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spk10: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Infusion's second quarter 2023 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise. Following the speakers from ours, we will open the lines for your questions. As a reminder, this conference call is being recorded. I'd now like to turn the call over to Iggy Njoku, Head of Investor Relations, to begin.
spk02: Good morning, and thank you, operator.
spk06: We welcome you to Infusion's second quarter 2023 earnings conference call. Hosting today's call are Oleg Movchin, 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 four 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 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.
spk08: Good morning, and thank you for joining us today to discuss our results in the second quarter of the year. I'm happy to announce another solid quarter balance between our top and bottom lines. Given the current macro environment and industry dynamics, our business continues to exhibit strength and agility. And Fusion provides an obvious differentiated alternative to existing legacy technology and operational capabilities, especially valuable in the context of ongoing revenue pressures experienced by investment managers. The accelerating quarter-on-quarter client additions, healthy bookings trajectory, increasing average contract value, and expanding margins are a testament to the resiliency of our business. While I am pleased with our level of engagement with existing and prospective clients, economic uncertainty and industry dynamics have created some short-term headwinds for our business. Macro uncertainty and challenging performance backdrop caused investment managers to compress expenses in the near term. As a result, some of our clients have reduced their spending on our platform and delayed fund launches. impacting our net dollar retention and top line growth. As we remain consistent with our strategy to open up traditional investment management segment and expand our market share in more complex hedge fund managers, our sales cycles and the resulting implementations become somewhat longer. Lastly, while we see pockets of improvement in the hedge fund launch market, this year's overall fund launches continue to experience one of the most challenging environments in the record. Despite the headwinds, we continue to take market share, expand our geographic footprint, drive profitability, and deliver superior client outcomes. As we've demonstrated in the past, our business model tends to be durable and resilient during challenging times. It is precisely in such times when we capture opportunities to deepen our mode, take business away from our competitors, and position our brand to enhance growth trajectory and financial profile. Now let me walk you through the key highlights of our financial performance for the quarter. Revenue grew 17% to $42.7 million as we continue to see client demand for our software and services. Adjusted EBITDA was $8 million and represented an 18.6% margin. I will let Brad discuss our financial results in more detail and provide some more color in a few moments. Our financial performance this quarter is a case study of flexibility and agility of Infusion's business model. It demonstrates our ability to modulate between revenue growth and profit margins, which is exceedingly important in this context of shifting industry dynamics. As our business evolves and achieves even higher scale, we will never take our eyes off maintaining our operating leverage as we balance our long-term growth objectives with capital allocation disciplines. It is precisely that operating leverage that allowed us to exceed EBITDA expectations this quarter and will set us up for further growth acceleration without sacrificing durability of Infusion's value creation machine. Now I would like to highlight several compelling wins demonstrating the broadening demands for our solution across all regions. In the U.S., revenue grew 14% year-over-year, reflecting the challenge in macroenvironment I outlined earlier. I am pleased to announce that we have welcomed ARK Investment Management, a Florida-based investment firm to our platform. ARK offers a range of investment products focused on disruptive innovation and delivered mostly via ETFs. The fund manager sought to replace its multiple incumbent providers with our comprehensive software platform. With Infusion, this client benefits from more automated and streamlined workflows, elimination of operational fault lines across multiple vendors, and a more robust compliance system. This conversion further validates our ability to expand our attempt into this exciting segment, as ETFs become vehicles of choice to deliver both passive and active investment strategies. In addition, I am thrilled to announce that we signed an agreement with the Liquid Markets arm of one of the world's largest global alternative asset managers. This firm operates a platform that offers private equity, credit, real estate, infrastructure, and other strategies to global institutional clients. Infusion will provide a scalable and reliable end-to-end solution that supports multiple verticals of complex derivative strategies. Our open architecture will allow for smooth integration with clients' proprietary systems via APIs in real-time aggregated views across all strategies. Additionally, Our platform will enable a much higher level of customization and will support further growth of the business by leveraging Infusion's high-touch client service. In EMEA, revenue grew 