Enfusion, Inc.

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 up the lines for your questions. As a reminder, this conference call is being recorded.

I now want to turn the call over to Bill Wright, head of investor relations, to begin. Good morning and thank you, operator.

We welcome you to Infusion's first quarter 2024 earnings conference call. Hosting today's call are Oleg Movchin, Infusion's Chief Executive Officer, Brad Herring, Infusion's Chief Financial Officer, and Neil Pawar, Infusion's Chief Operating Officer. Please note, our quarterly shareholder letter, which includes our quarterly financial results, has been posted to our investor relations website. I would 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, which are available in the investor relations section of 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 measures 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 for joining us today to discuss our results for the first quarter of 2024. I'd like to start by sharing my excitement about the direction of our business. in our team's ability to execute on our strategy. As you will hear from me, as well as our COO, Neil Pawar, and CFO, Brett Herring, shortly, the value proposition we have shared with all of you in the investment community and bring to market every day is resonating, and I'm incredibly proud of everyone at Infusion for their hard work and dedication. I'd also like to thank those of you who attended our first ever Investor Day on March 19th in Fort Lauderdale. We're grateful for a terrific turnout and engagement from shareholders and research analysts who spent the time to learn more about our story. For those of you who couldn't make it, our presentation can be found on the investor relations section of our website, where you can see how we outlined all the key factors in place for Infusion to achieve our revenue growth goal of 20 plus percent in the medium term. which we define as 2025 to 2027. We believe that current macro trends will support and enhance our overall value proposition, and Infusion's platform will be the last upgrade our clients will ever need. As for the first quarter of 2024, we're off to a great start with 33 new client wins. We're on track to achieve the full year financial guidance we laid out for you at our prior earnings call and investor day. On the call today, we will share several proof points that confirm Infusion's continued move up market while deepening our relationship with existing clients. I'm also pleased to share that client onboarding satisfaction scores are at three-year highs. Those familiar with our story know that this has been an area of focus and investment, and I'm delighted that our clients are seeing results. Now, let me walk you through some key highlights from the first quarter. Our economic trajectory remained unplanned in Q124, as we reported $48.1 million in revenue, delivering 17.3% year-over-year growth. First quarter adjusted EBITDA totaled $9.2 million, translating into an adjusted EBITDA margin of 19.1%. Brad will provide a deeper discussion on financials later. More broadly speaking, the industry backdrop remains volatile. We witnessed the typical seasonal volatility in December, which included a combination of year-end fund closures and consolidations, followed by new fund launches in January. This year was no different. The 33 new clients we signed during the first quarter is up from the 27th we signed last year in the first quarter, bringing our total client count to 868. Not surprisingly, launches represented a higher mix in Q1, representing 55% of new client wins this quarter. We expect the mix will balance out more with a higher percentage of conversions throughout 2024. Moving on to ACV, it increased sequentially from $219,000 to $226,000, a record in our recent history, representing 3.2% quarter-over-quarter and 7.8% year-over-year growth. As we successfully protect and grow our market share in Infusion's core hedge fund segments, our expansion upmarket will broaden our client base, resulting in higher ECVs as we continue to add larger asset managers to our portfolio mix. These larger new accounts deliver more stable revenue profile and offer a great opportunity to expand our offering with additional product functionality and managed services, which will support NDR expansion over time. Stated differently, as the ACV of our clients base improves over time, so too will the overall business level economics. Shifting gears, Let me provide you with a few notable client wins across geographies from the first quarter. In the Americas, revenue grew 16% year over year, up slightly from the fourth quarter. New wins were a combination of market share gains and several new fund launches, which is normal in Q1 due to seasonality. I'm thrilled to announce that we welcomed Foundation Credit as a new client. Foundation Credit is a prominent New York-based credit-focused alternative asset manager with $1.7 billion AUM specializing in municipal credit and infrastructure debt markets. In order to earn their business, our team designed a customized solution that will consolidate and replace multiple pre-existing systems across trade capture, portfolio management, risk, and the tracking of credit agreement terms and conditions. Historically, Foundation Credit was tasked with coordinating workflows across several styled legacy providers on a daily basis. Foundation Credit will now be able to enjoy one centralized view across its entire business. This is an exciting signing and another validation of our ability to deliver customized solutions that support and drive