Enfusion, Inc.

I would now like to turn the call over to Ignatius Njoku, Head of Investor Relations, to begin.

Thank you. Before we begin, I'd like to remind you that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC and are available in the Investor Relations section in 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. Reconciliation to the nearest GAAP measure can be found in today's earnings press release, which is available on the company's website. Hosting today's call are Thomas Kim, Infusion's Chief Executive Officer, and Steve Dorton, Infusion's Chief Financial Officer. With that, I'd like to turn the call over to Thomas to begin.

Thank you for joining us today for our fourth quarter earnings call. I'm pleased to announce that we delivered a strong quarter. We exceeded our revenue growth expectations and continue to build on a sustainable foundation of high growth, quality profitability, and high yielding investments that support our growing market opportunity. Equally, we closed out the year with an accelerating performance that validates the resiliency of our business model. Before I go over results, I would like to take a quick moment to highlight some of our key achievements in 2021. First, we successfully transitioned to a public company which allowed us to raise capital to fuel future growth, as well as improving our visibility with large institutional asset managers. Second, We reported annual recurring revenue growth of 36% and added 229 new clients, exiting the year with a total of 734 clients globally. Next, we continued to successfully unlock additional TAM, especially with institutional asset managers, where we saw 47% year-over-year growth and a growing pipeline. And given this growth in demand we're seeing in the market, we expanded our global reach with new offices in Australia, India, and China. Finally, from a governance perspective, we strengthened our board by adding two talented and experienced independent directors. I'm honored that they are part of the team and I'm excited to work with them. In addition to these key achievements, we want a number of prestigious awards and accolades that corroborate the progress we're making towards our vision. For example, fintech breakthrough awards recognized infusion for the best institutional investment solution i'm also thrilled that infusion was included in idc's financial insights top 100 fintech rankings for the first time and lastly i'm honored that infusion was named by builtin as one of chicago's best large companies to work for which is a testament to our people and culture as you can see Based on our achievements in 2021, we are doing what we said we would do, and the results are proof points for us to continue. I'm immensely proud of the hard work from our team globally and all that they have accomplished. In 2022, we intend to build upon our momentum to position Infusion for continued quality growth as well as profitability for years to come. To that end, we will continue to focus on transforming the global investment management landscape with our mission-critical cloud-native SaaS software and technology-powered services. Now let's turn to our results. In the fourth quarter, we generated a record $127 million in ARR, representing a strong year-over-year growth of 36%. Total revenue exceeded our expectations, growing 41% to $31.9 million with stellar growth across all our products. For the full year, we accelerated our revenue growth to 40% in 2021 from 35% in 2020, which supports the durability of our global subscription-based model. Given our solutions are mission critical, we continue to see momentum with hedge funds and meaningful growth across various client types, particularly demand and growth related to institutional asset managers, and certain adjacencies that I'll share more about momentarily. Our product demand generation and sales team delivered an outstanding quarter across the board, and as a result, we are seeing ongoing strength in our global sales pipeline. We added another 64 new clients during the fourth quarter, including notable wins across the board in APAC, EMEA, and Americas. This truly demonstrates the differentiated value we bring to investment managers by working with them to solve their evolving business needs and operational challenges with our proven cloud-native end-to-end solution. New wins were broad-based with healthy demand from fund conversions across institutional and alternative asset managers, as well as new fund launches. Of the new client wins this quarter, over 60% were conversions from legacy systems, which continues to clearly show our progress in taking share from incumbents and moving the industry toward cloud native solutions. Our powerful land and expand model has also enabled us to grab more client wallet share. Excluding involuntary churn, net dollar retention remains strong at 115% as existing clients continue to adopt more of our front, middle, back office solutions. Based on the growth we are seeing, we seized the opportunity to make profitable investments in hiring additional headcount in the fourth quarter to support onboarding and client services, expand our global footprint, as well as new product launches. Given these impressive results, I couldn't be more proud of the Infusion's team's continued success and execution, and I expect this momentum to continue through 2022. Now let me discuss a few exciting client wins that not only showcase why clients are selecting Infusion to be their partner of choice, but also highlight our ability to further penetrate our existing market, as well as unlocking new untapped adjacent ones. First, in the US, I'm particularly pleased with the increasing demand for our solution across all client types. I'm excited to announce that we signed another large multi-billion dollar distressed debt alternative investment manager. They selected Infusion because of our robust front office analytics, enhanced controls for front, middle, and back office, and efficient automation that improves speed to market for new fund launches. This represents a strategic win for Infusion for several reasons. First, it's a significant proof point on our ability to win business outside of the traditional equity markets. This win also highlights our approach in partnering with each client to build solutions that can also be delivered to the broader client community. In other words, we're delivering technology at scale. A large California-based $30 billion institutional asset manager is partnering with Infusion to replace their long-time legacy incumbent provider. They will utilize Infusion's order management system to streamline and improve workflows. They selected Infusion because of the white glove service we deliver, as well as our robust one-stop shop platform. In EMEA, We signed a leading long-only institutional fund manager with a long-term investment horizon in both private and public markets. This is another marquee win that further validates the flexibility of our solution suite to support investment managers that operate hybrid models. In this instance, the client is replacing their patchwork of disparate in-house legacy solutions with Infusion's platform to drive higher productivity through automation as well as realizing significant total ownership cost savings. In APAC, the investments that we continue to make are yielding meaningful results as evidenced by the following key wins. For example, we entered into an agreement with a Singapore-based long-only institutional fund with a 25-year track record in emerging