33% year-over-year, driven by our unique value proposition strongly differentiated against incumbent legacy competitors. I would like to stress that EMEA remains a key tactical focus for Infusion. And we're getting increasingly excited about maintaining our ability to expand our market share in both continental Europe and the Middle East. This region is very important for us in terms of maintaining growth momentum for our global revenue mix and expanding our serviceable, addressable market into traditional asset management. A marquee win in Europe includes a $15 billion London-based institutional asset manager. This long-only manager struggled with the legacy provider's product limitations, inhibiting ability to handle complex workflows, all of which drove unreasonably high technology spending. The client decided to overhaul the patchwork of disparate solutions and capture the benefits of the cohesiveness and flexibility of our platform and our front-to-back capabilities. This win is also special to us because it was sourced through our partnership agreement with Northern Trust. It is also important to emphasize that this new client engagement is a great example of Infusion's product-led growth strategy. As we continue our journey to capture the traditional asset management segment, we see increasing demand for portfolio construction and risk management capabilities. Along these lines, our team has implemented the framework that allows active portfolio managers to design their portfolios and express their views interactively within the system. This use could include sector, country, or factor exposures, as well as security-specific bets. Differentiated from many other competitive offerings, this capability is tightly integrated with the rest of Infusion's platform, allowing the portfolio construction process to flow smoothly into order management and execution and further downstream. In addition, I'm pleased to announce that Infusion signed an agreement with a London-based hedge fund that utilizes various trading strategies that include both public and private credit, and distressed assets. The fund manager selected Infusion because of our deep and comprehensive capabilities that support cash and derivative credit strategies, and our attractive total cost of ownership. I'm proud of this deal for several reasons. First, the fund manager initially chose another competitor, soon realizing the competitor's solution had several shortcomings, including lack of domain expertise in the credit space, manual trade processing, and nonexistent trade allocation functionality. It demonstrates the pattern we're increasingly seeing. Infusion continues to be a solution of choice for asset managers investing across capital structure and going well beyond equities as an asset class. Finally, we continue to expand our geographic presence in continental Europe by signing an alternative asset manager based in Norway, whose strategies include both equity and fixed income asset classes. As we continue to dominate the fund launch market, This mandate is consistent with our go-to-market strategy and positioning within Europe that is a target-rich environment for the traditional asset management segment. In APEC, revenue grew by 14% year-over-year. While top-line growth came in slightly below our expectations for the quarter, we were encouraged by ongoing market share gains and competitive takeaways. For example, I'm thrilled to announce that we entered into an agreement with a Hong Kong-based event-driven alternative investment manager. The fund managers struggled with the legacy provider's sluggish pre-trade compliance workflow and limited and clunky pre-trade allocation process. By partnering with Infusion, they consolidate many disjointed technologies on one platform, gain an intuitive interface, and more frictionless and functional trade execution capability. We also signed a new agreement with a Singapore-based family office, which manages equities and fixed income. The client was looking to overhaul the infrastructure to support the multi-manager setup. They selected Infusion because of its flexibility in setting up a multi-manager architecture and its easy-to-use, fully integrated end-to-end platform. Infusion will replace its manual error-prone infrastructure with our PMS, OMS, and accounting capabilities, resulting in streamlined operational processes and reduction in total cost of ownership. Infusion continues to distinguish itself as a provider of choice for multi-manager platforms where complexity both at the business ownership level and at the strategy level matters to the stakeholders. Now I'd like to discuss our continued focus on building our partner ecosystem and delivering new innovative products to widen the gap between Infusion and our competition. I'm excited to announce a new partnership with Everisk Technologies to provide powerful automated workflows to Infusion clients. Everest's workflows extend functionality and use cases available throughout the Infusion platform. The workflows can be quickly customized and deployed via API connectivity. This partnership represents a significant enhancement to our ability to execute on bespoke requirements in a time-efficient manner without the burden of custom development. This is a prime example of how our team continues to leverage our open architecture and deliver innovation in a way that sets us apart from legacy providers and allows us to maintain our technological edge and widen our competitive mold. Reiterating my previous comments, I'm also excited to highlight that we signed two more