Q1 2024 Enfusion Inc Earnings Call
Good morning, ladies and gentlemen, thank you standing by and welcome to infusions per quarter 'twenty 'twenty four earnings conference call. At this time all lines have been placed on mute to prevent any background noise. Following the speakers' remarks, there we will open up 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 right head of Investor Relations to begin.
Bill: Good morning, and thank you operator, we welcome you to infusions first quarter 2024 earnings conference call hosting today's call are <unk> margin <unk>, Chief Executive Officer, Brad hearing Infusions, Chief Financial Officer, and Neil Kumar Infusions, Chief operating officer.
Bill: Please note our quarterly shareholder letter, which includes our quarterly financial results has been posted to our Investor Relations website.
Bill: 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.
Bill: Reading 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.
Bill: 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.
Bill: In addition, todays call may include non-GAAP measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures reconciliation to the nearest GAAP measures can be found in todays quarterly shareholder letter, which is available on the companys website with that I'd like to turn the call over to <unk>.
Speaker Change: <unk> to begin.
Speaker Change: Good morning, and thank you for joining us today to discuss our results for the first quarter of 2024.
Speaker Change: I'd like to start by sharing my excitement about the direction of our business and our team's ability to execute on our strategy.
Speaker Change: As you will hear from me as well as our T O Neil Pawar and CFO Brett hearing shortly.
Speaker Change: The value proposition, which I've shared with all of you in the investment community and bring to market everyday is resonating and I am incredibly proud of everyone at infusion for their hard work and dedication.
Speaker Change: I'd also like to thank those of you attended our first ever Investor Day on March 19th in Fort Lauderdale.
Speaker Change: We're grateful for your terrific turnout and engagement from shareholders and the research analysts who spend the time to learn more about our story.
Speaker Change: For those of you who couldn't make it all presentation can be found on the Investor Relations section of our website.
Speaker Change: You can see how we outlined all the key factors in place for infusion to achieve our revenue growth goal of 20 plus percent in the medium term.
Speaker Change: Which we define as 20 to 25 to 2027.
Speaker Change: We believe that current macro trends.
Speaker Change: Support and enhance our overall value proposition and infusions platform will be the last upgrade our clients will ever need.
Speaker Change: That's for the first quarter of 2024, we're off to a great start with 33, new client wins.
Speaker Change: We're on track to achieve the full year financial guidance, we laid out for you at our earnings call and Investor Day.
Speaker Change: On the call today, we will share several proof points the confirm infusions continued move upmarket.
Speaker Change: While deepening our relationship with existing clients.
Speaker Change: I'm also pleased to share the client on boarding satisfaction scores are at three year highs.
Speaker Change: Those familiar with our story know that this has been an area of focus and investment and I'm delighted that our clients are seeing results.
Speaker Change: Now, let me walk you through some key highlights from the first quarter.
Speaker Change: Our economic trajectory remain on plan in Q1, 'twenty four as we reported $48 $1 million in revenue delivering 17, 3% year over year growth.
Speaker Change: First quarter adjusted EBITDA totaled $9 2 million translating into an adjusted EBITDA margin of 19, 1%.
Speaker Change: Brad will provide a deeper discussion on financials later.
Speaker Change: More broadly speaking the industry backdrop remains volatile.
Speaker Change: We witnessed the typical seasonal volatility in December which included the combination of year end fund closures and consolidations.
Speaker Change: <unk> by New New fund launches in January.
Speaker Change: This year was no different.
Speaker Change: The 33, new clients, we signed during the first quarter is up from the 27, we signed last year in the first quarter, bringing our total client count to 868.
Speaker Change: Not surprisingly launches represented a higher mix in Q1.
Speaker Change: Representing 55% of new client wins this quarter.
Speaker Change: We expect the mix it will balance out more with a higher percentage of conversions throughout 2024.
Speaker Change: Moving onto HCV it increased sequentially from 219000 to $226000 a record in our recent history, representing three 2% quarter over quarter, and seven 8% year over year growth.
Speaker Change: As we successfully protect and grow our market share in infusions core hedge fund segments, our expansion upmarket will broaden our client base.
Speaker Change: <unk> inquiry Tvs as we continued to add larger asset managers to our portfolio mix.
Speaker Change: This larger nida accounts deliver more stable revenue profile and offer a great opportunity to expand our offering with additional product functionality and managed services, which will support and Dr expansion over time.
Speaker Change: Stated differently as the ACO, our clients base improves over time, so too will the overall business level economics.
Speaker Change: Shifting gears, let me provide you with a few notable client wins across geographies from the first quarter.
Speaker Change: In the Americas revenue grew 16% year over year up slightly from the fourth quarter.
Speaker Change: New wins, where a combination of market share gains and several new fund launches, which is normal in Q1 due to seasonality.
Speaker Change: I am thrilled to announce that we welcomed foundation created as a new client.
Speaker Change: Foundation created as a prominent New York based greatest focused alternative asset manager with $1 7 billion AUM.
Speaker Change: Specializing in municipal credit and infrastructure debt markets.
Speaker Change: In order to earn their business our team designed a customized solution that will consolidate in the replace multiple pre existing systems across trade capture portfolio management risk and the tracking of credit agreement terms and conditions.
Speaker Change: Historically <unk>.
Speaker Change: <unk> created was tasked with coordinating workflows across several siloed legacy providers on a daily basis.
Speaker Change: Foundation created will now be able to enjoy one centralized view across its entire business.
Speaker Change: This is an exciting signing and another validation of our ability to deliver customized solutions that support and drive productivity for complex great managers.
Speaker Change: Another notable win this quarter.
Speaker Change: We just signed a multinational New York based alternative investment management company specializing in credit with over 100 billion in AUM and multiple business leaves.
