Enfusion, Inc. Class A

Q4 2022 Earnings Conference Call


spk_0: good morning ladies and gentlemen of thank you for standing by welcome to infusions fourth quarter two thousand twenty two audience conference call at this time online have been placed on the to prevent any background noise following the speakers remarks we will open the line for your questions as a reminder this conference coke is being recorded i would now like to hunt you able to our highest ignatius the joke who head of investor relations please go ahead
spk_1: the morning a thank you operator we welcome you to imputed for quarter to eternity earnings copies coal operators call or all a huge as chief executive officer and bread heard refuses chief financial officer to go accordingly shareholder letter which includes accordingly financial results of all been posted to our or law website i'd like to remind you that to their call the country forward looking statements he forward looking statements are subject to numerous risk and and choose including those that bought an apartment with the a see and available and investorrelations section and our website actual results may differ materially some any boy looking statements we like to do the phone witness statements speak only as of today and a copy the madison and an application on can't update them me to them to call at such as required by law in addition to those caught my crew mancha measures these measures should be considered as a supplement to and that as a substitute and get financial measures we can feel relation to the nearest got measure can be found in today's only shell the letter which is available on the company's website what's that i like to turn the car over it's only to begin the morning and thank you all for joining us today because cuts or fourth quarter twenty twenty two riddles and hippie to be here in an honor to be a jerk me today poor millard including feel i would like to first think all of my colleagues that the warm welcome that are you even this new role i'm looking forward to meeting fusion and i in a job
spk_2: opportunity to said that infusion the taken today
spk_1: and most thrilled to welcome break hearing that our chief financial officer who bring the and great track record is the public company see above
spk_2: i look forward to working with him to perdition infusion for scale didn't go through the next stage one go
spk_1: when it when you to the except for we are his despite market volatility and changing the men and barn
spk_2: we ended the year in a position of strength demonstrating that if you're confused used to be a combination of hydro and pretty the billy within the vertical that space
spk_1: with delivered stronger integral meeting a with profitability emergence expanded into new adjacent markets and won numerous mandate from the uk from vendors you could use knowing that managers an epic owners make all the capital allocation for technology products and glide services to prepare the company equal skill and will continue our global expansion or logic in more complicated juvenile opportunities out to school discipline in the second half of the year
spk_2: resulted in margin expansion in unable to company to generate positive ejected progress predispose
spk_1: google comes from their score the your ability of our business model and demonstrate our ability to deliver exceptional daily for our shareholders with this momentum get him into twenty two hundred three would like to make him in revenue growth and deliver stable and expanding margin profile very middle laser focused on deliver an exceptionally part of the about been powered by the dozen club soccer and services over him now let's turn to for quarter results what live with its borders performance deliberate and stronger or driven by the capital allocation
spk_2: revenue grew twenty seven percent to forty point five million dollars reflect an ongoing help calcutta mm in solitary the kitchen a jacket either deluxe six point eight million dollars and they represent the margin of sixteen point seven percent
spk_1: this outcome reflects our progress in further improvement company margin profile in our focus and during and fusion it's historical profitability we generated a or are of one hundred and fifty five million or thirty percent drop year over year we continue to strength in you failed a girls or products and services excluding longer return not dollar attention was one hundred and fifteen point four percent and will continue to have meaningful commercial expansion within our enquiries including involuntary churn the in the i remain at a healthy rate of one hundred and eleven point five percent with i'm thirty nine new client in the quarter
spk_2: and i'm a water with a total eight hundred and ninety glance from the counterpart fifty one percent of new client wins and with a slight uptick in winter it will catch one launches the launches remade overall down from previous year now that it's nice to climb we that highlight the political value proposition will deliver to the global investment management commute in the americas raving again hundred and ninety percent year over year driven by unborn inclined to an end in the region one of our new clients were excited about the north carolina baby diversity in dumb this effort owner's sticking to related outdated like the system with a more efficient answer and platform that supports all epic glasses and are useless goldwater ownership by partnering with infusion the investment manager who the manual work load and compliant capabilities in a media revenue grew fifty four percent year over year look at the record books level put the region and expected positive momentum to continue into one it when it really low i'm pleased to announce the confusion when i'm in the a multi billion dollar launch of equity casual this new sichuan one launch is a been offering from one of the biggest well known global his farm blood was the manager was beginner a buck wild made a platform which would allow them to accelerate the goal i brought and support anticipated
spk_3: a young girl and one of them with complied with it
spk_2: and fusion was chosen for flexible comprehensive and modern technology stack coupled with enter administered in addition this client was particularly interested in our buck reporting framework and ai technology to provide them with like ability to integrate with third party vendors
spk_1: i'm also excited to announce that apartment with a newly launched gets one day in the middle east
spk_2: this investment manager is supported by a notable sovereign wealth fund and will employ multiple sarah hughes include an equity it can come on global mackerel the from collected infusion because of a global reach and differentiate itself going greater particularly out loud made a and black or google dataset and or a buffet technology that together imputed will be able to fund manager to scale and deploy fish and work was this one is significant because it demonstrates arctic that an expanded into the middle east an important destination for both capital alligators and hedge fund managers now turn into a back legally revenue by thirty six percent year over year as would be healthy demand in the region i'm thrilled to announce that we entered into an agreement with a multibillion dollar tokyo based alternative investment manager this one was speaking to modernize the efficient and benefit knowledge attack which can of disparate outdated and complicated noise the investment manager selected confusing because of are fully integrated into had performed in our deep understanding of region specific function or requirement that continue the driver for that a that imputing will replace their menu error prone infrastructure without oil weymouth data analytics and accountant capabilities