institutional managers during this quarter who will be using and leveraging our portfolio construction capabilities. We plan to formally release it in the third quarter. The rebalancing engine will enable portfolio managers to design and implement a target set of portfolio exposures relative to various passive benchmarks in a seamlessly integrated process with our OEMS functionality, including pre- and post-trade compliance and trade allocation. We will be able to share some more details on this at an appropriate time. Aligned with our ongoing efforts to streamline the investment manager experience, Infusion rolled out 309 enhancements and features in the second quarter. Our cloud-native architecture enables us to be nimble by releasing product updates on a weekly basis and stay aligned and sometimes ahead of what our clients are expecting us to deliver. Now, I would like to provide some color on market dynamics. While we're encouraged by the uptick in the high-profile hedge fund launches this year and our ability to win in that segment, the overall launch market continues to be challenging and remains well below historical levels. Emerging hedge fund managers are confronted with probably the toughest fundraising and cost environment on record, resulting in suppressed and delayed launches. However, this is old news. While we continue to maintain and expand our dominance in the large and complex hedge fund segment, I expect conversions to drive an increasing portion of our overall organic growth as we continue to win hearts and minds of the traditional asset managers. Now, let me review some of the key elements of our strategy going forward. First, let me address our strategic positioning. All investment managers, both traditional and alternative, continue to embrace digital transformation. Global AAM compression, challenging performance environments, and ongoing industry consolidation collide to accentuate the need to optimize operating costs across the board. With our comprehensive front-to-back solution, shorter onboarding cycles, attractive value proposition, and open architecture, Infusion is very well positioned to continue to expand its market share while our competition finds itself out of position. We remain a painkiller as opposed to a vitamin, and our technology starts delivering value within six to 12 months since the beginning of engagements, where our competition takes 18 to 24 months. Second, we'll continue to run a profitable and growing business. This quarter is a testament of the flexibility of our engine, our ability to make money in the face of challenging market conditions. Discipline capital allocation and expense management have always been a staple of our execution style, and that will not change. Focus on profitability and margin expansion remains paramount to successful execution. Our leading product capabilities allow us to drive margins while delivering excess value to our clients. Importantly, it puts us in a position to avoid competing on price as we optimize our pricing strategy and grow outside of our core market segments. Third, we continue to unlock growth by executing on what our current and future clients are asking us to do. To that end, we view delivery of portfolio construction and risk management solutions as key to our successful expansion into the traditional asset management segment, where benchmark-aware portfolio management is the norm. Here, we maintain our all-in-one product philosophy, by delivering these capabilities in tight integration with all operational workflows and leveraging our open architecture to allow clients to choose optimization in the risk models and accommodate their proprietary investment strategies in the same environment as order management and execution, compliance, performance, and risk reporting. Interestingly, absolute return managers also see benefits of Infusion's fully integrated benchmark-centric capabilities, as they proactively manage risk across various dimensions, including country, sector currency duration, and factor risks. Importantly, we continue to go where nobody else does. As evidenced by our performance this quarter, our efforts to expand in Europe and the Middle East, especially continental Europe, are gaining momentum. Highly concentrated competitive playing field outdated incumbent technology, and a client base tired of elongated and expensive implementations bode extremely well for our ability to compete in the region. We see a robust high-quality pipeline there, and our team continues to execute against this opportunity set. Our unique mold allows us to protect our core market segment from emerging niche players and purposefully expand into adjacencies and unlock new opportunities. We continue to make investments to enhance our competitive stance, and with more institutional mandates. As we update our product on a weekly basis, Infusion's competitive edge gets sharper and our mold gets stronger. While competition still migrates to cloud, we increase flexibility of our workflows and turn Infusion into an open platform of unparalleled flexibility and scale. Stable and expanded mode supports our focus on market share expansion without the necessary distractions. To conclude the prepared remarks, Our business has demonstrated the resiliency of our economic model against the backdrop of macro and industry-specific challenges that have created uncertainty for our clients. Infusion continues to grow profit margins and expand and deepen its footprint across all market segments and regions. I will now turn the call over to Brad to discuss our financials.
