Enfusion Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 12, 2024

There are 9 speakers on the call.

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Infusion's 4th Quarter and Full Year 2023 Earnings Conference Call. At this time, all lines are being placed on mute to prevent any background noise. Following the speakers' remarks, we will open the lines for your questions.

Operator

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.

Speaker 1

Good morning and thank you, operator. We welcome you to infusion's 4th quarter and full year 2023 earnings conference call. Hosting today's call are Oleg Malchin, Infusion's Chief Executive Officer Brad Herring, Infusion's Chief Financial Officer and Neel Pilar, Infusion's newly appointed Chief Operating Officer. Please note, 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.

Speaker 1

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 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.

Speaker 1

Reconciliation to the nearest GAAP 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 to begin.

Speaker 2

Good morning, and thank you for joining us today to discuss our results in the Q4 of 2023. I'm honored to be completing my 1st full year as Infusion's CEO and thrilled to welcome Neel Pawar, our new Chief Operating Officer to the Infusion team. Neel 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 3 months, Neil's presence and enormous enthusiasm has been felt across our entire organization. We're sure Neil will be instrumental in helping us scale up the business and expand our market footprint with global enterprise clients.

Speaker 2

As for the Q4, I am pleased to announce that Infusion's business achieved several milestones and we saw the economic profile of our business continue 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. To that end, we continue to enhance our world class end to end platform that empowers all workflows. 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 mode.

Speaker 2

Our strong financial results this quarter reflect disciplined strategy execution and cost control. Several of our wins this quarter validated Fusion's strategy as we continue to move up market. We saw a combination of new client wins as well as conversions from our biggest competitors across several TAM segments and geographies. Now, let me walk you through some of our key financial metrics in the Q4. Our economic trajectory inflected upward in Q4 'twenty three as we reported $46,500,000 in revenue, delivering 15% revenue growth year over year.

Speaker 2

4th quarter adjusted EBITDA totaled $9,800,000 translating into an adjusted EBITDA margin of 21%, representing a 4 36 basis points expansion compared to the same period a year ago. This outcome is attributable to a combination of disciplined expense control and improving scale. From a full year perspective, in 2023, we reported $174,500,000 in revenue, delivering 16% growth year over year and $31,700,000 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 a challenging and turbulent industry backdrop throughout 2023, we saw growing momentum in Q4 that led to 45 new client additions, our biggest quarterly client win since the Q2 of 2022. This brings our total client count to 865, a new firm record.

Speaker 2

Our ACV increased to $219,000 another firm record, representing a 1% quarter over quarter and 6% year over year growth. Our progress upmarket continues to broaden our client base and has contributed to our continued ACV increase. Let me provide you with more details on our client wins this quarter. 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.

Speaker 2

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 $10,000,000,000 of internally managed AUM to the In Fusion platform. Instead of upgrading its legacy OMS, ERS will utilize In Fusion's full front to back capabilities. Additionally, ERS will take advantage of our portfolio workbench tool for quarterly rebalancing functionality. This is an exemplary strategic win for our business, particularly as we continue to grow and service pension advisers. We remain keenly focused on taking market share.

Speaker 2

I'm also thrilled to announce that Infusion signed Mariner Investment Group, a prominent alternative investment manager with $7,000,000,000 AUM. 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 Mariner 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 space. In Europe, Middle East and Africa, revenue grew 24% year over year, reflecting our continued expansion in Europe.

Speaker 2

We signed our 1st asset manager in Belgium in a 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 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 backdrop. Our growth in APAC was driven in part by client conversion from an asset management arm of a large corporation headquartered in South Korea. We were able to take this business away from one of our biggest competitors.

Speaker 2

This client win is a testament to our focused product strategy, which has enabled us to displace established competitors upmarket. Edging out 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 Neel Povar, our new Chief Operating Officer, to provide updates on our platform capabilities and client services.

Speaker 1

Thank you, Oleg, and everyone at Infusion for providing such a warm welcome to the firm. Before we discuss service, a few investors have asked what led me to join Infusion. 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. Infusion was designed as a multi tenanted SaaS platform from day 1 and since then has onboarded over 8 60 diverse buy side clients.

Speaker 1

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. While smaller clients have continued to be on boarded 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 established 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.