markets. In this competitive displacement, The client chose Infusion to transform their technology infrastructure and improve productivity. With Infusion, they were able to materially reduce their technology footprint and add more functionality at a considerable lower cost. I'm also pleased to announce that a large institutional asset management arm of a leading Hong Kong listed brokerage firm is partnering with Infusion to modernize their various outdated in-house solutions, streamline workflows, and reduce their cumbersome and manual processes. The firm will be employing a full range of Infusion suite of products, including order management and accounting. Finally, a well-known Hong Kong-based global institutional asset manager with $10 billion in assets under management selected Infusion to upgrade their incumbent technology provider. We won this business through a highly competitive five-party bake-off process, yet again demonstrating the increasing customer demand for our best-in-class solutions. These exciting global wins are significant for us because they demonstrate our ability to further penetrate our current market, continue to move upstream by winning institutional asset managers, and win share in adjacent markets like private markets. Let's briefly discuss the progress we're making with our partnerships, products, and the Infusion Global client experience. We're broadening our partner ecosystem to drive meaningful improvement in the way clients interact with our software. In December, we announced a strategic partnership with Coinbase that allows investment managers on Infusion's platform to monitor their crypto assets and seamlessly trade cryptocurrency at Coinbase alongside their traditional accounts in a single unified view. I'm particularly proud of this partnership because it marks Coinbase's first connectivity with an order execution management system provider that establishes both financial information exchange and API connectivity. This relationship not only serves as another example of the breadth and depth of our product offering, but also demonstrates the openness of our technology and strategy to become the hub for investment managers across asset classes. Shifting to functionality, innovation has always been and we expect it always will be the hallmark of our value proposition for existing and prospective clients. Infusion has a track record of innovation that sets us apart from our competitors and allows us to maintain our technological advantage. For example, we introduced a new mobile platform in February of last year and recently made substantial enhancements, including more robust order and execution management functionality and full mobile access to all personalized client configured reports. As a result, we believe this gives investment managers a whole new level of unfettered access to markets and as such, are more empowered to make investment decisions regardless of physical location. Moving to market dynamics, we continue to believe the investment management industry is in the early innings of a digital transformation, and Infusion is leading this technological shift. Outdated systems and on-premise point solutions have created inefficient workflows for investment managers. This has resulted in investment managers spending considerable time and resources patching and maintaining these cumbersome and legacy workflows instead of focusing on generating alpha for their clients. Our cutting edge cloud native SaaS platform addresses these challenges through our end-to-end solution, unified under one dataset, enabling our clients to focus on what matters most, investment performance. The industry recognizes our capabilities as evidenced by accelerating conversions in our customer pipeline, as well as our increasing penetration of our 19 billion plus dollar total addressable market. We believe we are winning share in the market because of our state-of-the-art technology, cloud-native end-to-end platform, high-touch services, and partnership approach. We're seeing a lot of demand for our solution, and we feel we are still in the early stages of the market opportunity. Now I want to review our priorities for 2022. We plan to continue to focus on delivering high growth while maintaining attractive profitability. We plan to build on the success that we achieved last year and continue to create value for our clients, partners, and shareholders. First, we will focus on winning more market share within our current markets and further expand our global footprint in new addressable markets as well as unlocking new adjacencies, particularly with institutional asset managers and private markets. Based on our results, we are convinced the market is ripe for us to win market share with these managers which comes with meaningful benefits for us as well as our clients. For example, our global reach helps our multinational asset managers who are looking to enter into new countries and regions, and our deep knowledge from new verticals and adjacencies support institutional funds that offer multiple strategies. As a result, Infusion further expands its product portfolio and functionality, fortifying internal knowledge base and expertise, widens the competitive moat, and increases the TAM opportunities. Our second priority is to continue profitably investing in our product portfolio to accelerate innovation and launch new capabilities to the market that extend our technological competitive advantage. We are already seeing substantial return on investments that we've made in the past several years, supported by our healthy net dollar retention and ramping customer adoption. Investments in product and delivery will allow us to offer new products, services, functionalities, to our clients, but also drive more upsell opportunities. We're also focused on building out our best in class client experience across onboarding and customer service. Excellent customer service is a critical component that underpins our overall strategy to win and maintain clients. The market recognizes this capability, particularly with our high touch experience and infusion specific vertical expertise with traditional asset managers. Clients have signaled to us that they want more of this exceptional high-touch interaction, and we look forward to delivering new experiences to them. Finally, we plan to selectively pursue strategic acquisitions that add new TAM, accelerate our strategy and adoption, and support our ability to dominate in current and new markets. So to conclude, we are optimistic on our position in the market based on the tremendous opportunities we are seeing now and ahead, We feel that now is the opportune time to focus on accelerating our growth. Our healthy year-over-year expansion of net dollar retention and strong ARR growth supports our belief in the durability and resiliency of the market opportunity. This is evidenced by the quality of wins and conversions that we generated. At this moment, I believe Infusion is in a unique position in the market. We are investing for growth. We are one of the few SaaS software companies that has both strong growth rates and healthy profitability. Finally, I want to reiterate my gratitude to my colleagues for your hard work and perseverance and to our partners and clients who have supported us since our inception. As you can tell, we feel great about Infusion's position in the market, and this momentum and success gives us confidence for an even stronger 2022. I will now turn the call over to Steve Dorton to discuss our financials.