Speaker Change: The capital structure.
Speaker Change: This client recently acquired an equity business from an investment bank and chose to implement infusion to derive fronts.
Speaker Change: Middle and back office operational efficiencies.
Speaker Change: Shortly after the completion of the infusion from Quebec implementation, they recognized the opportunity to drive similar efficiency with its structured credit business, which trades across asset and mortgage backed securities.
Speaker Change: At the request infusion designed an end to end workflow from pre trade compliance trade capture real time, <unk> and Shadow books, all with an open framework to integrate to third party best of breed risk providers.
Speaker Change: This is a prime example of our technology is broad adaptability and flexibility.
Speaker Change: Importantly, it is a reflection of infusions team ability to think outside the box and deliver creative and customized solutions to large investment managers.
Speaker Change: In Asia Pacific.
Speaker Change: Revenue grew 13% year over year, which is up 7% last quarter, but below the 20% growth of last year.
Speaker Change: Not surprisingly given the geopolitical and macroeconomic backdrop in the region, we continue to see capital outflows from China, and Hong Kong into Singapore, Middle East and Australia.
Speaker Change: Given our strong brand and market position and in APAC, we remain the partner of choice for New fund launches and seeing strong growth opportunities with large asset managers outside of China and Hong Kong.
Speaker Change: We are delighted to add a high beta grid launch to our client base with the addition of Chicago investment management.
Speaker Change: Our ability to consistently win managers, such as Chicago validates the value preposition will deliver to high quality asset managers. This.
Speaker Change: This type of wins confirm that our product and client strategy are continuing to help us win in the traditional asset management segment.
Speaker Change: In Europe, Middle East and Africa revenue grew two 1% to 9% year over year in the first quarter up from 24% growth last quarter as Europe continues to be our fastest growing region.
Speaker Change: Not surprisingly, we continue to win our traditional bread and butter investment management accounts in the European minus centers.
Speaker Change: But we're also making inroads geographically beyond the UK market.
Speaker Change: With 44% of new clients coming from outside the UK.
Speaker Change: On the client level basis, but we're pleased to see a few credit fund winds in the Europe, one new family office in Switzerland, and several account expansions.
Speaker Change: Given our European momentum, but plan to dedicate additional resources to further expand our market presence in continental Europe and middle East.
Speaker Change: A unique client expansion story I'm excited to share with you is ICP asset management and asset manager backed by the Norwegian Industrial investment company acre and led by in the <unk>.
Speaker Change: Who was the former CEO of Norges Bank investment management.
Speaker Change: ICP asset management is an existing infusion client that recently acquired an established Swedish asset manager Nora to form a single Nordic firm with a global reach.
Speaker Change: The ambition is to create unique products that provide exposure to the whole energy transition.
Speaker Change: The newly combined firm evaluated both its incumbent solution and current market offerings and elected to broaden its commitment to infusion as its pms gross product geographies and asset classes.
Speaker Change: <unk> once again is a clear proof point that not only can we lend and expand but also take share from our largest competitors.
Speaker Change: I would like to draw your attention to the strong geographic diversification benefits that infusion business delivers.
Speaker Change: While growth in the APAC region slows our revenue engine in EMEA is more than compensating for that dynamic, resulting in overall growth acceleration and margin expansion.
Speaker Change: We will continue to adjust our go to market strategy and execution tactics to reflect market opportunities on a global basis.
Speaker Change: At this time I would like to have Neil <unk>, our chief operating officer make a few comments on product and partnerships.
Neil: Thank you Eric and thank you to everyone for the warm greeting at our Investor day.
Neil: My trip to Asia close this out the opportunity to spend time with our colleagues around the globe and to meet with a fantastic group of clients, who have entrusted infusion to provide them the mission critical software and connectivity to operate their businesses.
Neil: Our clients in the APAC region represent 28% of our client base in total.
Neil: On our previous earnings call. We discussed how the addition to the portfolio Workbench product has helped us to win new accounts in the fourth quarter of 'twenty three such as the Utah retirement systems.
Neil: And this past quarter the value of having this product offering allows us to expand our relationships with some existing accounts.
Neil: One client story that perfectly illustrates our ability to grow our business with existing clients, which I'm pleased to share with you is that of trio.
Neil: <unk> capital is a London based multi boutique hedge funds with $2 1 billion of assets under management.
Neil: <unk> portfolio managers specialize in a variety of trading strategies, including event, driven emerging market macro and ESG long short equity, which offered to institutional investors in Irish UCITS came in offshore and single managed accounts formats, either as a standalone investor.
Neil: Or is the multi manager products.
Neil: We're particularly excited about this win as it is a textbook example of our land and expand strategy.
Neil: <unk> launched a single new funds with infusion in Q2 2021 as their existing solution could not handle the range of financial instruments required.
Neil: After two years on the platform <unk> CLO chose to implement infusions full front to back capabilities across the entire portfolio encompassing over 20 funds and accounts in Q3 2023.
Neil: In Q1 of 2020 for Trillium decided to further expand its relationship with infusion by Onboarding a related entity TCM wells to our platform with.
Neil: We're so grateful for our growing partnership with trim.
Neil: The timing of the wins this quarter was another coincidence.
Neil: We saw several conversion wins that were aided by our ability to rapidly released new versions of our software, thus being able to respond to clients evolving needs. We.
Neil: Can't overemphasize that competitive edge of infusions, multi tenanted SaaS model.
Neil: If you were at our Investor Day, you heard a few of our clients explain how they don't want to orchestrate and manage software system upgrades, nor do they want to have to wait months or years to have the latest version.
Neil: This past quarter infusion rolled out 205 enhancements and features across our portfolio management and order management systems and.