spk_1: the direct product of digital information declined significantly reduce the need for internal technology and operational resources in compressed total cost of ownership
spk_2: this exciting level we got a delegate our ability to move upstream across all regions when more conversions and expanded to new adjacent markets all during transit significant market concerned finally let's talk briefly about a new customer that went live on our platform in the fourth quarter which is gonna go at management with all three billion dollars of ethnic on their management vinegar the quantitative investment manager the deployed multiple strategists include an active equity and month i wanted a good investment strategies after extensive the village and then i got elected confusing too late there one time or math vendor with an object to reuse the house technology could bring and improve the functionality of the growing that and you didn't panic or a partner during the board and to streamline like it's legacy are close in i'm has been futile maybe i capabilities now live on the using platform then it would benefit from person with a great and a scale about technology that will a that ability to continue building their business can be years to come turn into brought up and knowledge
spk_1: innovation the keep your for our success and of committed to deploy new product and next generation solutions my little local declined and then you're moving steadily put a good portion of our total injectable market during the quarter world out new in canton computers across all platforms to continue to the built in jail
spk_3: and expand functionality
spk_2: for example where elite the cell surface general leisure boston and work well though the class of control or more than double put their own discretion
spk_1: we're also continue to do not read the i do allow our clients to quickly easily integrate with all black one
spk_2: are you would have made a series from hampton dory the a capability sweet with the poor creating an update and major trade guys within our blood flow vpn in were made or left few quarters of brought out a a to do it more in line with are you likely to do it in support our to be medically incline climb the really drive scale in a fish
spk_3: you know the platform at large ones
spk_1: in other notable enhancement much as quarter you the new framework for handling bank that the credit for good advice support for initial drawdown logic pro bowlers now using the one of the few lugworms the truly models that long as glad bravo
spk_2: from the global man down to the positions and we can support many of the complex educators a good him but not limited to delayed can go to carry out and pay down more pro rata a nonprofit in aggregate were well positioned to support our clients trading and levers credit strategies and this has been
spk_3: dragon are fill in the background
spk_2: all all we did work with hundred and fifty one patent new because outlet one during the quarter your the demonstrate an hour and going in the leash moving to market dynamics macro economic uncertainty has driven multiple chance to play out in the market first will continue to see global lack of managers and great and are willing to great it got protected and there but capabilities
spk_1: the industry isn't creeping was shifting away from on premise that of the third piece of software either homegrown or each together by competitor acquisitions
spk_2: additionally as a manager the focused and outsourcing both middle and that wasn't separation been country
spk_1: this is where including dungeon without got the tickets and operational efficient prompted back billable technology coupled with a deafening black lantern we believe our business is well positioned not only to whatever the ongoing much going i'm a but also benefit from it
spk_2: on one him the reduction and number of hits from launches in the late important decisions by get an investment firms could you used opportunities that in l a detailed title and other him he turned the that that much a janitor than that and platforms and traditional at the manners optimizing their quotes structures like converting the a legacy
spk_1: contributing sulfur and their line and our services to support their business
spk_2: that's a scenario what we typically saw throughout the kicker and from in our see now and will continue to when conversion from competitive situations
spk_1: importantly will continue to see capital shifting away from kids from launches in smaller his funds toward larger more they haven't let weren't in separately managed the structures as investors a leak and getting better performance reduce operational and keep are some read and access diversified portfolio of alternatives to radishes this is where we see our current multi strategy and not a manager clients growing rapidly and were with the outside the men to remain strong in the near future
spk_2: that's what we are such platforms continue to spin off and few beers team that had been successful internally including continues to benefit them such backdoor launches as technology familiarity and operational transition become natural
spk_1: now let me turn to argue top serious for twenty twenty three we want to build on our momentum to create value park life partners and shareholders a touch with all the per capita allocation on technology products and glad service organization
spk_2: what are competitive advantage is driving innovation and responding guard clank acknowledging the in a timely and got away by investing our technology stack and extending our product portfolio didn't functionality were able to deliver new capabilities and services and cancer competitive month
spk_1: capture more market share and dried up so opportunities that impudence bedroom flat line target underpins their overall strategy to when you clans work will become a half an hour on born and grew impatient brokers two point conversion students additionally will walk i'm making our account management and then started to few more operationally fish by investing in a related technologies
spk_2: this will enable us to support larger and more complex investment first while important our margin this investments will bolster our competitive than and will continue to position refusing to deliver high quality software and it's very dark ones as importantly were orchid committed to maintain an infusion path or margin expansion and operational efficiency wouldn't by the as a result high margins coupled with high growth rates have been a staple of our business model and the management team a topic on the bottom line more than ever in summary work lived with our education in the fourth quarter in how the company that up for success he twenty twenty three
spk_4: every new customers