Speaker 1

On this note, during the Q4, we successfully completed the 2nd phase of implementation for a hybrid asset manager with over $30,000,000,000 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 had initially onboarded our order management system or OMS and then after OMS was complete, we then expanded to accounting.

Speaker 1

This is a good example of our ability to land and expand made possible thanks to Infusion'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 eliminated 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 SaaS models is that clients never again have to handle system upgrades. Clients of on premise vendor software are often 18 to 24 months behind versions. Infusion releases its software weekly.

Speaker 1

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 product, our recent rollout of Portfolio Workbench, which we announced in the Q3 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. It also provides our clients with the ability to leverage in grid portfolio editing and works in concert with our order management functionality.

Speaker 1

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 Q4. The continual focus on innovation is a core value of infusion 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.

Speaker 2

Thank you, Neil. I now want to share with you some market dynamics we observed over the last few months. Despite a very modest pickup in hedge fund launches the past several months, we delivered 45 new client additions, our largest client win in 6 quarters. This quarter demonstrates our diminishing dependence on hedge fund launch dynamics as we diversify across market segments and regions. Although larger and more complex investment managers have longer onboarding cycles, Our SaaS native architecture fosters collaboration with our clients and provides a framework driving more predictable and timely onboarding processes.

Speaker 2

As investment firms experienced additional cost pressures, we saw tailwinds for our business this quarter. We see the industry players seeking our best in class software platforms to lower their total cost of ownership and increase operational efficiencies. This is our sweet spot. We have proven that our SaaS native architecture is a sustainable competitive advantage, providing a natural platform in which workflows are powered by the same dataset in software versus our competitors' on prem or satellite models. Accordingly, we anticipate that our overall composition of client wins will continue to shift more towards conversions this year.

Speaker 2

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 flexibility to invest in our business, talent and partnerships. Our key focus areas for 2024 will be executing our product roadmap by expanding our platform functionality and deliver new capabilities and workflows for our clients with specific focus on traditional asset managers provide existing clients with the highest customer service, exceeding their expectations achieve another 100% success rate for new client implementations 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 non critical expenses, so we can continue expanding our adjusted EBITDA margins, while deploying capital into our platform and product to support business growth.

Speaker 2

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 infusion's 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 session hosted by members of our management team. Advanced registration is required and in person attendance is by invitation only.

Speaker 2

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 19. I will now turn the call over to Brad to discuss our financials.

Speaker 3

Thanks, Oleg, 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. For the Q4, we generated revenue of $46,500,000 an increase of 15% over the same quarter last year. Of 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.

Speaker 3

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 client base. 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 4 quarters with 65% of those bookings coming from conversions. 4th quarter ARR was $185,100,000 up 12% year over year and 4% higher than what we reported in the Q3. Starting this quarter, we're simplifying our discussions around NDR.

Speaker 3

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, 102%. This is flat to what we reported last quarter, but it's worth noting that our Q4 NDR was negatively impacted by nearly 1 full percentage point from the consolidation of UBS and Credit Suisse as customers dropped duplicative broker connections. The impact of this consolidation will be a headwind for NDR through Q3 of this year. For other items inside of NDR, up sales remain above the lows we saw in the Q2, while churn rates continue to decline.

Speaker 3

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 to 106% to 107%, implying an additional 400 to 500 basis points of upside as these measures return to normal levels. Our reported adjusted gross profit increased by 13% year over year to $31,000,000 This represents an adjusted gross margin in the quarter 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 1 percentage points of gross margin in the quarter.

Speaker 3

Adjusted EBITDA for the quarter was $9,800,000 up 45% compared to Q4 of last year. This represents an adjusted EBITDA margin of 21%, which is up over 4.30 basis points from the same period a year ago. The improvement was due to improved scale across our SG and A functions as well as some targeted cost reductions that were implemented throughout 2023. For the quarter, we generated adjusted free cash flow of 4,300,000 dollars compared to $5,800,000 in the same period a year ago. This brings our total adjusted free cash flow for the year to nearly $16,000,000 representing a 50% conversion rate against adjusted EBITDA.

Speaker 3

That compares to $6,200,000 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 $900,000 compared to $800,000 in the same period last year. Against our fully diluted share count of 127,800,000 shares, our current quarter net income results in a GAAP EPS of $0.01 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 quarter over quarter changes in our balance sheet or capital structure. We ended the quarter with approximately $35,600,000 in cash and cash equivalents with no outstanding debt.