spk07: Thanks, Oleg, and thank you, everyone, for joining us today. I'm happy to report yet another quarter of market-leading growth and margin expansion while serving an end market that continues to waver against the backdrop of economic uncertainty. For the first quarter, we generated revenue of $42.7 million, an increase of 17% over the same quarter last year. While this quarter's revenue growth represents a slowdown from previous quarters, there are a few points I want to highlight. On a positive note, Oleg mentioned that our new customer bookings were up 44% compared to last quarter, and that we added 39 new customers in the quarter. This solidifies our ability to win new business in a market that is looking for economically viable single-source solutions. Second, we continue to see some return to normalcy in other key revenue drivers, such as downgrades and involuntary churn. With regards to headwinds, we saw two distinct items in the quarter. First, macro forces have continued to slow our organic growth as asset managers look for more certainty before adding incremental seat licenses or broker connections. Second, as a byproduct of converting more upmarket customers to Infusion's full stack, we are experiencing longer implementation times between signing and monetization. This is due to the additional complexities of conversions, such as data conversion and prioritization challenges within our customers' IT and compliance teams. Second quarter ARR was $171.2 million, up 15% year over year, and $4.2 million higher than what we reported last quarter. Net dollar retention, excluding involuntary churn, was 106%, down 441 basis points from the previous quarter. Net dollar retention, including involuntary churn, was 102% in the quarter. We discussed previously that NDR would experience some volatility in the near term as asset managers remain focused on optimizing their cost structures in reaction to macro-level uncertainties. When compared to historical NDRs, the largest item negatively affecting NDR in a quarter was a slowdown in net incremental seat licenses and broker connections that I talked about earlier. Once the macro environment begins to stabilize, we feel that NDRs excluding involuntary churn will return to historical levels of approximately 110%. Our reported adjusted gross profit, which excludes stock-based compensation, increased by 10% year over year to $28.7 million. This represents an adjusted gross margin of just over 67%. It's worth noting that there was a non-recurring technology charge in the quarter that negatively affected adjusted gross margins by approximately 100 basis points. As we've mentioned in previous discussions, we expect adjusted gross margins to remain between 68% and 70% for the next several quarters as we continue to invest in our client onboarding and servicing capabilities in support of our growth strategy. We still expect long-term adjusted gross margins to hover at or above 70% once we've completed these current cycle of investments. Adjusted EBITDA for the quarter was $8 million, up over 51% compared to Q2 of last year. Against our revenues of $42.7 million, this represents an adjusted EBITDA margin of 18.6%, up 410 basis points from the same period a year ago, and 470 basis points higher than the previous quarter. These results represent a 43% pass-through rate on incremental revenues from last year. Year-over-year margin expansion was generated by a combination of these high pass-through rates matched with prudent expense management as we continue to balance our long-term vision of delivering superior revenue growth and expanding profitability. For the quarter, we generated adjusted free cash flow of $3.8 million compared to $0.8 million in the same period a year ago. Adjusted free cash flow in the quarter was negatively impacted by a non-recurring $1.5 million payment, which we distributed to one of our primary shareholders related to a pre-IPO tax consideration. This payment was funded by a cash deposit in the same amount that was reflected in our Q1 ending cash balance. On a recurring basis, we continue to track to a rolling 12-month adjusted free cash flow conversion rate of approximately 50%. Gap net income from the quarter was $1.0 million compared to a loss of $4.1 million in the same period last year. We ended the quarter with approximately $28 million in cash and cash equivalents and no debt. In the quarter, we used approximately $29 million of company cash to settle federal and state tax withholding obligations related to a management incentive shares that were granted during our IPO and distributed in the current