spk_2: every new technology capability every new feature in our system and every support ticket result our team on the course the magnitude of the opportunity sat in front of confusion in our unique position i'd be remiss if i didn't acknowledge your calendar employees globally for their hard work and dealt with focus on education
spk_1: always result this quarter spent my reflection of that caliber parking their passion dedication and great you to continue to solve the most challenging problems are got them are safe and enable our client the generates a beer with ejected returns for the investors before i generally the call too bad
spk_2: i would like to highlight the steps were made to further strengthen our board with admission the to new independent directors pleased to welcome the age of commerce could get on the other community and the number make him government beauty and michael's pelosi or was appointed out board share i will now turn to call over to grab the discuss our financial results in more detail paypal and take that rewards for joining us today i'm happy to speak with you today about new role fear using a look forward to working with old executive team or employee here to help lead and fusion to it's next stage a break
spk_1: now on the numbers in the fourth quarter regenerated revenue of forty point five million an increase of twenty seven percent over the same quarter last year
spk_2: growth was driven by continued share with and quiet the man for our comprehensive solution fourth quarter adjusted gross profit which excludes stock based compensation increased by twenty five percent year over year to twenty seven point five million dollars this represents an adjusted gross margin of sixty eight percent it's worth noting that these results were impacted by a change and cost allocation methodology which
spk_1: lower que por adjusted gross margin by approximately one hundred and fifty basis points excluding this methodology change adjusted gross profit would have been sixty nine point five percent
spk_2: adjusted ebitda for the quarter with six point eight million dollars that the hundred and twelve percent year over year against a quarter revenue this represents an adjusted ebitda margin of sixteen point seven percent of six hundred and seventy basis points from the same period a year ago yeah every year margin expansion was a result of the scale ability of our staff model combined with a cough discipline and a quarter
spk_1: what are the changes were making it are earnings discussion is the inclusion of and adjusted free cash flow metric the reconciliation of adjusted free cash flow with included in the appendix of our shareholder letter
spk_2: for the fourth quarter we generated adjusted free cash flow of three point six million dollars compared to a negative three point one billion dollars in the same period a year ago current quarter results represent eight fifty three percent conversion rate against are adjusted ebitda
spk_1: cash conversion with slightly higher that expectations due to the difference and catholics items that will push you to twenty twenty three
spk_2: we exited the fourth quarter with a are at one hundred and sixty four point seven billion dollars a thirty percent year over year the healthy a are great reflect on going straight of our customer additions in our delayed when share despite a challenging twenty twenty two for our customers net dollar retention excluding involuntary turn with one hundred and fifteen point four percent down a hundred and twenty basis points quarter over quarter the sequential decline is driven by ongoing volatility in the market as the sector increasingly focuses on right sizing across structure that dollar attention including involuntary churn was one hundred and eleven point five percent relatively flat from a year ago period we time thirty nine new logo in the fourth quarter ending the corner with eight hundred and nineteen total points it's worth noting onto the the average size of our customers increased approximately thirteen percent compared to the same period last year as we continue to execute on our strategy to move up market that income for the fourth quarter was seven hundred and eighty eight thousand dollars which includes four point two million dollars of stock based compensation we ended the year and a strong cash petition with approximately sixty three million dollars in cash and cash equivalents and no debt we be a district of our balance sheet years that considerable like to execute on our long term strategy
spk_5: now on the garden
spk_2: before we get too deep i want to comment on a chain who are making to our guide it's practices after discussions between old myself at our board we've had decided to shift from forward quarter guidance to provide a annual gala with updates during each of our quarterly earnings calls were relevant a lot of be providing insight on the anticipated pacing of our result throughout the year
spk_1: the change was based on to detect factors burst we wanted to improve the alignment between our financial practices in the philosophy we used to run the business or approach is always been to deploy capital to create long term die for our shareholders and the practice or disgusting quarterly guidance is not aligned with that philosophy
spk_2: lacking given the combination of macro level uncertainty in the current scale of our business the practice of providing quarterly guidance is simply not uprooted while we are removing are forward quarter guiding we are adding information and are quarterly earnings material that we feel would be more relevant notably you will see in our recently revamped ak finally the addition of adjusted free cash flow and casual conversion metrics all that said the current your outlook for twenty twenty three i'll start with making a few comments to position the year as mentioned earlier our client base considerable challenges and twenty twenty two with underlying market down significantly and sustain volatility with in financial markets given the dynamics combined with macro economic uncertainty we anticipate that asset managers will continue to look for opportunities to right size they're cop structures into the first half of twenty twenty three this has several short term impacts on our business first a provide us with considerable market advantage to gain share are providing the market with a premium solution with a lower total cost of ownership
spk_1: that can we expect new phone launches will continue to lack historical levels until market stabilize and finally we anticipate continued volatility in our debt dollar retention rates as our current customers continue to monitor their spin in the backdrop of the uncertainty that mentioned