Thanks, Thomas, and thank you to everyone for joining us today. I'm excited to share our results with all of you. As Thomas highlighted, we finished the year on a high note as a public company, and we were pleased with our fourth quarter results. Total revenue in the fourth quarter grew 41% year over year to $31.9 million. Recurring revenue was $30.9 million, up 39% year over year. The robust growth is driven by a combination of continued strong execution, upselling existing clients, and increasing client demand for our end-to-end solutions. Fourth quarter ARR, our annual recurring revenue was $127.1 million, up 36% year-over-year from the year-ago period. As a reminder, ARR represents the annualized value of active platform and managed services subscriptions from our recurring software products and technology-powered services in the last month of the period. We continue to make good progress upselling to our existing clients who are finding value from adopting more of our products. Net dollar retention excluding involuntary churn was 115% in the fourth quarter compared to 120% in the year-ago period. Net dollar retention including involuntary churn was 111% compared to 115% in the year-ago period. As mentioned on our third quarter earnings call, the sequential decline in net dollar retention is due to higher comparables relating to the 2020 OEMS price increase implemented in November and December of the prior year. As Thomas commented, we signed 64 new logos in the fourth quarter, capping the year with 734 total clients. These new wins demonstrate the accelerating demand for our product and ongoing execution from our sales team. Fourth quarter gross profit was $21.7 million compared to gross profit of $16.5 million in the year-ago period. Fourth quarter gross margin was 68%, including stock-based comp, compared to 73% in the year-ago period. This was driven by our ramping investments in onboarding, client services, and higher managed services costs to capture market opportunity as discussed on the third quarter earnings call. Full year 2021 gross profit was $79.9 million compared to gross profit of $58.2 million in the year-ago period. Full year 2021 gross margin was 71% compared to 73% in the year-ago period. These increased investments are fueling higher growth delivering unrivaled client experience and nurturing long-lasting customer relationships. Turning to the remainder of our operating expenses, total operating expenses was $314.2 million compared to $28.4 million in the year-ago quarter. Please note, fourth quarter 2021 operating expenses included $294 million in stock-based compensation and related taxes. In addition, operating expenses from fourth quarter 2020 included a 16.9 million one-time bonus paid to key managers due to recapitalization. As Thomas mentioned, we continue to ramp investments to support our rapid growth, develop new product innovations, and enter new markets. In particular, we added headcount to support our customer acquisition strategy. We incurred expenses conjunction with further build out of our products and services capabilities as well as costs associated with public company operations in addition like many we are experiencing the impact of significant wage inflation particularly in technology a trend we anticipate will continue through 2022. income from operations was negative 292.5 million dollars for the fourth quarter compared to a negative $11.9 million in the year-ago quarter. Excluding stock-based compensation and related expenses, adjusted EBITDA was $3.2 million in the fourth quarter, compared to $5.7 million in the year-ago period. Fourth quarter adjusted EBITDA was impacted by the combination of lower gross margins, increased technology and development investments, higher G&A costs and higher than anticipated public company costs as detailed above. Full year adjusted EBITDA excluding stock-based compensation and related expenses was $22.9 million for 2021 compared to 25.3 million in the prior year. GAAP net income for the fourth quarter was negative $293.9 million compared to a negative 12.2 million in the year-ago quarter. I want to touch on the strength of our balance sheet and cash flow. We continue to maintain a strong balance sheet, which provides us with financial flexibility to support our overall strategy. We ended the year with $64 million in cash and cash equivalents. We paid down approximately $99 million in debt in the fourth quarter. Before we discuss our outlook, I would like to briefly review investments that we are making this year to position Infusion for growth in years to come. As Thomas discussed, and as evidenced by our results, we believe there's a tremendous growth opportunity in the market and will continue our targeted investments to capitalize on the momentum that we are experiencing. We're already seeing the benefits from the investments we've made in 2021, and we're confident on the continued ROI in the future. Our pipeline is robust, and we remain optimistic about the demand for our offerings. Given our momentum and the fact we exceeded our revenue expectations, we are leaning into investments as follows. First, we plan to bolster our go-to-market strategy to drive customer acquisition and support our global rollout in various markets. Next, we are increasing investments in product and innovation to expand our capabilities. Our goal is to always develop best-in-class products and to hire and retain talented engineers despite rising wages. Third, we plan to invest in client services and onboarding to support our rapid growth and expansion. World-class onboarding and client experience is central to our ability to win and retain clients. Finally, let's turn to guidance. We've updated our guidance metrics to be revenue and adjusted EBITDA. We believe these metrics better reflect the performance of our business. For the full year 2022, we expect revenue to be in the range of $147 to $150 million, which represents 33% growth at the midpoint. We expect adjusted EBITDA guidance to be in the range of $32.8 to $33.8 million, representing an adjusted EBITDA margin of 22% at the midpoint. Turning to our first quarter guidance, we expect revenue to be in the range of $32.5 to $33.5 million, which represents 36% growth at the midpoint. We anticipate adjusted EBITDA to be in the range of $6.3 to $6.5 million. For modeling purposes, we expect stock-based compensation of $32 million for the full year 2022 and $12.8 million for the first quarter. we believe there is an opportunity to scale the business and remain focused on achieving our long-term adjusted EBITDA margin target of 30% to 35%. To close, Infusion is positioned to continue delivering high growth in 2022, as well as quality profitability, driven by new client demand for our products, especially with institutional asset managers, upselling momentum with our existing clients, and the TAM we continue to unlock. We're a unique combination of solid revenue growth and profitability. 2021 was a strong year for Infusion, and I'm looking forward to a robust 2022. With that, we'd like to open up the call to questions. Operator, please go ahead.

Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking the question. We will now pause here briefly as questions are registered. Our first question is from Bahavan Suri, please proceed.

Hey, Steve and TK. This is Dylan on for Bhavan. Congrats on the fourth quarter, I guess. Two questions here. The first one, as we think about the overall kind of customer mix continuing to trend towards maybe conversions as historically you had maybe emphasized that new fund formation dynamic, obviously a lot of opportunity. relative to the number of logos to go after those conversions. And it's been a point of emphasis. I guess maybe love to hear how you guys are thinking about those dynamics continuing to take place and shaking out maybe over the coming years and how that maybe gives you added confidence and visibility into the business as these are maybe more the established asset managers here.

Hey, Dylan, how are you doing? Thanks for taking the time. I feel great about the mix of of logos that we're winning. I think that the outcomes in many ways are speaking for itself in the sense that we're not seeing any decrease in the new fund firm launches that we typically see year over year. We are seeing a good, solid set of outcomes associated with our ability to actually successfully swim upstream to larger traditional asset managers. And so we saw a healthy 47% growth year over year in our ability to basically follow through on the swing on what we said we would do. And alongside of that, we're also finding, as we expected that we would, the mix of what we would call hybrid customers that are doing both active investing across public as well as private markets. And so I expect in 2020, this year and years to come that we will continue to see the outcomes associated with more traditional asset managers, more of that hybrid, and more of those private market firms. And I think that we're excited that the flexibility of our capabilities and the evolution that we're doing in the technology fits right smack in the middle of being able to deliver great services and products to those folks. Does that Does that answer your question, Dylan?

Yeah, absolutely. That's great. Appreciate all the color there. And maybe kind of digging deeper into that as well, too. When you are having these conversations with these traditional asset managers, again, they've got the legacy complex systems. How much of that decisioning is effectively driven by a focus or an emphasis on operational efficiency versus, again, that ability to maybe introduce new funds or strategies here? I'm assuming it's some combination of both, right? But what resonates most? Is it, yes, the streamlined process, that data integration, new revenue streams, ease of compliance, et cetera? Yeah, we'd love to kind of understand what's driving the decisioning there.