quarter. this transaction decreased our fully diluted share count by approximately 3.7 million shares. Let me now talk about our guidance for 2023. While we observed indicators in Q1 and the first few weeks of Q2 that gave us confidence in our full-year revenue guide, by the middle of Q2 and the first few weeks of Q3, top-line trends do not provide enough momentum to support our existing revenue guidance. The main drivers for the reset are, as mentioned before, the slowdown in our customers' deployment of incremental spend, and the additional time it is taking to monetize our customer conversions. That said, our new revenue estimates for the full year are between $170 and $175 million. The midpoint of this revised guidance puts our year-over-year revenue growth at approximately 15%. With regard to EBITDA, we remain confident in our ability to maintain our profitability targets despite the reduction in our revenue projections. We are therefore only reducing our full year adjusted EBITDA guidance by $2 million to an expected range of $30 to $32 million. At the midpoint of our revised revenue and EBITDA guidance, our margins are 18%, which is consistent with our previous guidance. Also consistent with previous guidance, we expect an exit 2023 with margins of 20% or greater. Lastly, for modeling purposes, we are revising the projection of stock-based compensation for the full year to approximately $8 million from $10 million as previously described. With that, we'd like to open up the call for any questions. Operator, please go ahead.
spk10: The floor is now open for your questions. To ask a question in this time, please press star 1 on your telephone keypad. If at any point you'd like to withdraw from the queue, please press star 1 again.
spk02: We'll now take a moment to compile our roster.
spk10: Our first question comes from the line of Kevin McVey from Credit Suisse. Please go ahead.
spk03: Great. Thanks so much. Hey, I wonder if you could give us a little bit just more color on what allowed you to maintain clearly much stronger margin targets relative to where some of the adjustments on the revenue came in because it looks like at the midpoint actually margins go up, pardon me, 40 basis points for the full year. So I wanted to start there if we could.
spk08: Sure. Hi, Kevin. Good morning. So look, I mean, yeah, we talked about this, you know, a couple of quarters ago in the last quarter. You know, my objective has always been to get this business to the margin levels, which you know, have been historically a staple of Infusion's financial profile, which is north of 20-25%. As you know, historically, we've been, you know, even running the business for quite a while at about 40% margins. So, you know, we're basically balancing capital allocation and expense management given the market environment, given what we're seeing, but just as importantly, given what we are looking to do on the investment side. We're accentuating our investments in products and technology and relocating capital away from efforts like marketing or just operational capabilities that are not technologically scalable. So just natively, this business should be long-term, north of 20% easy and probably 25% EBITDA margin.
spk03: That's great. And then as you see the shift more towards kind of the asset managers, Oleg, how are you thinking about implementations? Because it sounds like there's a little bit more involved on the implementation side from a monetization perspective within the context of the pricing overall.
spk08: No question. So, you know, it's obviously a good news and a bad news, right? If we want to operate within the market segment, we... really need to perfect that element. So I view it on one hand as a switching cost. Therefore, we need to make sure we minimize the switching cost by streamlining the onboarding implementation process for traditional asset managers. Of course, they're more complex. Of course, they're longer. And this is what manifested itself in our current and guided revenue profile. From my perspective, it's still obviously somewhat delayed. but this revenue is not going anywhere and it's just as sticky as we assume and you would assume. However, I also would say I sort of think about this issue also not just as a switching cost but also a competitive advantage in a sense that just like in that famous joke, you don't have to outrun the bear, you have to outrun the next guy. And so insofar as our onboarding is much more efficient and shorter period of time than many of our competitors that typically take 18 to 24 months to onboard similar clients, we should be in good shape.