Neil: And all of our clients benefited from these upgrades simultaneously ensuring everyone is constantly running the latest version of our platform.
Neil: Moving on to market expansion as Oleg mentioned earlier, 44% of our Europe Middle East and Africa business came from outside the U K in Q1, 24, which is up from 27% in Q1 'twenty three.
Neil: This is in line with our plan to expand into Continental Europe.
Neil: Many of you had the opportunity to meet lots of tons spark at our Investor day, where she moderated a fireside chat with two of our clients Lotto runs our European sales team. Another her leadership, we're seeing deeper market penetration of trends, we expect to continue.
Neil: For example, the ICP expansion was the fifth consecutive quarter in which we won new business in Scandinavia.
Neil: Lastly, I'd like to touch on our overall services.
Neil: As we mentioned last quarter, we have accelerated the onboarding cycle.
Neil: As someone who has had to manage many upgrades and switches over my career on the buy side.
Neil: Understand how important switching cost saw two upsides.
Neil: We believe that the cost to switch to infusion both in time and effort is already materially lower than our competitors.
Neil: We continue to focus on this by putting emphasis on our inbound and outbound interfaces as well as our flexible reporting solution.
Neil: Getting clients up and running faster and more efficiently than ever has wide reaching benefits.
Neil: One obvious one is as we onboard clients foster will be able to recognize revenue more quickly.
Neil: As an additional benefit we've seen the clients with high on boarding satisfaction stores can be more receptive to purchasing additional products or services from us.
Neil: While clients on boarding satisfaction scores are at a three year high we continue to respond to our clients' feedback and find ways to continue to improve our service here.
Speaker Change: And now I'll turn it back to <unk> to discuss market dynamics.
Speaker Change: As the market dynamics, we're seeing an inflection from year end fund closures in December two new fund launches in January.
Speaker Change: We have been seeing capital flow shift out of China, and Hong Kong and into Singapore, India, Japan, and Dubai, Although we believe Hong Kong remains the core operating hub for fund managers.
Speaker Change: We observed more activity in Dubai recently.
Speaker Change: As it has been a destination for both intellectual and investment capital and we're evaluating opportunities in this market.
Speaker Change: China was a little quieter during this first quarter due to the lunar new year as well as some funding delays from newly launched investment funds in the U K.
Speaker Change: We expect to see activity ramp up after this events and now let me discuss our strategic focus.
Speaker Change: We're pleased with the start of 'twenty 'twenty, four with healthy new client growth and customer on boarding satisfaction at three year highs.
Speaker Change: The infusion team remains laser focused on product innovation customer satisfaction, and creating superior value for our shareholders.
Speaker Change: We continue to view, our best return on investment capital and investments in our product and people, which has been in motion and will continue throughout 2024.
Speaker Change: Our product team and software engineers are relentlessly working in synchrony to deliver new capabilities and workflows for our clients with a focus on traditional asset managers.
Speaker Change: Our focus on operational efficiencies through our product platform development is designed to provide our clients with more capabilities to self customize their systems and enable our team to deliver best in class client services in a cost and time efficient manner.
Speaker Change: We believe this will result in shorter completion times.
Speaker Change: My upheld desk interaction and wait times and greater customer satisfaction.
Speaker Change: In closing I am delighted with our first quarter results, but even more pleased with our team's ability to execute.
Speaker Change: We'll have the product offering to win new business and to land and expand with our current accounts.
Speaker Change: Our strategic roadmap and the revenue trajectory afford us the ability to invest in our account management and managed services teams as we simultaneously expand infusions platform and product capabilities.
Speaker Change: Added together.
Speaker Change: We believe this creates value for our clients and accelerated scale expense margins and drives efficiency.
Speaker Change: We believe our disciplined approach to capital allocation and the relentless focus on our technology capabilities puts infusion on the path to be a rule of 40 company over the medium term.
Speaker Change: I will now turn the call over to Brad to discuss our financials.
Brad: Thanks Ali and thanks, everyone for joining us this morning on behalf of infusions of 1100, plus global employees I have the privilege to report another solid quarter.
Brad: It reflects market leading growth combined with continued expansion of our profitability profile.
Brad: For the first quarter, we generated revenue of $48 1 million, an increase of 17% over the same quarter last year. This.
Brad: This quarter's revenue performance continues the trend of expanding our growth rate.
Brad: Adding 260 basis points over the growth rate, we reported for Q4 of 2023.
Brad: Referring back to the discussions we had in our last earnings call and at our Investor day on the designation between front and back book, the 17% growth rate in the quarter consisted of approximately 14% contribution from the front book at approximately 3% of growth coming from the back book.
Brad: While both of these figures are within the expected ranges, we discussed at our Investor Day meeting we.
Brad: We're watching the patterns in the back book drivers as Q1 churn and downgrades came in slightly higher than the normal seasonal pattern, we would have expected to see.
Brad: As a reminder, I would encourage listeners on the call to review the materials from our Investor day that lay out our discussion on front and back book revenue projections and those materials are posted on our IR website.
Brad: First quarter, IRR was $195 million up 14% year over year, and 3% higher than what we reported in the fourth quarter of last year.
Brad: As a quick reminder, from our last earnings call going forward. We are only reporting a single in Dr figure that captures both voluntary and involuntary churn in order to simplify our messaging to investors.
Brad: Our <unk> for the quarter was 103%, which is up 80 basis points from what we reported last quarter as.
Brad: As we talked about last quarter, the consolidation of UBS and <unk> will continue to impact our in Dr. Until it annualize in Q4 of this year.
Brad: The impact of the UBS CS consolidation on Q1 was a headwind of 60 basis points compared to 70 basis points last quarter.
Brad: We are still targeting an NDA or to expand to 106% to 107% as we close out 2024.