spk_2: you got your car structure and twenty twenty three we are investing in into primary in support of our overall growth strategy first we are making investments in our client services function to provide a scale model and sustainable servicing model that meet our customers high expectations second we're adding already capacity to our product and software development teams to the strengthen our current market leading position as well open up new addressable market segments combine these investments will put flight short term pressure on margin however we feel that funding the initiative support our growth trajectory and for this is the business for improves margin expansion going forward based on all the put we are introducing still here twenty twenty three revenue and adjusted ebitda outlook as follows we expect revenue to be in a range of one hundred and eighty five to one hundred and ninety million dollars we should the midpoint represent year your great of twenty five percent referring back to my comments on the uncertain market conditions facing the segment we anticipate revenue growth rates to be slightly higher in the second half of the year we expect the just either that be a the range of thirty two to thirty four million dollars which at the midpoint of our ranges represents and adjusted ebitda margin of eighteen percent
spk_1: we project adjusted ebitda margin to be lowered in the third quarter before steadily expanding throughout the year at exiting twenty twenty three at approximately twenty percent remodeling purposes new projects stock based compensation of approximately twelve million dollars for the whole year
spk_2: in summary we completed twenty twenty to withdraw result despite headwind in the segment moving on to twenty twenty three were building on that foundation to enhance our market leading cloud based in an investment management platform are making strategic investments in both our product and service in capabilities i have great confidence in the long term trajectory of our business in our ability to deliver strong revenue growth while continuing to expand margins and grocery casual with that i'd like to open up the called the question operator please got it
spk_0: thank you if you'd like to ask a question please post off followed by one on your telephone keep part a for any reason you'd like to meet your question it has stopped followed by pay us or and mind that if you are using a speakerphone place a month pick up your handset before asking your question again stop want to register your question so off ask questions come from the line of change for set off morgan stanley your line is now open please go ahead
spk_2: thanks very much i'm personally appreciate the all the discourse reply didn't they didn't share hello were letter really help water on the the conversion specific you gave in a deck has be about what appears to be a little bit of slowing convert oh man i'm given that this is just the typical to be around fifty percent relative to fifty percent last quarter and and sixty bought some year ago period that indicative of that or case of decision making it's only a larger quantity to expect that kind of health michael's prisoners
spk_3: ah hi jim because all i appreciate the question actually to vote for my perspective ah v
spk_2: this particular numbered not indicative of any when it ran we expects to pursue going forward to some smart our business is concerned i'm in a we believe we can easily be ads you know what we've seen historic over with the last couple of years was shooting for probably something like sixty to sixty five percent on conversion side are on average ah i'm as far as delay in purchasing decisions i don't think it is a something that will impact our that rate of our wins as percentage of the overall book yes overall the definitely has an impact on
spk_6: in on it could have an impact on the overall drop by the source for some disrupt our overall book i think we will continue to see on
spk_2: the stable to increase in share of our business in mark and audience
spk_7: that i got it and then you know and i touch out
spk_2: not road dahl retention kind of being followed all cetera and it's military sort of released from our perspective to see you still be able to deliver strong revenue performance even when we saw little bit of a decline now how do we think about the drivers of of net down tension in in worse that metric be away from your perspective the next one on three and five years and i guess is part of that and i are you know guiding her specifically in the but you know what's the level that you taking roughly need to be at in order to keep your revenue outlook thanks shared so so i think a couple of things so technically a strategic was on let me answer this or the for
spk_6: illinois so on the volatility that we expect it is driven by the grants macro economic environment or i didn't have you know our formulate to allow others to scale in and out with the clients in a plans command of they reduced number of licenses by make him in in on and and be increased number of licenses so that's part of you know you wanna call it downgrade and and upgrades yourself in that would typically in a scene in our business i'm actually from our perspective increases
spk_3: it's taken us of our clients because it's not binary right do they don't just have to cancel the relationship is just stay with us and scale in and out of this relationship
spk_2: ah i'm so our gold that i would say i'll go down there historically been a hundred and twenty percent mdr the on this is what from my perspective long term and an old one year three years four years i think that on us as a company both in terms of technology capabilities
spk_3: i'm glad services to get their right that's what i hold myself accountable to and of this is what i'm holding my team accountable to i think this is best in class platform in our customers deserve nothing less than world that customer service and in addition to the technology so in terms of drivers ah that you
spk_6: he asked about i think there will be a balance between sort of this code downgrade and people trans skill scale out and be a little more conservative with our when he mentions and on i prior remarks related to the actual growth in institutional our markets
spk_8: segments
spk_2: gold from our perspective young drop within all day manager and multi strategy platforms and were already seen some green shoots of our ability to expand our relationship with a glance commercially they diebler which i think historically all we haven't really done a good job and this is something where pain big most attention to
spk_6: looking as in our our client base a careful and creating value in expanded that footprint
spk_7: that it that you're too much
spk_0: thank you
spk_9: on that question comes from the line of cutting that they of credit suisse your line is not open please go ahead great thanks so much and just to follow up on a question organic again congratulations on the results really really am good outcome
spk_2: it's your only way to think about kind of that and like dormant clients in terms of his are certain percentage a client theater you know active at different times in the year you know is it just headcount to think about may be a lower end of the range where that is today and were that's been historically and does that flex backed up just to see we get a sense of you know where the optionality sit me with an existing counts it is late to frame that ah i don't know if there is it feels analogy to you know i will say that in some of the volatility that bread mentioned in his remarks you know definitely clients are common of the whole industry is coming off of a difficult year and then day in a both equities and bonds or down depending on