spk02: Thank you.
spk10: Our next question comes from Alana Parker Lane from CIFL. Please go ahead.
spk05: Hi, guys. Good morning, and thanks for taking the questions. Oleg, Brad, I was curious if you could square the comments you made about the hedge fund launch environment and the greater emphasis on conversions driving organic growth longer term with the step down we saw in conversions as a percentage of total. I think it was down year over year and quarter over quarter. So can you just walk us through a little bit of that dynamic and what your expectations are going into the rest of the year?
spk08: So actually, Parker, in terms of a number of funds, that may have been the case, but as a percentage of revenue, conversions are still in the same ballpark. It's 59%. And over the quarters, it's 58%, 57%, give or take. So it will continue to go up. So it will probably be north of 60% for a while. And as we shift away from... launches, it will be 65 and above toward the next several quarters.
spk05: Great. Appreciate the color there. And then, Brad, you mentioned that some clients are reducing spend here. I'm curious what you're seeing as the primary driver of that. Is that primarily a downtick in seeds? Is it people actually ripping out certain aspects of the solution? Is there a general trend that you're seeing there that's most prominent?
spk07: Hey, Parker, good question. No, we're not seeing, you know, anybody rip out, you know, different components of the stack. It's primarily manifested itself in reduced seat counts or reduced connection counts. But one of the things we have started to see is those trends where, you know, the asset managers went through about a, you know, nine to 12 month window of trying to optimize that, that the downward trends on that has started to stabilize. So that's an indicator that we'd like to see. So now we're just looking for, you know, when that inflection point takes place to when they start adding seat counts and adding connections again. But at minimum, we have seen at least a pretty good slowdown, if not, you know, stabilization in the fact that they're not pulling down seat licenses or pulling down connections anymore.
spk05: Yeah. Yeah. Understood. All right. Appreciate it, guys. Thanks.
spk02: Thanks, Parker.
spk10: Our next question comes from the line of Michael Effante from Morgan Stanley. Please go ahead.
spk02: Hey, guys. This is James Fawcett.
spk09: I wanted to ask about NDR, and we saw some sequential improvement in client count, and definitely that's constructive, but how should we be thinking about NDR? I understand the environment is challenging, but last quarter you had mentioned you had confidence in 110 percent level being potential trough and now we're a little bit below that at 106 I think what are you seeing in terms of other areas or drivers from NDR outlook from here so obviously it's you know two drivers there James so one is you know voluntary and the second one is involuntary and so you know all we can control
spk08: is voluntary churn and upsells. From that perspective, we spend most of the time on protecting the perimeter and making sure the clients are satisfied and happy. We've done an enormous amount of work and actually that work translated into very significant results. As you remember, that's the first thing I've focused on and I've done since joining Infusion as a CEO about a year ago. And those efforts are bearing fruit. We monitor clients' health very frequently, and all the scores and PS scores and indicators are trending up and very close to where we think they should be. So that definitely will translate into higher levels or lower levels, I should say, of voluntary churn. And from Upsell's perspective, and sort of that's somewhat correlated with involuntary churn from macro perspective. We just need to do a better job at understanding our clients' business, understanding opportunities for creating value, and capturing higher share of clients' wallet. And on that front, we're also thinking through some of the strategies to optimize our pricing. both to create value for the client and capture the integrated nature of our offering, while at the same time maximize our economics.
spk09: Got it. Got it. And back on the point around conversions, I know you talked a little bit about integrations and that kind of thing, and that makes sense. But Have you seen anything in terms of the competitive environment that may be impacting that part of the business at all, or even just a switch in prioritization from the customers of how they think about what they want to sequence?
spk08: Can you clarify the left part, the prioritization question?
spk09: Yeah, just wondering if the customers are saying, hey, we definitely want to move forward at some point, but they may be focused on other parts of their own businesses.