Definitely on all those points, but what we're hearing is I can't expand my business into other asset classes. The technology that I have or the system that I have is preventing me from basically ramping up into other opportunities. We're hearing a common theme around that, and it's not just on the software, it's on the software alongside the services. And so either I don't have a middle and back office that can support the other asset class or esoteric asset class that I'm looking to trade, and so we don't, or the system itself that they currently have doesn't support their ability to basically trade in the styles or construct portfolios in the styles that the market is dictating that they must do. And so it's kind of interesting how the evolution of what we're seeing is changing to our advantage, where when you combine both the software and services, we're just able to give the traditional asset managers more flexibility into tapping into more opportunities that normally they've just sort of left at the table and moved on to more traditional things. And so we're seeing that more. And just to kind of wrap it all together, we're seeing that more at a level where our pipeline is growing. I think that if I look at last year and roughly around the same period in this year, our pipeline has doubled. And the level of traditional asset managers, as well as, quite frankly, larger enterprise hedge funds in that mix, it's just great to see our ability to lean in. and to have sort of a market that sort of gets it in terms of how we can sort of help, you know, solve some of their biggest business problems alongside of healing their technology that they've sort of been stuck with.

Got it. Super helpful. Thanks again for taking the question, guys, and nice job.

Thanks so much. Thank you for your questions. Our next question is from Parker Lane with Stifel. Please proceed.

Yeah. Hi guys. Thanks for taking the question. Wondering if you just step back and look at the history of this business, how such sensitivity is there? Um, you know, I'm going to see investment managers that are looking at your platform. Um, you know, you look at their it spend holistically, how sensitive are they to fund performance? Is that something that comes into consideration when they think about, uh, the pace of their adoption of either a conversion or launching something new?

it's top of mind, right? And so if you think about what most investment managers are looking to solve for is balancing their profitability or lack thereof in certain instances with the increase in assets under management that they're witnessing. And so their ability to basically optimize you know, the engine, if you want to call it, to be able to reach better profitability while at the same time try and achieve more quality alpha, it is the thing that they're trying to solve for. And you can't, and I think what they're realizing, in fact, at least what our outcomes of what we're producing and our pipeline in terms of who we're speaking to are signaling is that, you know, legacy incumbents are having difficulty helping them navigate through that because it's just inflexible. Their operating costs are ballooning out of proportion, and so it's now a handicap in their ability to achieve their goals. And so there is sensitivity in terms of their need to figure out how to do that better. And as we continue to tell our story and show as a reduction of how... how much lower, you know, we've sort of brought the barriers and injuries down to, they're just basically seeing firsthand that it's achievable in terms of reducing their cost of ownership and increasing their profitability alongside of it, and then basically reestablishing new wires, both from a people perspective and a process perspective, but also get rid of that tech debt that they've been plagued with for a while. So all of those things are compounding And because we're just doing it, you know, faster in terms of showing them the tangible outcomes of how it looks, we're seeing the adoption grow. And it's just the word of mouth associated with that is sort of on fire.

Yes, great feedback. And then I noticed in some of the big customer wins, you called out OMS accounting being included in those. Are you finding to a greater degree that customers are choosing Infusion because of those tools more so than portfolio management itself? Or is portfolio management still going to be the number one lead product here? And those are things that they can solve for in addition to moving to a more modern system. Thanks.

It's so cool, Parker. I mean, what I'm seeing and what we're seeing and the excitement that we have is that, you know, With our existing clients, it's maturing to the point where different personas are adopting to different parts of the system. For our existing clients that may have started with the portfolio management system or had a bend to the GL or accounting, we're now seeing traders within those same organizations lean into the OEMS and lean into all of the counterparties that they have access to within the system to basically fulfill the execution part of the strategy of their business. For the new opportunities that we're seeing, in addition to what we saw sort of last year where where it was about the portfolio management system and then we saw a really cool trend with managed services and that bridge, we're now seeing all of those things plus traders within new opportunities saying, I too need a flexible capability to execute on my orders and I like how it's integrating with the other pieces and additional data that I get when I'm effectively looking at the quality of execution that I'm trying to achieve alongside of the quality of the strategy that the portfolio managers and the CIOs are sort of laying the groundwork for. And so it's really great to see the community come together to see not only the benefit of just one, but now the benefit of the whole thing through the lenses of different personas that care about different things, but how all those things come together so that the CFO, the middle office, and the back office are now reaping the benefits of some balance and parity across, okay, now I'm getting the best of all the worlds and not really skimping on some of these things that have caused pain. So it's really cool to see that. I expect that to compound and see some of the results as we step into the future.

