Specialist
Former executive at Enfusion LLC
Agenda
- Measuring levels of market saturation
- Enfusion’s customer expansion opportunities beyond hedge funds
- Financial health assessment, highlighting profitability growth
- Growth outlook and potential of maintaining high-teens or twenties growth
Questions
1.
Could you give an overview of Enfusion’s overall operating environment and pull 2-3 key trends or drivers you think we should pay attention to when looking at the business and the investment management industry more broadly?
2.
Could you walk through the key business segments and revenue streams for Enfusion and how these have evolved over the last couple of years?
3.
When we’re thinking about revenue contribution percentages, how should we be thinking about across the four segments you outlined? For which have you seen contribution grow vs come down in the recent months and years?
4.
When thinking about Enfusion’s future growth drivers, you said that the software and fixed line are obviously driving most of it right now. Do you foresee that being the case in five years or is there another segment in there where you say, “Analytics is a pebble now but could become 10%, 15% or 20% of the business”? How are you thinking about contribution expectations?
5.
You talked about how Enfusion has now created an end-to-end solution, starting on the back end to the front end, which was unique. The company saw very strong cross- and upselling throughout the pandemic and had retention rates in the 120% range. That’s dipped back down now, but how are you thinking about the cross- and upsell opportunity and the ability to get people to utilise its entire platforms rather than disparate solutions moving forwards?
6.
You mentioned that Enfusion needs to get clients to do more managed services and it’s a really nice add-on, so the cross- and upsell. Is this an Enfusion problem of getting people to do this or is it a more general industry challenge that people don’t want to outsource this type of work?
7.
Cross- and upsell is obviously a key growth driver for Enfusion as it continues to invest in its solution. As you discussed, the company made different changes to its business and tried to become a more robust platform. Do you think this is ultimately going to work out? You said it’s not doing a great job, and even you as an expert in this couldn’t really execute it given its go-to-market strategy and offering. Is this something that within a couple of years you’re going to say, “Hey, it has figured it out. It has fixed the go-to-market and its net retention is spiking back up”? Alternatively, was that high NRR [net revenue retention] during the pandemic artificial and you don’t expect to see that in the future?
8.
We’ve talked about the different business segments, and profitability has obviously become a heightened concern or focus for most companies in 2023. Is there any particular segment that you view as most profitable that you think Enfusion is going to put particular investment into or emphasis on growing over the next couple of years?
9.
You’ve mentioned twice that Enfusion can and should raise prices. Why is that a lever that the company hasn’t pulled yet, and how much pricing power does it actually have? Could it raise prices by 1% or 2% across the board or drive upper-single-digit growth just by raising these prices?
10.
Could you outline the competitive landscape across the different segments? How has Enfusion’s positioning trended over the last couple of years?
11.
We’ve talked about Enfusion being a more robust platform. Would you put anyone else in that category as a full end-to-end offering, so front and back end, and across the different segments that you’ve discussed?
12.
You mentioned that, in 2015-20, Enfusion’s product-led growth is what helped it to become one of the leaders within the industry. Would you still say the company is leading in product quality, or have companies much caught up within specific niches? Could Enfusion be at risk if we saw a merger of a couple of solutions that came in and became a suite player, as Enfusion is?
13.
Have we seen any mergers between a solid front end and a back end? If not, why not? It seems to be a pretty logical case of, “Why don’t we join forces to take down Enfusion?”
14.
Vendor consolidation is an idea that a lot of people talk about. What has that done for Enfusion in terms of win rates? More generally, how would you say the company’s win rates have trended over the last 12-18 months or so?
15.
How many of the players we’re discussing are getting invited to the RFPs [requests for proposal]? Is it just a couple or a ton, and they’re having to battle more and more as people enter this market?
16.
Regarding growth opportunities, you talked about how Enfusion focuses on firms with under USD 5bn AUM [assets under management], particularly under USD 2bn. What’s the opportunity to push above that? How does that change the competitive landscape and product requirements? Could you elaborate on that credit opportunity and why that hasn’t become a more relevant revenue stream for the company?
17.
Enfusion has seen pretty steady growth. The company has obviously seen a deceleration from the 30% and 40% growth during the pandemic, just to achieve 20%, but is looking at getting back to around 23-27% in 2024. What’s fuelling this growth re-acceleration? How are you thinking about growth rates? What are your expectations for them over the next 1-3 years or so?
18.
When we think about the growth opportunity and the levels of saturation within Enfusion’s competitive environment, are there still untapped markets? Alternatively, is it more about capturing market share from different vendors and other competitors at this point?
19.
Obviously, as growth has slowed for many companies in 2023, profitability has come more into focus, and Enfusion has seen some improvement in free cash flow and net income. How much room do you think there is for additional margin expansion, becoming a highly profitable business vs just growing marginally, and also trying to fuel growth and figure that out further down the line?
20.
It seems that there is additional growth opportunity, profitability levers to be pulled and a healthy pipeline of opportunities to go after. Enfusion had the downturn in 2022, which a lot of software companies had. The company hasn’t seen the bounce-back in 2023 so far and is down 25% YTD. What are investors fundamentally seeing that isn’t exciting them about this company, or that they believe is the reason it should be underperforming the broader tech market by 35-40% YTD?
21.
You mentioned that Enfusion would be a potentially interesting acquisition target at the right valuation. Who would you look to as someone that would buy the company? Which elements of the business do you view as the most attractive elements that someone could bring in?
22.
We’ve touched on the macro environment and the impacts it has had. Are there any specific ones that you want to highlight, whether headwinds or tailwinds, that you think are going to impact Enfusion’s trajectory over the next 12-18 months?
23.
What is your outlook for Enfusion? Is there anything else you want to cover that you don’t think we’ve touched on enough?
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