Enfusion, Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Infusion's fourth quarter 2022 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise. Following the speaker's remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I would now like to hand you over to our host, Ignatius Njoku, Head of Investor Relations. Please go ahead.

Good morning, and thank you, operator. We welcome you to Infusion's fourth quarter 2022 earnings conference call. Hosting today's call are Oleg Marchin, Infusion's chief executive officer, and Brad Herring, Infusion's chief financial officer. Please note, our quarterly shareholder letter, which includes our quarterly financial results, have all been posted to our IR website. 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 quarterly shareholder letter, which is available on the company's website. With that, I'd like to turn the call over to Oleg to begin.

Good morning, and thank you all for joining us today to discuss our fourth quarter 2022 results. I'm happy to be here, and I'm honored to be addressing you today formally as Infusion CEO. I would like to first thank all of my colleagues for the warm welcome that I received in this new role. I'm looking forward to leading Infusion, and I'm energized by the opportunity set that Infusion is facing today. I'm also thrilled to welcome Brett Herring as our Chief Financial Officer, who brings along an impressive track record as a public company CFO. I look forward to working with him to position Infusion for scale as we go through the next stage of our growth. 2022 was a successful year for Infusion, despite market volatility and changing demand environment. We ended the year in a position of strength, demonstrating that Infusion continues to be a unique combination of high growth and profitability within the vertical SaaS space. We delivered strong revenue growth, maintained our focus on profitability and margins, expanded into new adjacent markets, and won numerous mandates from our key hedge fund managers institutional investment managers, and asset owners. Very focused capital allocation for technology, product, and client services to prepare the company for scale as we continue our global expansion towards larger and more complex institutional opportunities. Our fiscal discipline in the second half of the year resulted in margin expansion and enabled the company to generate positive adjusted free cash flows. These outcomes underscore the durability of our business model and demonstrate our ability to deliver exceptional value for our shareholders. With this momentum getting into 2023, we plan to maintain and enhance revenue growth and deliver a stable and expanding margin profile. We remain laser-focused on delivering exceptionally positive client outcomes powered by the best-in-class software and the services offering. Now let's turn to fourth quarter results. We're pleased with this quarter's performance delivering strong growth driven by disciplined capital allocation. Revenue grew 27% to $40.5 million, reflecting ongoing healthy demand and solid execution. Adjusted EBITDA was $6.8 million and represents a margin of 16.7%. This outcome reflects our progress in further improving the company's margin profile and our focus on returning infusion to its historical profitability. We generated ARR, of $165 million, or a 30% growth year over year. We continue to see strength in new sales across all our products and services. Excluding involuntary churn, net dollar retention was 115.4%, as we continue to have meaningful commercial expansion within our existing client base. Including involuntary churn, the NDI remained at a healthy rate of 111.5%. We signed 39 new clients in the quarter, and in the quarter with a total of 819 clients. Convergence accounted for 51% of new client wins, as we saw slight uptick in win rate for hedge fund launches, though launches remained overall down from previous year. Now let us move to client wins that highlight the powerful value proposition we delivered to the global investment management community. In the Americas, revenue again grew 19% year over year, driven by ongoing client demand in the region. One of our new clients we're excited about is a North Carolina-based university endowment. This asset owner is seeking to replace its outdated legacy system with a more efficient end-to-end platform that supports all asset classes and reduces total cost of ownership. By partnering with Infusion, the investment manager improves its manual workflow and compliance capabilities. In EMEA, Revenue grew 54% year over year. We had a record bookings level for the region and expect this positive momentum to continue in 2023 as well. I am pleased to announce that Infusion won an EMEA-based multi-billion dollar long-shared equity hedge fund. This new hedge fund launch is a spin-off from one of the biggest well-known global hedge fund platforms. The manager was seeking a robust cloud-native platform which would allow them to accelerate the go-live process and support anticipated AUM growth, as well as increase complexity. Infusion was chosen for its flexible, comprehensive, and modern technology stack, coupled with end-to-end managed services. In addition, this client was particularly interested in our robust reporting framework and API technology to provide them with flexibility to integrate with third-party vendors. I'm also excited to announce that we're partnered with a newly launched hedge fund based in the Middle East. This investment manager is supported by a notable sovereign wealth fund and will employ multiple strategies, including equity, fixed income, and global macro. The fund selected Infusion because of its global reach and differentiated software and services, particularly our cloud native end-to-end platform, single data set, and robust API technology stack. Together, Infusion will enable this fund manager to scale and deploy efficient workflows. This one is significant because it demonstrates our success in expanding into the Middle East, an important destination for both capital allocators and hedge fund managers. Now turning to APAC. We grew revenue by 36% year over year, as we see healthy demand in the region. I'm thrilled to announce that we entered into an agreement with a multi-billion dollar Tokyo-based alternative investment manager. This client was seeking to modernize their efficient on-premise technology stack, which consisted of disparate, outdated, and common capabilities. The investment manager selected Infusion because of our fully integrated ANTREAD platform and our deep understanding of region-specific functional requirements that continue to drive our success in APAC. Infusion will replace our manual, error-prone infrastructure with our OEMS, data analytics, and accounting capabilities. As a direct product of such digital transformation, the client significantly reduced the need for internal technology and operational resources and compressed total cost of ownership. This exciting global win further validated our ability to move upstream across all regions, win more conversions, and expanded to new adjacent markets, all during times of significant market uncertainty. Finally, let's talk briefly about a new customer that went live on our platform in the fourth quarter, which is Panagora Asset Management. With over $30 billion in assets under