Speaker 3

As we discussed last quarter, we've recently secured a revolving line of credit totaling $100,000,000 but as of year end, we had not taken a draw against those funds. Now I'll move on to guidance for this year. For 2024, we anticipate revenues to fall between $200,000,000 $210,000,000 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 $40,000,000 $45,000,000 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.

Speaker 3

The primary reason for the year over year expansion is related to the increasing scale benefits across our SG and A functions, offset by investments in our product and technology 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, our 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 between 50% 55%. There are also a few tactical items I want to pass along.

Speaker 3

1st, modelers should expect our stock based compensation for the year to fall between $19,000,000 $20,000,000 The increase over 2023 stock based compensation of $8,000,000 is largely due to forfeitures in the first half of twenty twenty three, as well as implementation of a revised incentive plan for 2024. 2nd, 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 and 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.

Operator

The floor is now open for your questions. Our first question comes from the line of James Faucette with Morgan Stanley. Please go ahead.

Speaker 4

Hi, everyone. It's Michael in Fontaine for James. Thanks for taking our question. Oleg, 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?

Speaker 4

It seems like net net things are a lot healthier than they have been over the prior 2 years. So I'm curious what you guys are seeing both in terms of magnitude as well as the composition of the pipeline? Thanks.

Speaker 2

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 launches over the multi manager, multi strategy platforms.

Speaker 2

We have 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 adds, we keep protecting our door from hedge funds in general and hedge fund launches in particular, But we keep our eyes squarely in the price 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.

Speaker 4

Got it. 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 were generally in that 40% to 55% range. You obviously alluded to some product investments that you guys are making.

Speaker 4

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 conservatively? Thanks.

Speaker 3

Thanks, Mike. I think there's 2 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 investments we want to make this year.

Speaker 3

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 the low end of that range is probably in the 35 range. It's probably more like 45 on the high end.

Speaker 4

Got it. That's helpful. Thanks guys.

Speaker 2

Thanks, Mark.

Operator

Our next question comes from the line of Dylan Becker with William Blair. Please go ahead.

Speaker 5

Nice job here. Maybe starting with Oleg 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 of standardizing processes, moving faster, 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 that product innovation and things that you can productize further in the future?

Speaker 2

Yes. 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 take this.

Speaker 1

Yes. So Dylan, thanks for the question. Look, I think when we're onboarding new clients, obviously, to the extent that there are clients that have features that they want 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 on board 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.

Speaker 1

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.

Speaker 5

Got it. Yes, that makes perfect sense. And then Brad, just thinking 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 contextualizing the aggregate business momentum and how that kind of fuels the outlook for acceleration here into 2024? Thanks.

Speaker 3

No, thanks. It absolutely is, Dylan. I think the nice thing for us is if you look at all of the momentum drivers on 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.

Speaker 3

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 into 2024.

Speaker 3

It's actually all three

Speaker 2

of those components contributing positively. And I will Dylan, I'll also add that we keep diversifying geographically. So whenever we see weakness in one area of the world or in one sector, We see that flag being picked up somewhere else, which allows for additional stability.

Speaker 5

Great. Thanks, guys. Appreciate it.

Speaker 3

And we'll talk 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.

Operator

Our next question comes from the line of Parker Lane with Stifel. Please go ahead.

Speaker 5

This is Matthew Kickert on for Parker. Thanks for taking my questions. To start, you talked about guiding to 106% to 107 percent net dollar retention in context of the 2024 guide. Can you talk about what is driving that increase and what went into coming to that number along with any churn baked into the guide? Thank you.

Speaker 3

Yes, sure. We'll go into this actually a little bit more next week, but to give a little bit of flavor for it. The improvement is coming from a couple of areas. One is our net organic growth. 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.

Speaker 3

We saw customers very hesitant to add seats as their books grew internally. 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 2021 and 2022 levels. With respect to churn, it's a similar story. We did see churn pick up in the middle part of 2023.

Speaker 3

And subsequently, we've seen those churn numbers fall off again as you get into the back half of twenty twenty four. Normal churn us will run-in the 4% to 5%. But keep in mind, about 3% to 3.5% of that is involuntary. It's just hedge funds either not funding or not launching or coming unwound and not redeploying those funds. So we'll talk about that more next week.

Speaker 3

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 going to help us.