Brad: Where I discuss the target of 16% to 17% for the quarter.
Brad: I would like to call out there was approximately 150 basis points of margin benefit or roughly $600000 in the quarter from non-recurring savings that will not repeat throughout the remainder of the year.
Brad: Adjusted free cash flow for the quarter was negative $1.2 million.
Brad: The decrease in adjusted free cash flow from Q4 of 2023 is due to the timing of our 2023 annual incentives that were paid out in the first quarter.
Brad: For the trailing four quarters are adjusted free cash conversion was 47%.
Brad: Note that there was a one time $1.5 million distribution payment made to FTB capital that we discussed in Q2 of 2023.
Brad: Which reduced our free cash flow conversion by 4%.
Brad: GAAP net income for the quarter was negative $800000, which results in a gap EPS of negative one penny per share.
Brad: Similar to last quarter, we do not have anything significant to report with respect to our balance sheet or capital structure. We ended the quarter with approximately $33 million in cash and cash equivalents with no outstanding debt.
Brad: Our cash balance combined with $100 million of capacity on a revolver gives us adequate liquidity to support both are organic and inorganic growth objectives that we discussed at our Investor day in March.
Brad: Moving onto guidance I will reiterate the full year guidance, we provided in our previous call. As a reminder, that guidance included revenues between 200 $210 million adjusted EBITDA between 40, and $45 million and a free cash conversion rate between 50 and 55%.
Brad: For modeling purposes, we continue to expect stock based compensation to land between 19 and $20 million for the full year.
Speaker Change: With that we would like to open it up the call to questions. Operator. Please go ahead.
Brad: To ask the question simply press start and then the number one on your telephone keypad.
Brad: My first question is from the line of Michael <unk> with Morgan Stanley. Please go ahead.
Michael: Hi, Ron Thanks for taking my question Oh, I can now I'm curious, how you're thinking about resource allocation Wes.
Michael: The Salesforce Charlie you, obviously talked about.
Michael: Some of the different geographic revenue exposure, but I'm curious like ability to sort of talk on that depending on what you're seeing in various regions would be helpful.
Michael: Yeah, Hi, this is Neil.
Neil: Of the Salesforce right now, we're obviously looking to expand particularly in Europe, we see a lot of opportunity there in our core segments in the recent wins that we talked about on the call a few minutes ago.
Neil: You know <unk>.
Neil: A result of our continued emphasis in that region. Unfortunately, we're not doing that at the expense of other regions and so I would say.
Neil: In Asia Pacific without growing our investments in our Salesforce significantly obviously, you know from macroeconomic reasons that <unk> talks about things.
Speaker Change: Slow down a little bit there.
Neil: The us we're still pushing as we continue to grow into the sort of higher ACB more complex logic client segments. So very much a focus on North America, and Europe, and yeah continuing to invest.
Speaker Change: That's helpful. I appreciate it and nice to see that K P. I acceleration really across <unk> RNA C. V. I wanted to ask on the full year outlook I know, it's somewhat early in the year, but given the performance in the corner, particularly on profitability I was curious how you would frame.
Speaker Change: Previously provided outlet for us and whether or not you know the <unk>.
Speaker Change: Performance in the quarter, either leaves you Mark convicted and a 24 hour lock her potentially tracking towards the higher end of it. Thanks.
Speaker Change: Hey, Michael this bread I'll I'll take that you know what are the things that they mentioned on the call. We did have a few.
Michael: Kind of nonrecurring type things that helps us on profitability and a quarter I mentioned that in the call specifically.
Michael: Thought of that I think first quarter and is a little little early to declare victory. So we look good we liked the way the trends are playing out, but we're a little bit cautious on a couple of little things I mentioned around.
Speaker Change: Where we saw absurd and some other things come into the first quarter, but we feel really good about our guidance.
Speaker Change: For the full year.
Speaker Change: And we're just gonna see how that plays out but we just wanted to be we don't Wanna get ahead of ourselves as early in the year.
Speaker Change: Makes sense thanks, guys.
Speaker Change: Your next question is from the line of Dillon Becker with William Blair. Please go ahead.
Dylan Tyler Becker: Hey, guys, it's safe hundred gallon.
Dylan Tyler Becker: Looking at that ACB metric, giving you guys did pushups during much larger asset managers, what's the importance of these customers and how should we expect the balance of ACB grilled first maybe new logo ads going forward as it can be fairly balance given the long tail opportunity or what's the right way of thinking about this.
Speaker Change: Hi pass over here so.
Speaker Change: Of course necessarily as we will upstream and sell it to more complex larger phones institutionalists managers.
Speaker Change: <unk> <unk>.
Speaker Change: Encourage you and everyone else to think about <unk> in a very.
Speaker Change: A more granular weight.
Speaker Change: You have a large chunk of customers steps.
Speaker Change: About 500000, but a lot of our plans.
Speaker Change: $250000.
Speaker Change: A year or less.
Speaker Change: So.
Speaker Change: That portion of your portfolio.
Speaker Change: Overtime will shrink, but it will shrink disproportionately and so the idea is the averages are sort of difficult to interpret it's across the entire clan basis. So we are very focused on growing the portion of your portfolio.
Speaker Change: With larger clients leather in this particular case one of the.
Speaker Change: Reasonable JCB walked up is because some of the clients with much Lori <unk> insurance and of course mathematically yields higher activity as well.
Speaker Change: Okay awesome. Thanks for color and then if I could squeeze in one more just thinking about the partnership ecosystem angle as you expand your value proposition and address more components of these traditional at the manager workflows Uhm I'm wondering how you guys think of leveraging this channel to support incremental capacity our values.
Speaker Change: Services, they can offer our customers to different integration.