Yeah, makes sense and good to hear. Congrats again on the quarter.

Thanks, Parker. Thank you for your question. Our next question is with Koji Ikeda from Bank of America. Please proceed.

Hey, Thomas. Hey, Steve. Thanks for taking the questions. Just a couple from me. So I wanted to ask the question on, on the increased investment profile for 2022, you know, fully understand kind of the go-to market, uh, the product and the client onboarding, you know, all those categories all make sense, but trying to understand, you know, what, what changed from the time of the IPO to today, you know, maybe, maybe shed some light on the decision-making process or, or things that you saw with maybe leading, leading indicators, uh, that you look at, you know, that really drove that decision to increase the, increase the investment profile today.

Yeah, and so if you recall when we had this conversation way back when, it was sort of like, we're going to continue to invest. We're going to look for signals in the market, proof points and evidence that suggest that we either need to accelerate the investment or invest in certain areas. As we stepped through Q4, we saw exactly that. We saw an increased level of interest in the larger traditional asset managers. We saw an increase in signals and messaging from even larger enterprise hedge funds. And then the same went for managed services. And so as we saw proof points and evidence that those things were there as a result of growing pipeline, the progression of those conversations into deals actually closing, we felt that the opportunity was perfect for us to reciprocating kind associated with the increase of that activity with all of the things that you mentioned, which was double down on making sure that we are delivering a world-class experience on not just the onboarding, but steady state on support. and double down on broadening our capabilities on managed services because they're asking for it, right? And as we kept doing that, we started seeing the traditional asset managers asking for more capabilities throughout the functionality that were right in the wheelhouse of things that we were planning on doing. And so we decided that we would accelerate doing that so that we would meet the demand in terms of the signals in terms of more asset managers wanting to come on board. And so all those things just sort of, you know, needled us to a place where, you know, given our profitability and given the momentum and the growth that we were seeing, that was the perfect time to start investing and get ready for really some of the exciting sort of wins that we started to see in Q4. And so that's kind of how I would add it all up. There's not a lot of rocket science in there other than, you know, we just wanted to make sure that we weren't building and accelerating just for the sake of it. We wanted to see proof points of that growth, and we did, and we leaned into it.

And now we're making sure that we're staying ahead of our growth. So we started to make those investments throughout 2021, especially in the latter half of 21, and we're planning to continue to make those investments as we go forward.

And do so, mind you, it's important to say, do so in a disciplined fashion, right? Don't do it in such a fashion where, you know, it's too much too fast, but do it in just the right level where... where we're measuring ourself relative to really, and it kind of goes back to the thesis of what we do and how we do it, what is it that our customers are saying they want, right? And they're the ones that are standing idle by to act as receivership for the things that we're building and investing in. And I think it's paying off.

Yeah, we're confident we're going to see the ROI from those investments the same way that we have in the past.

Got it. Thanks, Thomas. Thanks, Steve. Just one follow-up. Thinking about the period of volatility in the markets that we're having today, maybe remind us, we've definitely seen periods of market volatility over the past decade. Maybe post Great Recession, help us or maybe remind us during those times of market volatility, how did sales cycles shake out? Did they move around at all during those periods or

know is it just more steady eddie regardless of what was going on in the markets thanks guys yeah yeah you know you know my heart goes out to everyone that's affected by the you know the conflicts that are going in the world uh or even the surges of covid that we're seeing in apac and so so clearly you know it's never fun to see you know those kinds of of events uh you know at any point in time uh that said you know if you take a step back and look at who we are and our model, as a subscription-based model, we don't have a lot of volatility based on the macro conditions or the volatility in what's going on globally. Coupled with the fact that what we have to offer and deliver, it's not a nice to have, it's mission critical. If you are an investment manager, you need these products and services And so how all that adds up consistent with conversations that we've had in the past. And again, it's sort of evidence to how we've always been able to maintain sort of our profitability in the past and our margins and all those things. It all points to that it's a mission critical service and product to have. Based on the subscription, it's pretty steady. And based on what we're seeing, You know, it's just continuing it on in that fashion, and, you know, we expect that to continue in that way.

Thanks, guys. Thanks for taking my questions.

Thanks, Soji.

Thanks for your question. Our next question is with Kevin McVane from Credit Suisse. Please proceed.