spk_6: which courage and country are looking at the anywhere between one and twenty five percent so you know i am the down accordingly management few the down accordingly and or people another and talking about performance season in many cases so there is just the economics of the business our changed right so it's not about like demo the year right it's about worthy in the of them in in the cycle so to speak far and as i mentioned there is there is this balance right we we do see some in i'll slow down and decision making and our people reduce the number of licenses however you know as you can see from our
spk_2: financial that the resulting from our guidance
spk_6: the you know that's what i called downside complexity in this business this is what we're seeing play out today on one hand and ah people are a real rematch and and and trying to reexamine what an object tagged at best it and out today and our town twenty bill and or sorry tenth one a million dollar budgets in or hundred people staff that supporting the disparate legacy the some that come into our to help and this is where we come in and for you know the sort of cash font so early
spk_2: more hedge fund launches
spk_6: are we seeing counterbalanced with some of the capital acts with significant amount of capital that has gotten into mulvey strategy farms and multi manager platforms in this is where with find in our sweet spot
spk_10: where good with service him his clients the scale and as they scale and then subsequently as they spin off and he'd manager step have attempted sat on their platform were right there to get them as they launch is as i was what what i call that door launches so began the just to some
spk_9: arise it's know about she's in our results so to speak with dormancy it's really mild like are getting through this little trough related to twenty twenty two which is a young arguably you know worst performance year for or asset classes and forty years young dahab position ourselves for
spk_11: for the growth of with his business don't miss lot of sense and then it does you think about the line versus the high end of that range on the revenue any but that aren't any thoughts puts and takes would get to the that high end above the range is it kind of client windsor just any thoughts are on the guy which obviously looks really really good hey get this is brad of i'll take that yeah right you know we felt like the guidance would go with a good balance you know i think there's a couple of things will play out over the course a year we we've talked a couple times about kind of the condition of the of the segment so you know obviously some some better stability in the market i think it pushes up toward the high in the that you know that tends to drive symbol headphone lot as we talked about that of
spk_3: that have got a for that a little that we think that could pick back up with stability come into the market i'm we also fake you know some of the product capabilities were going to be putting out the next you know three to six months put us in positions where we could get higher bookings this year don't have as a huge in your impact but certainly the sooner we get those out that poo
spk_11: revenue on the table for up for the current year just quickly move into the expense side you know we got a lot of of of levers to pull of we're certainly can be watching the revenue dharma closely as as kind of prudent spenders a bar of our capital we're going to make sure that dog
spk_12: we we time that well we got some opportunities for some consolidation we've got some opportunities for use some enhanced tool that improve our scale ability i'm into that and are on our expense efforts on client services a lot of that has to do with spending some money in twenty twenty three decrease a very strong scale ability to next
spk_13: year on this could be some in your impacts for that as well
spk_14: very helpful thanks so much
spk_0: thank heaven
spk_15: thank you on next question comes from the line a thin and backup of when imply your life five been go that
spk_3: yeah you mind as and and and great results here maybe an olive starting with you there was a lot of talk rank and software and that service and elation and a shareholder letter
spk_2: clive you can elaborate again he that kinda quiet service heat benefiting not only the overall adoption framework it should be the models but ah but how to speak may maybe like that what ravages talking about on at the pipeline innovation as well appealing down on yep great question i am afraid of my doctor that the whole called talking about this topic so couple of things here in our bread would say that we ended up in the many services business and i just want to make the difference between decline service to the whole which is in ah supporting the clients and an ongoing they
spk_6: system result in issues and customizing the technology and all of that with in a many services as as a business of in of doing things for clients on an ongoing consistent basis like trade of formation confirmations in all rack something like that and so far as overall plan service services concerned i just you know ah as you know it's one of the thing that i've done the first first thing that is when i came in as really revamp and restructure that part of our business to make sure that it's often the line it's a line much better with our sales process
spk_2: i'm he under a it's a line much better with how each client experiences infusion right so as one of our with rican clients said last week a and i will never forget that is what's the point of heaven good software if your clan services is not good and you know i'm taking this too far beyond this is just way more important for for us now than ever because historically you might remember we've been really focused on smaller and simpler players and they supported themselves effectively right and software out has has been so powerful and still so powerful and customers really will love using it i'm kind of torturing them customize and it so that we did not actually have to do much right which
spk_6: actually as a result drop economics now as we go upstream and service much larger and complex managers by default that looking at us as extension of the operating teams and therefore they actually expect many of them especially larger one they expect some kind of white glove service in so were design and our business dare to accommodate that in i would feel it's just it it has to happen in there
spk_3: fort number one will have to make sure we have the gym aligned in number to make sure the steam with operational efficient so we actually use technology to scale and maintain economics of the business or gross margins are you know seventy percent loss this is our target young dumb
spk_6: our our net margin for the result are conforming to what we think of business could be a long term the second part is in i'm here bought brad managed services business i'm in a we ended up and his business by by default rather than by design and were currently looking at that very careful and see if we can really position at than the marketplace is a separate line of business which is where what clients are incumbent client base is coming to watch and asking us to do that for them right as an extension of our relationship today right and so the question for us says
spk_2: what can we do what should be do have a price it properly so that would deliver value to the client and we create value for the shareholders as well but you know we have right now