spk08: Oh, so the last part is it has to do more. It's not so much conversion. I would say it's actually more launches where even the clients that launch, there are some delays either related to their operational issues or in terms of lending capital and kind of making sure everything is funded and they actually start trading and that oftentimes spills over into our implementation of broker connectivity and so on and so forth. From conversion perspective, that slippage tends to be relatively minimal, especially as we go toward larger, more complex clients and institutional clients. Typically, the onboarding and implementation takes anywhere between six to nine months. And within six to maybe seven months, we may see some revenue already from the client. So that's where we are. And I think that's where we should spend more time on, per my previous comment to Parker, That's our competitive advantage. And insofar as we're better and faster and smoother than our competition, we will win. And I don't see anything in the space where our competition is doing a better or faster job. In fact, in that market segment, there was literally three players that we really seen competitively. Just because of the nature of their architecture and setup, which is mostly on-prem, by definition, it's much more difficult to onboard.
spk02: Great. Thanks for that, Oleg. Sure.
spk10: Again, as a reminder, the floor is now open for your questions. To ask a question this time, please press star 1 on your telephone keypad. Our next question comes from the line of Gabrielle Borges from Goldman Sachs. Please go ahead.
spk00: Hi, this is Callie Valenti on for Gabriella. First one from me is just, can you provide any color on the magnitude of the sea count impact that you're seeing? Kind of what's the typical tailwind you would get from sea count? And then what kind of headwind are you seeing now?
spk07: Yeah. Hey Kelly, this is Brad. I'll take that. Um, you know, normally if you think of like at the NDR level, you'd see, you know, a couple of percentage points come from call the organic growth of the incremental count ads, um, in our existing client base, um, you know, call it, you know, two to 400 basis points, uh, of NDR growth. And all we're seeing right now is, is, is not, you know, it's not a negative number. We're just not seeing that two to 4% that we would have seen otherwise. Um, Hope that answers your question.
spk00: Yes, very helpful. Thank you. And then just second one for me. How much visibility do you have into back half numbers? Like what has to go right for you to meet numbers for the whole year from like a bookings perspective or just times with implementations?
spk07: No, that's a great question. We obviously spent a lot of time on our back half revenue projections. We ran, you know, I feel like we're in a really good space with what we've guided towards We've run several different scenarios. We've pressure tested it six to eight different ways. There's a coin flip, and we're having to have six or eight things go right. We're just having to look through the current trends, play those out, and then at the same time, some of the initiatives that we know we have in place that will start to develop in the back half of the year. So I feel like we've got really good visibility to it. I feel like we've modeled it prudently and pressure tested enough different ways that we can get very comfortable with what we put out there now.
spk02: Great. Thank you. Our final question comes from the line of Dylan Becker from William Blair. Please go ahead.
spk04: Hey, guys. Maybe kind of touching or asking some of the earlier questions a different way, digging into some of the cautious sentiments you guys are seeing, is there a sense of how much runway there is for further optimizations across these asset managers? I think, Brad, you mentioned it's already been going on nine or 12 months. I'm sure you're talking to these customers every day, Oleg, but maybe how much of this is an impact of kind of some of the flow through of what we've seen historically, maybe versus further deterioration in that segment?
spk08: Just to clarify, you're asking about optimizing the time of revenue capture or optimizing the market share? Maybe, can you clarify that?
spk04: Yeah, the seed dynamics and kind of the optimizations of the cost structures that they're seeing that's kind of weighing on the growth profile.