Speaker 2

And just one more addition to that. The quality of the book is we're seeing quality of the book is 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 do understand what they're looking for, creating solutions that being very targeted with our onboarding process. And at the end of the day, when clients do go live, there is 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.

Speaker 5

Okay. That makes sense. And secondly, 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 is it purely better macro and a better mix of offered solutions?

Speaker 2

We just kept pressing. We didn't do much differently at 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, South Korea, in Belgium, in Australia, in Singapore. I'm just thinking about how we kind of position the business.

Speaker 2

We're following the capital. And 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 market to understand what we're doing and filling up those gaps. And so nothing really changed. We're seeing balanced inflow, both from launches and from conversions. And we just keep executing what we set out to do over the last couple of years.

Speaker 5

Terrific. Thank you.

Operator

Our next question comes from the line of Aleksei Gogolev with JPMorgan. Please go ahead.

Speaker 6

Hello, everyone. Could I first ask you to provide an update on the dynamic that you saw in the U. S? We've seen a pickup in Americas, but can you maybe elaborate what was the growth in U. S.

Speaker 6

Only and maybe broadly how much of that growth came from the Utah Retirement System?

Speaker 2

Well, Utah Retirement System is just the recent client wins. So it's it did not reflect in our revenue for 2023, but the book of business in 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.

Speaker 2

On the other hand, we are 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 infusion that much. And so from that perspective, the balance between launches and conversions for us is pretty healthy. Our bookings, as you know, we don't discuss them. But as far as our portfolio revenue mix and bookings mix, it's still very well diversified.

Speaker 2

So there is we don't see any lumpiness in that from that perspective, if that's what you're asking for.

Speaker 6

Okay. Thank you. And in terms of the platform revenue growth, which was below 14% for the 2nd quarter in a row, With your increased efforts moving up market, do you anticipate greater share of managed services in your 2024 guidance of 17.5% at the midpoint?

Speaker 2

We don't. 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 my 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. It's just part of the package we're offering to clients.

Speaker 2

What we do do is we invest relentlessly back into the platform to make sure when we do deliver managed services, it does come with 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 we track. 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.

Speaker 6

Thank you,

Operator

Our next question comes from the line of Koji Ikeda with Bank of America. Please go ahead.

Speaker 7

Hey, this is Natalie Howe on for Koji. I wanted to ask about your strategy for M and 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?

Speaker 2

Great question, Nathalie. Thank you so much for it. So we obviously are watching macro environment and only to the extent that it creates opportunities. There is a pretty decent we still keep seeing 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 companies with product that is relatively raw, but already captured hearts and minds of certain part of the market. And so we're looking at relatively wide range of M and A opportunities.

Speaker 2

As I mentioned before, for us, it's relatively high hurdle rate to acquire something just because, as you know, this is our focus to make sure that our SaaS 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 supplements our current technology functionality very well. A couple of areas, as you know, which we focused on as far as our total addressable market is concerned, we do not have strong capabilities in its private markets. And that's where we think opportunities are opportunities exist.

Speaker 7

Got it. Thank you. Appreciate the color.

Speaker 2

Of course.

Operator

Our next question comes from the line of Gabriela Borges with Goldman Sachs. Please go ahead.

Speaker 8

Hi, good morning. Thank you for taking the question. I have for Oleg or for Neil. I'd love to follow-up on the product roadmap comments. 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 want to embed in the platform and is leverageable across your entire initial base?

Speaker 1

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.

Speaker 1

They would much rather 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 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 Crowds effect of everybody contributing to a common multi tenanted platform.

Speaker 8

That makes sense. Thank you. And the follow-up 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. How do you think about the normalized growth profile of infusion over a medium term to long term timeframe?

Speaker 8

And I imagine that you've done a fair amount of work on this head of the Analyst Day too, so would appreciate whatever comments you're willing to share at this time.

Speaker 3

Gabriel, this is Brad. I'll take that. 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, what drives each.

Speaker 3

So look forward to having that conversation on Tuesday next week.

Speaker 8

Sounds good. Thank you for the color.

Speaker 2

Thanks, Gabriela.

Operator

That concludes today's question and answer session. I would now like to turn the call over to Oleg Molchan for closing remarks.

Speaker 2

Thank you all. I appreciate all the questions. We're looking forward to hosting every one of you next week on March 19 in Fort Lauderdale on our Investor Day.

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Earnings Conference Call
Enfusion Q4 2023
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