spk_6: about eight hundred and twenty clients in the roughly
spk_10: what roughly hundred and twenty clients today actually use managed managers so it's a huge portion of our you know entire client base actually use in that part of our capability and so it's in our it behooves us to in a look deeply and see if we can it
spk_2: actual expand that relationship and so again this is this duality between in a pure staff model and software and service model where you know would go and service in on to juvenile live like i just mentioned panic or ah ah were in order to this assumption way to partnership and they expect us to provide a certain
spk_6: level of service
spk_2: as a supports right as as a partnership an ongoing basis and to other clients expect us to perform or asking us to perform in or ongoing daily task like managed services and human services organization would endow in on there is there's something direct and now economic opportunities for up there
spk_15: i hope it makes them
spk_1: yeah that makes total sense appreciate the deck and color that many ah another an in one i guess a high level tim allen
spk_2: how should we be thinking about some of the recent proposed changes are needed to see welcome to settlement cycle compression and other areas and potential drivers are back office investment automation well as the at the instruments and more towards that will time processing capabilities that's that right again and this is one of one of those in a big opportunity for us right would have a lot of farm conversations on the subject
spk_3: you know v in our clients clients are golf actually looking to country be to to the discourse and so we were kind of internally were looking at different way to address it in i think what we are very well positioned to do so given our software capabilities so in a or all this
spk_15: military chanted before in old market microstructure changes in all the midfield the for compliance in which is another area of us or great importance both in terms of you know software functionality on oil met side as well as regulatory reporting you know this is where we we think and are we're responding
spk_0: pretty well to market demand so of course will will definitely be there to accommodate
spk_15: perfect thank you get cricket
spk_16: thanks
spk_6: on next question comes from the line of pokey i cut us of bank of america the lines i think please go ahead hit hail like and brad thanks for taking the questions first first one for me is as you head into twenty twenty three and a how are you thinking about your go to market strategies and focus mit maybe they're from a a geography or product perspective that can be different this year when compare to last year
spk_2: ah you know there's i don't think there's a difference how we do want to read ah refocus our effort for example on regional are competitive advantage of that would have you know i will just sexual a highlight the me up as an example where in the business getting to the point where he has become an actual it's relative or i expected to become relatively stable twenty percent of our overall revenue mix he and there's a ton of opportunity at highlighted before for seeing a lot of opportunity in the middle east
spk_6: he earns you know that part we were doing a lot of work on the subject just like any other region in in the world it has it's own nuances read it has it's own operating nuances it has a different nuances related to trading ah and risk functionality that are specific to the region and in fact this
spk_2: that's how we historically one in at that hour had different capabilities within our software that
spk_6: clamp actually value them in a we did exceptionally well said and shoulders above or competition and that how long i'll just over a generic value proposition detectives and sarawak traditional position where cloud native i know go for onto an integrated software but really thinking about how can differentiate ourselves taken into account what i would call local or localized competitive advantages in so that's what we're thinking of far as global expansion is concerned with one
spk_2: also the the client that and mention one of the largest you can use headphones we've had some success in australia and of course in a hong kong and singapore continue to be in a relatively active borders what launches and and conversion of our concern young dumb in a us is you know this is where we the most of the larger institutional asset managers are and where continue to position the business you know eat be in in that segment and the more aggressive way in a testament to that our recent wins on are in for example the endowment that we recently a closed and a couple of other interest in multi strategy multi monitor fans that you know a young taken take into account and capture the very essence of what confusion as is all about which is ability to bring together front and or your mouse with portfolio management would risk management with a backhand yeah and gray the framework where you know people just worry about rating give a lot of what a motto is can gather allegation and big the the don't worry about acknowledge your operations so the god the market strategy i would say there is no really you know there is some overarching in position and messages you know that i would stand to the market and say you know the if demand the same with me more focus of continue to focus on larger institutional complex glance but as far as actual nuance i would highlight
spk_11: in all really figured figuring out what actually works for that particular local market in the really zero in on that and execute him against that relentlessly and winning on that basis got it now that that is super helpful and thank you and i wanted to ask the follow up question on a net dollar retention and it sounds like of the commentary from brad that the involuntary revenue churn with about four and a half percent but customer churn might have been a bit higher than that is that the right characterization on on how customer retention shake that a queue for and and then just taking more solar you know how should we be thinking about involuntary revenue churn and and customer turn assumptions that embedded in the twenty twenty three guidance thanks guys in a hurry kelly this is brad i'll take that your your your numbers that and and presumption on on shirt or right
spk_2: you know that kind of mention that the back half a twenty twenty three we did see
spk_17: cern pick up slightly i'm you don't you think about how we projected twenty twenty three to play out we get paid a little bit of a residual and twenty twenty three off of the off of those same numbers but we do think it's to improve back to kind of more normal levels by a year
spk_14: and that that a byproduct to the competition i had a minute to go around you know the the stability that comes into the market that kind of draws up that turn so you know what we expect a little bit of a creature to the first half but we do they it returned back to normal for the backup
spk_0: gotta thanks so much bad take you got your taken the question
spk_2: ten times got you thank you
