know, South Korea, Belgium, Australia, Singapore, and just thinking about how we kind of position the business, capital is more or less flowing out of money centers such as Hong Kong and London, and we're kind of deploying our eyes and ears away from those and rebalancing the book and kind of positioning the product and positioning the platform for the market to understand what we And so nothing really changed.
Part of the package that we offer our clients when we go to market. So we do have.
As you guys hear me say multiple times I keep my.
Close eye on closed closed eye on managed services in general we are not in a position at this point in time to be managed services forward. When we go to market is just part of the package what we're offering to clients. What we do do is we invest relentlessly back into the platform to make sure when would do deliver managed services.
It does.
Comed with Mac.
Maximally high gross margins, so that the technology that we use to deliver the service is basically the mirror image of the same technology that our clients could use to accomplish the same task and so again. This is not something that was obviously something would track at this point in time the platform.
Oleg Movchan: We're staying balanced in flow both from launches and from conversions, and we just keep executing what we set out to do over the last couple of years. Terrific, thank you. Our next question comes from a line from Alexei Gogolev with JPMorgan. Please go ahead. Hello, everyone.
Oleg Movchan: Could I first ask you to provide an update on U.S. Collaborate and, broadly, how much of that is there?
Itself is like our people the spear once we redesigned the new engagement model is as I alluded to a couple of quarters ago, we will be ready to.
Oleg Movchan: Well, you know, the Utah retirement system is just, the recent client wins, so it did not reflect on our revenue for 2023, but the book of business in the U.S. is pretty healthy. First of all, I would like to acknowledge that there is some consolidation going on in the hedge fund space as the large multi-manager, multi-strategy clients keep looking for scale and keep looking for talent. On the other hand, as our numbers show, we're not... First of all, this phenomenon is not happening at the scale that is material to the industry, not that we see. And second, this phenomenon doesn't impact us. And so from that perspective, the balance between launches and conversions, conversions for us are pretty healthy; our bookings, you know, as you know, we don't discuss them, but as far as our portfolio revenue mix and booking So there's, we don't see any lumpings in that, you know, from that perspective, if that's what you're asking.
Go to market with managed services.
Thank you Alec.
Sure.
As a reminder, the floor is now open for your questions staff. Good question at this time simply press the star followed by the number one on your telephone keypad.
Our next question comes from the line.
Of.
Koji Ikea with bank of America.
Please go ahead.
Hey, this is Natalie Howard for Koji I wanted to ask about your strategy for M&A given the current environment.
Are you guys planning on waiting for the macro just settled further before making more of those decisions.
And I also wanted to hear more on whats going into those decisions and which part of the business do you think would benefit the most as you go into 2024.
Great question, Michael there. Thank you so much for it. So we obviously are watching the macro environment and only to the extent that you had.
It creates opportunity there is.
Pretty decent we still keep seeing a decent amount of disconnect between capital that's available to more stable growing technology businesses the on.
Capital Thats available to kind of earlier stage.
Oleg Movchan: Okay, thank you. And in terms of platform revenue growth, if you were to increase that for... Do you anticipate a greater share of... We don't.
Early stage companies with product that is relatively raw, but already captured archon minds of certain barto to market.
We're looking at relatively wide range of.
Oleg Movchan: So the way we think about managed services today is it's really a part of the package that we offer our clients when we go to market. So we do have, as you guys hear me say multiple times, I keep a close eye on managed services in general. We are not in a position at this point in time to be managed services forward when we go to market.
M&A opportunities.
As I mentioned before for US it's relatively high.
Hurdle rate.
To acquire something just because as you know all of this is our focus to make sure that our.
<unk> Native architecture remains the core of our value proposition. However, we do see some interesting opportunities out there that are very neatly.
Oleg Movchan: It's just part of the package we're offering to clients. What we do is we invest relentlessly back into the platform to make sure when we do deliver managed services, it does come with maximally high growth margins so that the technology that we use to deliver the service is basically the mirror image of the same technology that our clients could use to accomplish the same task. And so again, this is not something that was obviously something we track.
Compatible with our tech stack beyond supplements, our current technology functionality very well a.
A couple of areas as you know, which we.
Which we focused on as far as our total addressable market is concerned.
We do not do not have strong capabilities.
And as private markets and Thats, where we think opportunities are.
Opportunities exist.
Got it. Thank you I appreciate the color.
Of course.
Our next question comes from the line of Gabriela Borges with Goldman Sachs. Please go ahead.
Oleg Movchan: At this point in time, the platform itself is like our tip of the spear. And once we redesign the new engagement model, as I alluded to a couple of quarters ago, we will be ready to go to market with managed services. Thank you. Please share. As a reminder, the floor is now open to your questions. To ask a question at this time, simply press the star followed by the number one on your telephone.
Hi, Good morning, Thank you for taking the question I have.
Sure Neal.
Follow up on that product roadmap comments, specifically as we think about landing and working with more sophisticated larger customers.
Do you think about that balance.
Operator: Our next question comes from the line of Koji Ikeda with Bank of America. Please go ahead. Hey, this is Natalie Halon on behalf of Koji Ikeda.
Customization and James Perfect Black Fellows.
So those customers versus how much do you actually want to bet on the platform and its leverage posture entire install base.