Great. Thanks so much, and congrats on the fourth quarter results as well. Hey, as you're starting to compete and kind of win more on the institutional asset manager side, have you seen any changes in the competitive dynamics, or has the competitive environment been similar? I wanted to start with any initial thoughts around that.

Hey, Kevin. You know, I don't want to be flip about it. I want to be, you know, I want to be humble about it, but the reality of the matter is that one of the reasons why we're winning is is because the landscape isn't changing. It's not evolving, right? And so the facts in terms of the outcomes that we're producing, like 60% of our wins is basically deprecating legacy incumbents. It's happening because the landscape has been pretty stale, continues to be stale for a while. you know, the folks in the party are basically realizing that, realizing how detrimental that is to their business. And as a result of not being handcuffed as they were in the past, of like, these things are so painful and so hard to migrate off of, when we threw all that out the window, you know, we're seeing the kinds of outcomes that I expect to just continue to grow. And so we are deprecating those legacy players The landscape, I almost want to say we're shaping what the new landscape needs to look like. Institutional asset managers are really responding well to that as what our outcomes suggest. And we're just going to keep leaning in on that and try and dominate in all these areas. And it's all about trying to be impactful to the client. So we want to be able to maximize on our ability to show how we can be impactful to our partners. And so we're just going to keep leaning in on that and dominating in those areas where we think we can be, you know, maximally helpful to our partners. Does that answer your question?

It makes a ton of sense. And just to follow up on that, TK, you know, as you're winning larger engagements, is it you're starting with a point solution or is it end-to-end? And if it's point, like what's the most common area that they're coming in on?

So we're doing both. And so on those instances where it's point, we're still seeing folks lean in on the PMS, but we are seeing an increased fashion where the OEMS and the traders are on the front of the lines and on making those decisions to purchase and come on in the community. And so we are seeing a good uptick in that OEMS side and that is another area as a result of that we will continue to invest not only in the technology but the people around it to be able to deliver the kind of experience that those traders are increasingly interested to see how much better can it get for them you know, relative to our model that they historically may not have been so much exposed to. And so still strong on the PMS as expected, but a rising interest in the OEMS. And then on the managed services, same thing. The middle and back office, they have a say, and we're making sure that they're being heard.

Thanks so much. Thank you for your question. Our next question is from Gabriella Borges with Goldman Sachs. Please proceed.

Good afternoon. Thank you for taking my question. This one is for Steve. I believe last quarter you had messaged that NRR would be down in the mid to high single-digit range because of the anniversary of the pricing increase in OEMF. It seems like it came in closer to 10, 11 points, so we just have to get a little bit of color on NRR. and what your expectations are for 2022. Thank you.

Yeah, thank you for the question. So, yeah, the NRR, because of the price increase, as you can see, the NRR is still very strong, and we're expecting it to continue to go forward into 2022 and to continue to increase, especially as we see more and more adoption in some of the things that that TK just spoke to, right? So we're seeing higher adoption in our OEMS, we're seeing higher adoption in our managed services, as well as our real-time data, and even in our analytics as well. And so we will continue to see that improvement as that goes forward.

That's helpful. And some more question that goes forward for gross margin. Just give us a little bit of color on the drivers to get back in the 70% range. When do you think you'll be there? And then long-attempt pause to the high 70s. Thank you.

Yes, so as we alluded to in the last quarter earnings call, we are continuing to invest and make sure that we're staying ahead of our growth, right? And so as a reminder, what falls into cost of sales is our hosting costs, right? We also have amortization of our software cap. But it's mainly around the additional employees and headcount that we're bringing on for onboarding, for support, and for managed services. And so, as we spoke last time, we are continuing to make sure that we're investing. We're going to continue to do that for the first half of this year. And starting in the second half of 2022, we expect to start seeing efficiencies and scale as we go forward. So another couple of quarters of investment as we're going forward, and then we hope to see and expect to see that scale as we go forward.

Thank you.

Thank you for your question. Our next question is from James Fawcett with Morgan Stanley. Please proceed.

James? Did we get disconnected? I don't know.

Operator, can you still hear? I think James is disconnected. Our next question is with Chris Donat from Piper Sandler.

Hi there. Hey, Thomas, you can hear me, right? Yes.

Hey, Chris.

Okay. Just wanted to follow up on – I think you might have just answered it, Steve, on the last question. But you talked earlier in the call about ROI, and I was just wondering, timeframe on ROI, are some of these investments going to pay off? Is it a matter of quarters or a matter of years?