spk_6: on next question comes from the line of park lane stifle the line i think please go ahead as as many kicker after parker thanks i'll take my questions to start what have you learned a successful go to market pets looks like with a larger skilled on conversion are these concerns language just portfolio management system are they adding a whole suite solutions up well what have we learned or so i'd definitely be holistic approach him and we would do it would hit with we kept in some situations where you know we are successful in london expand said have been in terms of
spk_2: zell and be some functionality and then expanded into the overall our overall stack were also in a more naturally state to feeding into you
spk_6: would you would call maldives at strategist or liquid else that are those large institutional players actually alter their platform as as you i'm sure i'm in the reasons and an not ten fifteen years the tramp has been to become sort of the supermarket of different strategies and a any to to show a manager
spk_3: ill have substantial size they're trying to offer for everything from you know i shouldn't be five hundred index striking to up for to basis points or one basis point two very complex strategist from quand to you know global macro city
spk_6: i'm in the real estate and private equity and so we typically fit into that balk at where they actually offer liquid else young dumb some systematic and wanted dead a strategist and then as would build more footprint within the organization that manages and and on hundred kids you two hundred billion dollars we expand that relationship in a lot of other things and some of the functionality i can highlight years just it from product in offer brought a driven
spk_2: expansion of brought up driven growth perspective ah some of our product initiatives include creating capabilities around
spk_6: benchmarks and enable and the managers to rebalance their portfolios either to match the benchmarks or to take active
spk_2: risk with respect to benchmarks as it'll be as a as as those investors are trying to beat those and so some of those things related to portfolio construction on one hand and then translate and bills active bats or hedge and strategists into actual trade and called him that loop send him that ah director of trades order
spk_6: hours into our or a math and then going back and the rinse and repeat this is why would think the strength of our offer and will ah will really shine salt in august little the highland level comments but as far as that particular market segment we we still have a lot of what the job you know complexity of their businesses they're high and almost i can say like if you think about hedge fund universe you can sort of stratified and think about every segment and with him every segment
spk_2: in don't want a more or less similar than lot of course the same but they're similar when it comes to those large organizations every one of those as unique and i'm in a way will learn quickly to adapt and with see what they need from workflows perspective on some of them a very very differ friend from what arm catch on to actually do i am both in terms of how landmass and compliance works in terms of what they're looking for the backhand in terms of risk requirements are actually looking to
spk_6: expand that offering as well were in almost all of all of our was want some kind of are not just the bar for the course but relatively sophisticated risk management and risk analytics capability
spk_2: that understood that scary color and then secondly how large do you live in scale your mansell solution second over the next year what an aggie perseus having on your ability to sow cancelling stand margins
spk_6: oh right so that the eastern of at asked two questions and one and that gonna be the the the second the second part of your question is going to drive the first so the mentioned one and i was pope boom and deal on as the question
spk_2: ah you know we ended up and his position where we have bring a large portion of our business amanda sure this isn't a keep highlight and that this is one of those founder from my perspective underappreciated after that does business a sitting on
spk_3: wickets very similar economic relationship rip relationships with other firms that are providing miniature was this in and with sell our software to them
spk_6: right and soul but well looking at this cause there's a position and both tactically and strategically trying to figure out how to
spk_2: how to expand expand our footprint fair and be there again court and brad and by design of the bolstered by default now did the trick is in that second from from our perspective the trigger them that second part of your question which is how to do that without deluded margins and that's that's a big deal and we actually have done that before
spk_18: ah we did identified some ah brought gaps the and the functionality requirements that we actually need to execute on
spk_6: to continue to grow that business without diluting that pure sas
spk_2: gross margin so to speak yeah i am absolutely convinced it's possible you know everybody's challenge and me on that ah we we have a lot of conversations both external and internal the on the subject everybody sort of know that manager of it as a standalone business hum
spk_19: his lore margin than pure sad business
spk_6: i'm also aware of that but this is where we i think we will win because if would figure out the formula that actually has been drive and infusions growth ah all this years prior to their ip all and enable the company to be noticeable forty complaining but but the role of eighty company
spk_2: i believe is going to create
spk_6: read a key to profitability oh the men the services
spk_2: and one more it still on i would offer and conclusion is what we can see and actually competitive situation is that many services
spk_6: ah becomes a sort of final icing on the cake where one will replace the sort of this piecemeal technology stack which is our that of bread and butter convert i'm setting yeah and you know where he played the competitor up a prompt where for example where portfolio management system where he plays or him as complex where he played back and
spk_2: and then all of a sudden you know what all that entire stack and so they they for example and and in this case they actually use another managed services organization to support that former a legacy disparate stack with hold lines in between but want where he played that who is the better with best company deck
spk_20: actually service and support that acknowledges deck that is infusion other than infusion so what happens regularly have one what as we win ah competitively those technology replacements it's a natural extension of the business dexter with supplement it with manager says it so that if set of if good that it a cannot
spk_0: it's worth what happens as a side effect ah the sticking it though the clients also increases in that right back to be and yeah questions that gorging deal and asked that it makes sense
spk_21: yellen make sense and on makes her as answer my questions and congrats on a corner
spk_2: they give a pigment