Speaker Change: Great questions. So a couple of things I'll say, yeah, maybe.
Speaker Change: Can chairman here so.
Speaker Change: Right.
Speaker Change:
Speaker Change: <unk> <unk>.
Speaker Change: Those relationships.
Speaker Change: Us given.
Speaker Change: Different vintages plans.
Speaker Change: Plans to us and vice versa.
Speaker Change: And other than the other way, we think about it is when we actually with Covid joins Bailey proposition with another.
Speaker Change: Solution provider and we go to market together and enhance or essentially Billy proposition for the client.
Speaker Change: Abundance of examples there we're talking about some some incentives to.
Speaker Change: Help us sell contents help us in the risk models.
Speaker Change: Hello, <unk> data and vice versa, we've seen opportunities where.
Speaker Change: We have those partners or.
Speaker Change: They provide certain capabilities like optimizers risk models performance of tradition, where these declines that still live in this data is compartmentalize technology World, where we can bring to the table.
Speaker Change: Yeah, maybe just to add to that this is Neil I'll give you a couple of examples here. So this company called fund apps that we have a partnership with they provide trades reporting to regulators. It's a great example of leveraging sort of you know the partnership with them to quickly add capabilities that we don't need to build ourselves and that we can quickly.
Speaker Change: Provide to walk clients, but with a deep integration you know.
Speaker Change: Clients would much prefer to use industry tested data pipelines and connections and not have to manage so there are a myriad of numerous you know data <unk> connection's themselves. Another Great example is backstop, it's CRM solution used within the hedge fund community that we've integrated into the platform. So we have a number.
Speaker Change: There are others like this and we're we're investing in building mall because we think this is a really sensible way to provide value to our clients.
Speaker Change: Alright.
Speaker Change: Your next question is from the line of Jeffrey Lane with Stifel. Please go ahead.
Jeffrey Parker Lane: Hi, Thanks for taking my question here. It's Parker you know you reference switching time and and costs being lower with infusion has that been the primary impediment for these asset managers that you're looking to convert in the past or is there other dynamics at play.
Jeffrey Parker Lane: So.
Speaker Change: Let me start with our usual session Neil will.
Neil: Compliments My my answer so the impediments.
Jeffrey Parker Lane: Many things right, both risk and cost of translation.
Jeffrey Parker Lane: When we when we talk to a larger clients, it's almost bed the pain that they currently incur a number by technologists is that they are doing a lot of bandwidth and they run.
Jeffrey Parker Lane: Should exceed their sort of concern about risk.
Jeffrey Parker Lane: Visibility into all around boarding process, then they just cannot help but make a choice.
Jeffrey Parker Lane: Decided to switch bolsa approach. This in a modular session. So in addition to our ability to on board plans.
Jeffrey Parker Lane: Incomprehensible.
Jeffrey Parker Lane: Sort of just the sandwich or would do a products kind of Lyndon extend approach, where we either on board a portion of their organization when it.
Jeffrey Parker Lane: It's broken down last request and product by Division.
Jeffrey Parker Lane: Then go horizontally or we start with portfolio management system that evolved traditional default approach and then we continue to integrate both up and down onto William messaging account, but.
Jeffrey Parker Lane: Switching costs are super important that we're investing in products and platform that enable us to.
Jeffrey Parker Lane: The data migration and the board.
Jeffrey Parker Lane: And.
Jeffrey Parker Lane: Much more efficiently and on the flip side using enabled clients to use executive the same tools to self service and do it themselves.
Speaker Change: Just to add to that Oh, like I would say that you know our our average implementation time over the past four quarters for clients, who lost you know switching or converting to infusion is range between seven to nine months, which you think is is pretty good. This obviously more work, we wanna do to bring that down, but it's worth it's worth mentioning that.
Jeffrey Parker Lane: For for clients, who are switching to nonsense companies just procuring hardware it can be 50% to 80% of that timeframe alone and then when you factor in the potential supply chain shortages, you know with chips and we saw this over the pandemic and now with the AI computing demands trying to just get the hardware to run this software.
Jeffrey Parker Lane: Cut off on each of the majority of that timeframe, obviously as as assassinated platform. That's how the challenge for us and our clients are able to reap the benefits by getting onto the platform sooner.
Jeffrey Parker Lane: Very interesting Neil maybe just to stay with you here you you called us some nuances in the APAC market I was wondering if you could go a layer deeper there on what those nuances look like and how they impact your view on the market opportunity and ignore importantly deals cycles that you're seeing in that region.
Neil: Well, let me first maybe make a comment just on some of the nuances I was referring to and then perhaps I'll I can talk more about the macro picture that we saw when we were together in APAC last week.
Neil: What we've noticed as we talk to clients in the region is that you know even just when you look at the way swap trades a finance their you look at some of the compliance rules, they're they're very different if there was one message that we heard loud and clear and we hear this from all European clients as well. It's you know the E. U is not one country in APAC is not <unk>.
Neil: Country, and so as we went across those regions and so they'll talk to clients in each region. We recognize that there are just differences in the way products trays and the way, they're they're financed we need to make sure. The system can handle so that you know, especially those who are using us for their accounting did not have to do a lot of.
Neil: Just once a month and to try and you know line their books relative to their custodians or or their prime brokers. Our admins. So you know those market nuances are a lot of the nuances I was referring to but I think your question is the right one which is there's also a sort of macro economic trend that we witness, particularly.
Speaker Change: In APAC and I'll hand, it over to I would like to to share his thoughts on that yeah. Thanks, So yes, sir.
Speaker Change: Margaret a consistent theme people on the back of a fundamental concerns about geopolitics, China economy's slowdown.
Speaker Change: Just being able to extract and protect the capital in the region, we're seeing capital leaving.
Speaker Change: Phone call.