No, no, matter of order, right? And yeah, as a reminder, as we're making these investments, we're looking for ROI almost immediately, right? And so as we're continuing to invest, it's really to just stay right ahead of our growth, right? And so we've continued to invest. The headcount that we added during 2021 was significant. We have invested across the board, so we actually increased our headcount for the year at about 80%, and we actually invested even more and did more hiring when it came to our technology and development group and our sales and marketing group. So we're looking for that ROI immediately, and we continue to see that return each quarter.

And I would say, Chris, the outcome, the top-line outcome that we achieved in Q4 was in part the result of some of those investments that we made in Q3 as well as in Q4. And so it kind of goes back to the point that I was making earlier in terms of the discipline of the investments that we are making and ensuring that they're smart investments that yield profitable outcomes for the firm in the short term but also set ourselves up in the long term to be aggressive, which, again, if you look at our long history of how we've operated, it's exactly how we've operated years ago. It's the same playbook. And so we expect to see the same outcomes in terms of the impact of those investments.

Okay, got it on that. And then I wanted to ask, As a follow-up, maybe a question that's a little early, but I'll try it anyway. With the partnership with Coinbase and the connectivity on the OEMS, have you had any feedback from clients on that one? Is it something that's an important factor in decisions they're making for new wins? Or is it way too soon to tell? And where do you feel compared to competition on ability to integrate, uh, effectively, you know, I think you get a new asset class once every decade or maybe for a generation in this business. So it seems like, uh, you guys have a decent lead over competitors, but where do you stand up with them on, on crypto?

Sure. And so, um, how I think about it is that we didn't just stumble into Coinbase, you know, uh, you know, because we thought it would be fashionable to start to get involved in cryptocurrency. It was client-driven based on what our clients were starting to ask for. It was also a collaborative approach with Coinbase in terms of what they felt was going to be meaningful to them. And so those things sort of came together. We shared common values and principles in terms of what it is that we were both trying to achieve. And I'm really happy that we were able to come together to basically create a relationship that I think our clients, our mutual clients will benefit from. And so I think that it's going to yield positive results largely because it's in line with how we think about everything in terms of investments. Our clients are asking for it. And so there are folks already in the wind that are looking to see the outcome of that partnership. And then if I zoom out just for a little bit, we want to be, you know, our strategy is to be the hub for the investment manager. And so whether it's a Coinbase, we're inviting, you know, others that are participants in the market to join and to become a part of our ecosystem so that the benefit of all of that integration largely will be to the benefit of the investment manager that's looking to effectively bring all those things together so that they can make faster, better, more informed investment decisions. And so it is a little early in the sense of, you know, show me the outcome, but I suspect that the outcomes will be within expectations based on how we're stepping through this. And I expect to see more of these as we step through the future.

Got it. That's very helpful. Thanks, Thomas.

Thank you very much for your question. And our next question is of James Fawcett from Morgan Stanley. Please proceed.

Hey, it's Jonathan on for James. Sorry about earlier. We'll ask my two questions up front. You highlighted M&A earlier in the context of potential expansion. Can you talk through puts and takes around what you're looking for and how you're thinking about timing? And my follow-up is, you know, what's contemplated in your outlook from an international perspective? Thanks.

Thanks. Welcome back. M&A. How I think about M&A or the principles behind what we will do on M&A is – it has to accelerate our growth, it has to unlock TAM, and it must and will never break what makes Infusion special, which is the unification and simplification around the data. And so we will actively contemplate and evaluate opportunities under that parameter where where companies, products, and services consume what makes us special around our data, which then makes the combination feel much more organic when it comes to the workflows associated with bringing two things together. And so we love opportunities where firms and innovative products you know, largely fit in that camp. And we will be aggressive in looking for companies that fit that mold. And through that aggression, you know, from a timeline perspective, listen, we're actively on the hunt. And so we'll evaluate those things and think about our client partners first and foremost and figure out what provides value to them. And then we'll step through it, you know, you know, as those opportunities present themselves. Does that?

And then on your second question for international, we are continuing to see our revenue from international clients or is continuing to grow as a percent of our overall revenue. And so we expect that to continue into 2022. So the Americas are still growing at a fast pace and a fast rate, but EMEA and APAC, or growing at a faster rate than that and is becoming a larger percentage of our overall revenue. Helpful. Thanks, guys.

Thanks so much. Thank you very much for your question. There are no further questions registered at this time, so I'll now pass the conference back over to the management team for closing remarks.

So thank you all for taking the time again to speak with us and continue to listen to our story. We're really excited about the outcomes that we produce, and we're really looking forward to having further conversations and updates for you in the very near future. And so to that end, I hope everyone has a great evening, and I look forward to speaking to you again soon.

Thank you. That concludes the Infusion fourth quarter 2021 earnings conference call. Thank you for your participation.