spk_11: and keep our final question comes from the line entrepreneur parks or goldman sachs your line i think please go ahead i kind of mine too young for gary are uncertain for me as as the average contact tiger the growth of thirteen percent in the quarter and an hour and fifteen how we think about the impact that and are having from an average contract valuable than optimal it whose bread up i'll take that i think you know the the will talk with a group in the customer size first and that that's completely a byproduct of of what old just walked us through in terms of every move up market you know when that whole stack becomes available all that i
spk_6: he going to increase contract value especially as we move up market is the bigger asset managers your as translate
spk_11: in indy are i think there's a couple a key point there one is that entire management services discussion we had a big that was a really key point to make
spk_3: in terms of how that plays into contracts size but it also it has a ripple effect into in the and i think that kind of facilitate go oh is gold standard of twenty percent of in the are some of that is going to come from things like adding
spk_2: adding managed services to that stacked so i think i've written they're very intertwined
spk_22: the they're not necessarily mutually exclusive you know we've also got scenario where we go out into of market and are our initial contract may not include the post accurate because the asset managers are much in the much larger scale size you're still going to see an overall increase in contracts as they just wanted to compliment when we don't want to make it sound like you know
spk_6: managed services and only way for us to expand their relationship will decline them and we recently have done a lot of work and i do not give upgraded to our technology seem to actually sort of in real time expand our product portfolio the respond to blind man's he under ix it as a result expand camera your relationship or the so this is not just now never services driven but not the breath point no one is sometimes northerly to
spk_2: shoot
spk_6: on one hand suicidal the same coin in those two drivers off in the arms digging a soda business our number one of getting into you know logic line just because the tickets island of desert into going deeper within the current client base and in on just it really great and valley for the past and then they're still there are still situations frankly where you know customers a use some other capability ah that you know not it's not that we don't have it but they just don't know that we do it and and just i know and it makes me makes my blood boil know situations right and so this is what we
spk_21: i really like two thousand and twenty three is really about that falls it's about in all much just focusing on the outside not just be an aggressive in go into business it's not just about bookings my just about going to you know whatever name and or dubai or tokyo it's about really really making sure that a every single climate was your today's reprehensible making sure that would great value everyday making sure that you don't even client that would do not here
spk_2: ah are heavy and continue to broccoli engage with a grin climate and great villain comes to someone
spk_6: think here and an hour of any new uncle for the environment
spk_3: sudden twenty twenty three at least i can continue company talking about a stronger january february and get carried anything to at the airport
spk_6: yeah again and them indices i will defer to brad to comment from his perspective what is his quantitatively from qualitative perspective that the just the technical fan or i am and we were walking into two thousand and twenty three with a very low base ah in all all asset markets you know aside from cash with the guess that get us dollar or down above and beyond their historical norms right so from from that be detected at ethel and susan
spk_2: the fact that rift actors have been behaving well and the left in a couple of months you know makes people feel better makes people breathe better that's that's fine
spk_23: ah i know we don't have a crystal ball with on of know what markets win a gold today or whatever in two years but in a would definitely see so that behavioral change in our at that i mentioned that one can people just in this wait and see mode sometimes on the other hand there's has been active in in some interest in sounds in know for
spk_6: rod in on the bit uncertain feel that kate but as wouldn't want when it does a result on either side right did actually what what were we really come in with a sort of conducted a strategy if if think they're really not as good as people expect this is sort of upton got the imitation and reposition it if things are great
spk_11: we will see more launches and more expansion and or budgets being allocated to in a jar customers right but the your were not thinking about our business you know it within the time horizon of couple of months grinded the focuses in a long term shareholder value creation and we just simply that way
spk_24: the deck directed with well positioned to get
spk_11: capture whatever opportunities will be created in twenty twenty three
spk_2: on the other to add to that i'm kind of getting very specific on your question what we're seeing here certainly some slight improvement coming out a key for them you know as early as the segment kind of you know corrected itself and que three teeth or time frame
spk_6: the we anticipated like i mentioned in my mind fremont or prerecord remarks the i'm those transfixed and a little bit into key one were saying that continue about what we thought on but then at the same time we're also seeing things like are pipeline pick up or pipeline is improved significantly from where we were a couple of months ago so to always point i think it's a natural diversification
spk_2: in this business of the times a great we do well at times are tough we do well as well celebrate is a great head is kind of built into the inherent business i think you can grab a lack of knowledge of what one more not to better days there's no question underscored one more real quick addition you know we'll we'll we'll we'll see some balance am you know as would gold gold children to long only strategists your there might be some potentially in on additional bait and this business if you're well but typically eat when we have seen in on their foreman his first performance degradation of our clients right we asked mean ah you know that hedge fund managers and our platform i actually doing really well given them
spk_25: volatility right someone not doing so well somewhere up some are doing well right but also interesting and lean out because of this compression of risk premia quite often times people are a demon from the font that they can not from the font that
spk_0: the should he and you know typically now you have situations when somebody used to manage ten or fifteen billion dollars in now they managed three or four right and soul of a sudden in all the economics of the businesses especially sometimes give a high watermark are different
spk_3: yeah and you know the decision regarding asked at that point becomes almost a no brainer
spk_6: i think you i saw another take no questions like that this climate like the conference call back later to the management paper close enough
spk_0: both thank you thank you all from great questions were forced are always available in real time for an additional questions

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