management, Panagora is a quantitative investment manager that deploys multiple strategies, including active equity and multi-asset quantitative investment strategies. After extensive due diligence, Panagora selected Infusion to replace their long-time OMS vendor with an objective to reduce their in-house technology footprint and improve the functionality of the growing business. Infusion and Panagora partnered during the onboarding to streamline legacy workflows and enhance the Infusion API capabilities. Now live on the Infusion platform, Panagora benefits from frictionless upgrades and a scalable technology that will afford flexibility to continue evolving their business in the years to come. Turning to product and technology. Innovation is the key pillar for our success, and we're committed to deploying new products and next-generation solutions by listening closely to client demands and moving steadily through the adjacent portion of our total addressable market. During the quarter, we rolled out new enhancements and features across our platform to continue to improve stability and scale and expand functionality. For example, we released a self-service general ledger posting workflow so the clients have control over closing their books at their own discretion. We also continue to develop APIs to allow our clients to quickly and easily integrate with our platform. For instance, we have made a series of enhancements to our API capability suite to support creating and updating many trade types within our platform. The API enhancements we made over the last few quarters have brought our API capability more in line with our UI capability and support our systematically inclined clients to really drive scale and efficiency for the platform at large volumes. Another notable enhancement launched this quarter is the new framework for handling bank debt and credit facilities, as well as support for initial drawdown logic for revolvers. Now Infusion is one of the few platforms that truly models the loan asset class properly from the global amount down to the positions. And we can support many of the complex edge cases, including but not limited to delayed comp, cost of carry, drawdowns and paydowns, both pro rata and non-pro rata. In aggregate, we are well-positioned to support our clients' trading and leverage credit strategies, and this has been driving our success in this segment. All in all, we deployed 361 enhancements and new features across our platform during the quarter, further demonstrating our ongoing innovation. Moving to market dynamics. The macroeconomic uncertainty has driven multiple trends to play out in the market. First, we continue to see global asset managers embracing our fully integrated, cost-effective, and robust capabilities. The industry is increasingly shifting away from on-premise sets of disparate pieces of software, either homegrown or stitched together by competitor acquisitions. Additionally, asset managers are focused on outsourcing both middle and back-office operations and trading. This is where Infusion comes in, with our cost-effective and operationally efficient front-to-back scalable technology, coupled with the best-in-class client services. We believe our business is well positioned not only to weather the ongoing microeconomic uncertainty, but also benefit from it. On the one hand, the reduction in the number of hedge fund launches and delays in purchase decisions by existing investment firms could reduce our opportunity set and elongate sales cycle. On the other hand, in terms of the upside, large alternative investment platforms and traditional asset managers are optimizing their cost structures by converting their legacy system to infusion software. and relying on our services to support their business. The upside scenario is what we typically saw throughout the history of the firm and are seeing now as we continue to win conversions in competitive situations. Importantly, we continue to see capital shifting away from hedge fund launches and smaller hedge funds toward larger multi-manager platforms and separately managed account structures as investors are looking to attain better performance, reduce operational and key person risk, and access diversified portfolio of alternative strategies. This is where we see our current multi-strategy and multi-manager clients growing rapidly and where we see outside demand to remain strong in the near future. Subsequently, as such platforms continue to spin off and feed various teams that have been successful internally, Infusion continues to benefit from such backdoor launches as technology familiarity and operational transition become natural. Now let me turn to our key focus areas for 2023. We plan to build on our momentum to create value for our clients, partners, and shareholders. As such, we focus our capital allocation on technology, product, and client service organizations. Core to our competitive advantage is driving innovation and responding to our client technology needs in a timely and thoughtful way. By investing in our technology stack and expanding our product portfolio and system functionality, We're able to deliver new capabilities and services, enhance our competitive mode, capture more market share, and drive upsell opportunities. Next, Infusion's best-in-class client service underpins our overall strategy to win new clients. We're focused on enhancing our onboarding and implementation process to improve conversion experience. Additionally, we'll work on making our account management and managed services teams more operationally efficient by investing in the related technologies. This will enable us to support larger and more complex investments first while improving our margins. These investments will bolster our competitive stance and will continue to position Infusion to deliver high-quality software and service to our clients. As importantly, we're also committed to maintaining Infusion's path towards margin expansion and operational efficiency as witnessed by this quarter's results. High margins coupled with high growth rates have been a staple of our business model, and the management team is focused on the bottom line more than ever. In summary, we're pleased with our execution in the fourth quarter and how the company is set up for success in 2023. Every new customer, every new technology capability, every new feature in our system, and every support ticket resolved by our team only reinforce the magnitude of the opportunity set in front of Infusion in our unique position. I'd be remiss if I didn't acknowledge our talented employees globally for their hard work and selfless focus on execution. Our results this quarter are simply a reflection of the caliber of our team. Their passion, dedication, and creativity continues to solve the most challenging problems our customers face and enable our clients to generate superior, risk-adjusted returns for their investors. Before I turn over the call to Brad, I would like to highlight the steps we made to further strengthen our board with the addition of two new independent directors. We are pleased to welcome Deidre Sommers, who sits on the Audit Committee and the Nominating and Governance Committee, and Michael Spelassie, who has appointed our board chair. I will now turn the call over to Brad to discuss our financial results in more detail.