Neil: Singapore, Italy.
Neil: And also from investment opportunity in perspective.
Neil:
Neil: Doesn't managers that typically kind of presented themselves as.
Neil: Sort of getting exposure to APAC once holistic region, they tried to differentiate within that bloc.
Neil: Focus on countries like India and Japan.
Neil: Versus just being a pilot levered to to China, and Hong Kong, However, having said that the seal see that the Hong Kong remains pretty strong operating base for many APEC centric managers as you know with you have a very strong brand equity.
Neil: Compounds specifically, but.
Neil: Reiterated multiple times.
Neil: We extend our presence around.
Neil: Around Hong Kong to cover.
Neil: Two color broadly and of course shifted our attention too.
Neil: The middle East is part of our EMEA portfolio.
Speaker Change: Got it thanks for the feedback here.
McNay: Your next questions from the lineup mcnay with it UBS. Please go ahead.
McNay: Great. Thank you a and he talked about 79 months of implementation time.
McNay: You know the fees associated with that.
McNay: Cost savings.
McNay: Has it changed much just give it some of the efficiency and bringing to bear.
McNay: Hi, Kevin can you <unk>.
Kevin: Question for the jury really well.
Kevin: Yep.
Kevin: Cost of the implementations I know you talked about 79 months, what's been the average implementation cost and.
Kevin: What type of cost savings your client seeing if you folks drive it more and more efficiencies.
Kevin: In the channel.
Kevin: Well look at them and implementation costs severely from clients clients again.
Kevin: The kind of stone to nine months, it's an average number as well if you have to appeal it back a little bit and see.
Kevin: <unk> complexity of different plans actually Covid drive that cause I don't think it's kinda just summed up two dollar amounts will look at the relationship with clients on a holistic basis. So it just becomes part of it.
Kevin: Probably emphasize the actual risk assessments.
Kevin: And to clients, sometimes it means that if they want to take a little longer instead of nine months that you didn't want to take 12 months just to make sure that this morning, they would've been as in production and they can go to life. They will take longer right. So when people think about Neil expensive lifetime thinking about the <unk> when they think about that.
Kevin: Portion.
Kevin: A lot of different things et cetera into it as hardware software.
Kevin: Datasets, how how much.
Kevin: How much data you need to actually migrated from the legacy systems to work with modules, who wants a migraine. So it's a multi dimensional.
Kevin: Question, but we sort of price that elements over the.
Kevin: <unk> relationship with declines from <unk>.
Kevin: Elizabeth respect envelope and.
Speaker Change: Maybe the only thing I would add to what I think said is where we see the most savings for clients since it's often hard to tell exactly what the savings are because obviously.
Kevin: We don't get much transparency into what they're.
Kevin: No preexisting cost structure as well, but having been on the other side of the table I can tell you that like when a client adopt or portfolio management tools are all the management tools and our accounting tools. There are obviously going to see a much bigger say.
Kevin: Savings, because they're typically replacing three or more independent systems that they have to keep you know synchronized and reconciled and mutually consistent which they can then replaced with a single eyeballs fuel's all three of those key components. So there is obviously a scaling factor to those savings given you know.
Kevin: Pentagon, how wide a range of our products that they adopt.
Speaker Change: That's very helpful and then right.
Speaker Change: 600000 of our current savings.
Speaker Change: In the what.
Speaker Change: Exactly was that.
Speaker Change: Yeah. The biggest one had to do with the provision for receivables, we did a really good job and the last two quarters of 2023 with our collections.
Speaker Change: So that didn't translate into the calculations you use for your reserves. So we actually ended up in a in a credit position on our provision for.
Speaker Change: The quarter, that's actually reduced it we don't see that kind of continuing we're gonna go back to normal provisioning against are open receivables, which is a very small number but given the fact of how good. It was in Q3 Q for from a collection perspective it actually.
Speaker Change: Took us from a debit to our credit position in Q1, I just don't see that recurring so we wanted to call that out.
Speaker Change: Thank you.
Speaker Change: Your next question is from the line of let's say go with.
Speaker Change: Mhm.
Speaker Change: <unk>.
Speaker Change: The <unk>.
Speaker Change: That.
Speaker Change: Already possess quite a lot of <unk>.
Speaker Change: To cover traditional asset managers, and I'm sort of those asset classes, but did you say you were saying that you need so the product filled out or investment decision making processes.
Speaker Change: So could you maybe talk about how the product build out here and when do you think you can meet those customer needs.
Speaker Change: Yeah sure actually I will.
Speaker Change: Let me also do dive into that I would say there are two elements here alright, and just the broadly one thing is investment decision, making part that you just mentioned that has to do with.
Speaker Change: On one hand absorbing information about expected returns both the best of class level and at the security and instruments level and incorporate that into a portfolio construction and then translating that into a portfolio implementation stuff, which is as we discussed many times. This is what portfolio Workbenches all about.
Speaker Change: Right now it's been released in.
Speaker Change: First first version, where you basically can do heuristic.
Speaker Change: Portfolio construction at the park and Great and then you.
Speaker Change: You apply compliance rules and then rebalanced the portfolio coordinate with the next stage will be a little more sophisticated than the benchmark will be taken into account. So you can actually rebalance portfolios relative basis, and then we will have all the process too.
Speaker Change: Allow for more quantitative driven systematic portfolio <unk> with constraints. So this is sort of portfolio construction and then the portfolio implementation piece of dimension has to do with just a scale in the system. So that we can apply and much more complex.
Speaker Change: Pre enforce strict compliance rules much more complex compliance logic and much more complex and high level scale allocation capability, where we will just dealing with throughout the allocation for like 20th somebody's for a hitch fun, but with like 50000 come with thousand accounts each of which can.