Oleg Movchan: I wanted to ask about your strategy for M&A given the current environment. Are you guys planning on waiting for the macro to settle further before making more of those decisions? And I also wanted to hear more on what's going into those decisions and which part of the business you think would benefit the most as you go into 2024. Great question, Natalia. Thank you so much for it.
Fantastic question. This is Neil thanks for that.
Yes, we get a lot of requests from clients for a variety of features and.
One of the interesting things that we've observed when we talk to our clients is that they really don't want us to build bespoke solutions for them they would much rather.
Oleg Movchan: So, we obviously are watching the macro environment and, you know, only to the extent that it creates opportunities. There is a pretty decent, we still keep seeing a decent amount of disconnect between capital that's available to more stable, growing technology businesses and capital that's available to kind of earlier stage, early-stage companies with products that are relatively raw but have already captured the hearts and minds of a certain part of the market. So we're looking at a relatively wide range of M&A opportunities. As I mentioned before, for us, it's a relatively high hurdle rate to acquire something just because, as you know, this is our focus to make sure that our SAS Native architecture remains the core of our value proposition. However, we do see some interesting opportunities out there that are very neatly compatible with our tech stack and supplement our current technology functionality very well. A couple of areas, as you know, which we are focused on as far as our total addressable market is concerned. We do not have strong capabilities in private markets, and that's where we think opportunities are.
Have the functionality embedded in the platform and implemented in a way that works across industry. Because if you think about it from their perspective, they're trying to get out of the business of doing things in a very bespoke way and that's what attracts them to a platform like ours and so even though when clients do need to.
Build something thats very specific to that business and that does happen from time to time, our API is allow them to access the data in the way that they need to so they can perform whatever customization. They want to perform more often than not they are really pushing us to get those features into the platform. So that they don't have to support the monarch.
Go forward basis, and B, they benefit from sort of the wisdom of crowds effect of everybody contributing to a common multi tenanted platform.
That makes sense, thank you and the follow up.
Ed.
You connect the dots.
Commentary on the front book back book, and the macro trends and what Youre seeing in the industry.
Operator: Thank you. Our next question comes from a line from Gabriela Borges with Goldman Sachs. Please go ahead. Hi, good morning.
How do you think about the normalized growth pressure Allison infusion over a medium term to long term timeframe and I imagine that you've got a fair amount of work on this ahead of analyst day, Jason I appreciate the comments you're willing to share at this time.
Neil Pawar: Thank you for taking the question. Either for Oleg or for Neil, I'd love to follow up on the product roadmap comment. Specifically, as you think about landing and working with more sophisticated, larger customers, how do you think about the balance between customization and doing specific bespoke work for those customers versus how much you actually wanna embed in the platform that is leverageable across your entire customer base?
Yeah, Hey, this is Brad I'll take that yes, thats a great question.
My answer to that is we're going to have a pretty exhaustive conversation about that next week, we're going to break down our growth algorithm into the front book and back book components, what drives each so look forward to having that conversation on Tuesday next week.
Neil Pawar: Fantastic question. This is Neil. Thanks for that. Yeah, we get a lot of requests from clients for a variety of features. And, you know, one of the interesting things that we've observed when we talk to our clients is that they really don't want us to build bespoke solutions for them. They would much rather, you know, have the functionality embedded in the platform and implemented in a way that works across industries. Because if you think about it from their perspective, they're trying to get out of the business of doing things in a very bespoke way.
Sounds good thank you for the color.
Thanks Gabriel.
That concludes today's question answer session I would now like to turn the call over to OLED Martin for closing remarks.
Thank you all I.
I appreciate all the questions, we're looking forward to holston.
Every one of you next week on March 19 in Fort Lauderdale on our Investor Day.
That concludes today's call you may now disconnect.
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Neil Pawar: And that's what attracts them to a platform like ours. And so even though when clients do need to build something that's very specific to their business, and that does happen from time to time, our APIs allow them to access the data in the way that they need to, so they can perform whatever customization they want to perform. More often than not, they're really pushing us to get those features into the platform so that A, they don't have to support them on a go-forward basis, and B, they benefit from sort of the wisdom of the crowds effect of, you know, everybody contributing to a common multi-tenanted platform.
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Neil Pawar: That makes sense. Thank you. And the follow-up question for Oleg and Brad, I want to connect the dots on some of your commentary on the front book and the back book and the macro trends and what you're seeing in the industry. What do you think about the normalized growth profile of Enfusion over a medium-term to long-term timeframe?
Bradley Herring: And I imagine that you've done a fair amount of work on this ahead of the anniversary, too, so I would appreciate whatever comments you're willing to share. Yeah, hey, Gabrielle, this is Brad. I'll take that. You know, that's a great question. And my answer to that is we're going to have a pretty exhaustive conversation about that next week. We're going to break down our growth algorithm into the front book and back book components, and what drives each.
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Bradley Herring: So I look forward to having that conversation on Tuesday next week. Sounds good. Thank you for the call. Gabriela, that concludes today's question and answer session. I would now like to turn the call over to Oleg Movchan for closing remarks. Thank you all. I appreciate all the questions and comments.
Oleg Movchan: We're looking forward to hosting every one of you next week on March 19th in Fort Lauderdale for our Investor Day. That concludes today's call; you may now go. Thank you for watching. Bye. Bye.
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