spk08: I got you. So, interestingly enough, within that space, so I would think about it in several buckets, actually, primarily two. So we have a situation when we serve larger, more complex hedge fund or multi-strategy platforms, or even loan only clients with a little more complexity to them, especially related to pre and post trade compliance and trade allocation and all of that. There, the seed counts may be important for multi-strat, multi-manager platforms. It doesn't have to be important. for more static loan-only type managers who, by the way, have multiple investment vehicles that they actually use to deliver the strategy. So it can be a hedge fund format, it can be a usage format, it can be a mutual fund. And that's where we are also capturing some revenue to the extent that we're charging for that kind of framework, you know, given number of funds, given number of accounts. And that's what I was telling Jim earlier, that that's something we're actually thinking through really, really looking at really closely and thinking hard about how we package the pricing right on one hand to deliver value to the customer, but also stay competitive and stay, you know, economically viable and economically prudent as a business. From traditional investment management perspective, you know, we see an interesting opportunity. I think I mentioned this a couple of times in my prepared remarks, where, as you know, our traditional buying persona has been, you know, either middle office or back office type person or, you know, somebody on the front office side, like head of trading or a trader that pilots OEMS, so to speak. Now we're seeing more and more demand for people given the system to investment decision makers, right? Portfolio managers, risk managers. And this is where additional seats and additional client counts will come from, especially from traditional asset management perspective. And for multi-strat, multi-manager platforms, the same PMs that are looking to make investment decisions as opposed to just execute trades around middle office apps or you know, run, run GL and accounting stuff, they will be the ones that will want to use the system more. And, you know, we'll look at it as another potential expansion of our time.
spk04: Got it. Okay. That's super helpful. And then switching to Brad from a metric perspective, it seems like there's a lot of kind of encouraging momentum you guys are seeing. And although there's some cross currents, right, but improving that new clients, you're seeing margin leverage, bookings, growth, contract values, et cetera. Can you help us kind of level set that with the revised outlook? Maybe what gives you confidence? And it seems like some of the implementation stuff is more kind of contractually structured than fundamental weakness. So kind of giving confidence in that revised outlook that this is enough.
spk07: Yeah. Hey, Dylan, great question. So a lot of this stems from kind of what we talked about before is the fact that the headwinds kind of hit the back book and the front book is more the beneficiary of the tailwinds. So when we model this out, one of the things we try to be very prudent on is making sure that we are smart about how we reset guidance and give us enough room just to make sure this is a one and done deal for us resetting expectations. We have seen some decent trends on the back book. They certainly haven't played out as we thought they would three, call it six months ago. But we are seeing some trends that at minimum have stabilized. Now we're just looking for those to improve. But at the same time, like I mentioned a minute ago with Goldman, I don't need some huge hockey stick of performance improvement on the back book to help make these numbers. With regard to the front book, it's kind of the same concept. We have a schedule. Anybody who's boarded or anybody who's signed up for the service, we have a pretty clear schedule. pretty clear visibility into the schedule of when those start to implement and when those will start to monetize. As we go through that, then we take even some conservative approaches for particular slips or anything else that might happen. So for us, it was about running those different scenarios I mentioned to make sure that this becomes a one and done for us in terms of resets.
spk08: Got it. And Dylan, just to pile up on this, another important element that gives us a little more comfort in you know, just looking forward, has to do with some of the markets I mentioned earlier and going deeper in them, which is, you know, in APAC going outside Hong Kong, which is typically, you know, Hong Kong, as you know, our kind of home turf and, you know, market that we're very comfortably controlled without sort of being complacent, as well as in Europe. So we are very disciplined and much more disciplined now than ever. in terms of qualifying leads and scrubbing the pipeline. And that translates into much higher win rate. And so that's another strategy accent, if you will, that we were leaning on. As you saw, revenue in EMEA grew 33%. And so that helps stabilize the overall portfolio mix if one region one segment exhibits some kind of weakness, we pivot and accentuate the other.
spk02: Got it. Very helpful. Thank you, guys. Thanks. I would now like to turn the call over to Oleg Motion for closing remarks.
spk08: Thank you all for good questions, for insights. Hopefully, we were helpful in providing some visibility into our past and the future financial results in the business model and the strategy and look forward to executing on behalf of our investors and clients.
spk02: Thank you, ladies and gentlemen. This does conclude today's call. Thank you for your participation. You may now disconnect.
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