Speaker Change: Its own investment guidelines constraints.
Speaker Change: And so on and so forth so on that front, we definitely have.
Speaker Change: A lot of work to do but.
Speaker Change: The good news for US is that architecture or the system is set up very well. So this is just a matter of us invested time money and.
Speaker Change: Making making the brunt of that yeah, I think I'll like you're covered most of it the only the only things I would add I would say is you know, especially in the institutional segment, we have a lot of demand for institutions to be able to do a lot more self service on the platform today, there are a number of things.
Speaker Change: Things for example, in our compliance suites, where to make a change you have to login ticket with our support desk and we make the change for you you know larger more complex clients want more control over that themselves. That's something that we're starting to roll out and then just maybe too quickly address your question on the timeline aspect.
Speaker Change: You know as we've mentioned the the fact that we do weekly releases, we're pushing these things out incrementally all the time I mean, it's gonna take US a couple of years for you know for us to be able to say, we've you know we handle every single nuance of every single market for every single client type, but but the good news is as we.
Speaker Change: On board more clients.
Speaker Change: Tends to drive our prioritization Q cause we want to make sure that we have the functionality that they need to go live and then as we add those features to the platform other clients get the benefit of it and it makes the platform more attractive for future clients to be to be onboard it too.
Speaker Change: Great. Thank you for that Neil and Uhm <unk>, if I could maybe ask you about the comments you made regarding the elevated churn in the first quarter does that impact your outlook for the normalized turned level that you mentioned earlier in the year I think it was about.
Speaker Change: Four to five per cent.
Speaker Change: No it doesn't <unk>.
Speaker Change: There's normally a seasonal patterns sure in Q1, yeah that tends to be the highest turned quarter is customers Gotta go through the previous year, and who survived and who doesn't.
Speaker Change: There was a little higher but what I'd call out the the the account number was a little higher than we anticipated, but the impact wasn't.
Speaker Change: As much as you would've been associated with those count because what turned out was really small clients. So it's a it's a combination of who chern and then what's the impact of that shirt. So that's what we're watching closely we just wanted to call. It out to say, there's something we're looking at.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you Alex.
Gabriela Borges: Your next question is from the line of Gabriella gorgeous with Goldman Sachs. Please go ahead.
Gabriela Borges: Hi, good morning, Thank you, perhaps a link or a meal alright.
Gabriela Borges: How do you think about the monetization strategy around <unk>, how much does it help you and kind of anything else I just when you plan how much of that I can check <unk> I'm just pulling up at how do you think about charging for that.
Speaker Change: So well. Thank you very much this is actually the topic does your for us.
Speaker Change: Fusion. So as you know traditionally our pricing model has has been very simple and sort of generic right.
Speaker Change: It's basically price per license priced received and then we make my name's broker connection so as we reach the blood for it would make it.
Speaker Change: More sort of I would say a multi layer right we need to strike a balance.
Speaker Change: Between the fact that we have like assess.
Speaker Change: Technology set architecture, driven assess model with the fact that now instead of just.
Gabriela Borges: Making the system better we actually developed in premium features and differentiated features that.
Gabriela Borges: Actually not clients.
Gabriela Borges: Use or not not the whole plan to actually evaluate not all plans.
Gabriela Borges: Be willing and able to pay for.
Gabriela Borges: We are kind of doing a wholesale revision or probably I should we go to the market and the particular before for larger class. So this this is a big big topic of discussion for US. It definitely will result in one way or the other it will result in a more granular bryson it and more.
Gabriela Borges: Is better economics for for Us, but also better alignments for the clients right because we we can simply just.
Gabriela Borges: Continue to make the system better without.
Gabriela Borges: Reflecting it in Oregon.
Speaker Change: Maybe it was just <unk> to add to that in the more immediate sense.
Speaker Change: The new features in the portfolio workbench are helping us win your business that we wouldn't normally when if we didn't have this functionality. So that's already contributing to to our revenue story, it's also giving us the opportunity to expand our relationship with existing clients. So we've had clients look at the functionality and then want to.
Speaker Change: To add that to.
Speaker Change: They're sweet and thus that adds more seats within that client and thus also drives additional revenue and then obviously for US. We're also getting tremendous validation on the product market fitful that product, which you know while that in itself doesn't directly contribute to revenue. It gives us tremendous conviction that were move.
Gabriela Borges: That product in the right direction and.
Gabriela Borges: Making it fit for purpose for obviously this larger segment that we're growing into yeah. Just gabriella for clarity of this is an old allergic to I just got the meal just felt line if not portfolio mortgage specific or business and I hope that some of your students.
Gabriela Borges: Across across the board we go all are.
Gabriella: Differentiated protocol brings in the pipeline.
Gabriela Borges: Generic so the same framework will it should apply whether we price.
Gabriela Borges: Functionality.
Speaker Change: Right now thank thank you I appreciate that that's all.
Speaker Change: <unk> brought on how to think about it now.
Speaker Change: Nowadays.
Speaker Change: <unk> C company.
Speaker Change: <unk> I'm trying to <unk> trying to get on more on the back half of the year is that.
Speaker Change: That's something that you're absorbing are having served on for the last couple of years with your pipeline and how to think about how you think about changing seasonality.
Speaker Change: <unk> email hot market.
Speaker Change: Yeah. That's a great question. There's there's if you think about it let's talk about it in the book back book Delineation, we've used before in the back book you don't see much seasonality other than what I mentioned Q1 tends to be the quarter, where customers kind of reassess their cost structure, whether it's they survivor.
Speaker Change: Which is the churn comment I made but also whether they do some downgrading along the way that typically is a little bit more heavily weighted in the first quarter, even in the first half of the year.
Speaker Change: When you go to the front book, there's definitely some seasonality there you tend to see less.
Speaker Change: <unk> booking in the queue for I'm, sorry, Q1.
Speaker Change: His customers are coming out of the prior year and then that begins to pick up more in the back half yep, but what Neil mentioned earlier when you get into some of the implementation times, they get longer with the asset managers. It begins to monetize for us a little smoother. So what you don't see is necessarily a bunch of bookings in the second half of the year.
Speaker Change: Revenue gets accelerated in the second half of the year because the revenue from those longer term booking clients that take longer to board tends to drag out you know for what we've mentioned 79 months. So while there's some seasonal pattern in the booking itself. How it affects revenue is is not near a significant.
Speaker Change: I would like to actually advertise that because this is <unk>, how we think about it.
Speaker Change: Poor basis.
Speaker Change: In the past it says analogy is being more related to the catch France to launches to closures to.
Speaker Change: Capital flows in and out of the space.
Speaker Change: As we go into more traditional segments.
Speaker Change: What branch was described I would expect to be prevalent framework for us from seasonality perspective is bookings sort of stagger, the onboarding will stagger as well right and so once we dial in and perfect that machine.
Speaker Change: Hopefully the onboarding themselves will start flowing up to the revenue and we will talk regarding bookings into revenue in the way that is much smoother and kind of smooth smooth as those seasonality patterns. If you will is part of our revenue.
Speaker Change: Thank you okay.
Speaker Change: Mmm takes care of it.
Speaker Change: Your next question to lineup co G E <unk> with the Bank of America. Please go ahead.
Speaker Change: Yeah, Hey, guys. Thanks for taking the questions I wanted to circle back on the guidance you know the reiteration of the guidance range of 200 and $210 million for this year and the reason why I ask is the guidance tells really two stories here you know the low end of the Guy grilled deceleration story for 2024, while the high end is a much more attractive story.
Speaker Change: Celebration so as.
Speaker Change: Look at the key metrics here.
Speaker Change: Our and our our clients an average contract out maybe help us.
Speaker Change: Pick one or two of those metrics is key metrics going forward to help us trying to where he could end up in the 20th 24 guidance.
Speaker Change: Hey coach this is Brad I'll take that up you know, it's exactly why we put a range on it you know they're still there were one quarter and we still got three quarters left to play out so we want to.
Brad: Watching a lot of things were watching our booking patterns were watching the backbone for watching upfront book revenue production.
Speaker Change: Yeah, any one of those in combination.
Speaker Change: To give some insight on full year a R. R. As a good number to look at you know that's a.
Speaker Change: Good indication of how the book is performing ended up itself.
Speaker Change: But you know, we're a little bit noncommittal at this point to kind of place it in the range or we certainly wanted to make sure. We reaffirmed our guide to to provide confidence with this group that we do feel comfortable with the range. We provided but we still got a long way to go so I would look at our our I would look at the patterns in N D. R. I mean, that's probably the.
Speaker Change: Two best numbers I would look at both in your seat.
Speaker Change: Yep Nope that makes sense. Thank you for that and a follow up and maybe.
Speaker Change: Just kind of digging in deeper on the demand environment, just from a holistic level, but let's say the market.
Speaker Change: Are very similar.
Speaker Change: What we've been seeing over the past six months and will just project that out over the next 24 months does that potentially change the way you think about the growth algorithm for the business.
Speaker Change: No.
Speaker Change: No not at all I mean.
Speaker Change: <unk> the same approach the same machine you have we.
Speaker Change: We discuss it.
Speaker Change: Multiple occasions, basically climbed redemption, plus Smith, and that's new growth and we just have to get better at.
Speaker Change: Regaining lines and captured more than honest with the clients and that will.
Speaker Change: Get us to rule of 40, combined with new salesman institutional asset management market, it's relatively simple rules that'll go right.
Speaker Change: And maybe just to add we're seeing clients still around the fee pressure, they're still under budget constraints and so when they look at their total cost of ownership of their systems, they're still looking for ways. They can operate their platform more efficiently and obviously infusion gives them an option to do that in a very different way and so you know.
Speaker Change: We don't see that changing in the foreseeable future and we think that that works well given our business model, Yeah, and then they'll look at our darker color.
Speaker Change: <unk> broke mix.
Speaker Change: Evolves over time and covered balance launches versus conversions like did this quarter.
Speaker Change: Pretty goods or it was in terms of launches there was nothing to be ashamed of the control that market space, we defend the market share them with grilled market share their although it was you know all of our strategic direction is to extend around that APEC slowdown.
Speaker Change: EMEA reaccelerated so.
Speaker Change: This diversification benefit that <unk>.
Speaker Change: <unk> strategy that delivers you know kinda world potentially pull a far can never listened woods.
Speaker Change: Go that of course with all live through 98, 2000, Nathan Covid environment as.
Speaker Change: As we discussed, especially in those situations often times, it's a great opportunity for infusion to Cheyenne capture the downside convexity.
Speaker Change: File of our business.
Speaker Change: Got it thanks, thanks for taking the questions.
Speaker Change: Mmm.
Speaker Change: And at this time there are no further questions I will turn the call back over <unk> for any closing remarks.
Speaker Change: Well. Thank you so much for for insightful questions for the framework for sort of keeping us in our tools.
Speaker Change: Focus.
Speaker Change: On what matters will of course remain very excited about what infusion is what is going to be and you would feel strongly that we are differentiated visa via a competition.
Speaker Change: There was a lot of work to do for us to get your full potential what what this company can be but we absolutely focused on creating shareholder of alien making sure we deliver on promises to the shareholders.
Speaker Change: This concludes today's the first overdraft <unk>.
Speaker Change: 24 earnings Conference call. Thank you for joining you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
Speaker Change: [music].