productivity for complex credit managers. Another notable win this quarter, we just signed a multinational New York-based alternative investment management company specializing in credit with over $100 billion in AUM and multiple business leads across the capital structure. This client recently acquired an equity business from an investment bank and chose to implement Infusion to drive front, middle, and back office operational efficiencies. Shortly after the completion of their Infusion front-to-back implementation, They recognized the opportunity to drive similar efficiency with its structured credit business, which trades across asset and mortgage-backed securities. At their request, Infusion designed an end-to-end workflow from pre-trade compliance, trade capture, real-time IBOR, and shadow books, all with an open framework to integrate to third-party best-of-breed risk providers. This is a prime example of our technology's broad adaptability and flexibility. Importantly, it's a reflection of Infusion's team ability to think outside the box and deliver creative and customized solutions to large investment managers. In Asia-Pacific, revenue grew 13% year over year, which is up 7% last quarter, but below the 20% growth of last year. Not surprisingly, given the geopolitical and macroeconomic backdrop in the region, we continue to see capital outflows from China and Hong Kong into Singapore, Middle East, and Australia. Given our strong brand and market positioning in APAC, we remain the partner of choice for new fund launches and see strong growth opportunities with large asset managers outside of China and Hong Kong. We are delighted to add a high-pedigree launch to our client base with the addition of Shakara Investment Management, Our ability to consistently win managers, such as Shikara, validates the value proposition we deliver to high-quality asset managers. This type of wins confirm that our product and client strategy are continuing to help us win in the traditional asset management segment. In Europe, Middle East, and Africa, revenue grew 29% year over year in the first quarter, up from 24% growth last quarter. as Europe continues to be our fastest-growing region. Not surprisingly, we continue to win our traditional bread-and-butter investment management accounts in the European money centers. But we're also making inroads geographically beyond the UK market, with 44% of new clients coming from outside the UK. On a client-level basis, we were pleased to see a few credit fund wins in Europe, one new family office in Switzerland, and several account expansions. Given our European momentum, we plan to dedicate additional resources to further expand our market presence in continental Europe and Middle East. A unique client expansion story I'm excited to share with you is ICP Asset Management, an asset manager backed by the Norwegian industrial investment company, Acre, and led by Yngve Klingstad, who was the former CEO of Norges Bank Investment Management. ICP Asset Management is an existing Infusion client that recently acquired an established Swedish asset manager, Noram, to form a single Nordic firm with a global reach. The ambition is to create unique products that provide exposure to the whole energy transition. The newly combined firm evaluated both its incumbent solution and current market offerings and elected to broaden its commitment to Infusion as its PMS across product, geographies, and asset classes. ICP, once again, is a clear proof point that not only can we lend and expand, but also take share from our largest competitors. I would like to draw your attention to the strong geographic diversification benefits that infusion business delivers. While growth in the APEC region slows, our revenue engine in EMEA is more than compensating for that dynamic, resulting in overall growth acceleration and margin expansion. We will continue to adjust our go-to-market strategy and execution tactics to reflect market opportunities on a global basis. At this time, I'd like to have Neel Pawar, our Chief Operating Officer, make a few comments on product and partnerships.

Thank you, Oleg, and thank you to everyone for the warm greeting at our investor day. Just prior to today's call, Oleg and I returned from visiting Infusion's offices in Hong Kong, Singapore, and Sydney. My trip to Asia closes out the opportunity to spend time with our colleagues around the globe and to meet with a fantastic group of clients who have entrusted Infusion to provide them the mission-critical software and connectivity to operate their businesses. Our clients in the APAC region represent 28% of our client base in total. and include a cross-section of hedge funds, asset managers, and family offices. It's been an amazing experience and gave me a first-hand chance to not only understand market nuances in this region, but equally to see our team's dedication and drive. On our previous earnings call, we discussed how the addition of the portfolio workbench product has helped us to win new accounts in the fourth quarter of 23, such as the Utah retirement systems. In this past quarter, the value of having this product in our offering allowed us to expand our relationships with some existing accounts. One client story that perfectly illustrates our ability to grow our business with existing clients, which I'm pleased to share with you, is that of TRIUM. TRIUM Capital is a London-based multi-boutique hedge fund with 2.1 billion assets under management. TRIUM's portfolio managers specialize in a variety of trading strategies, including event-driven, emerging market macro, and ESG long-short equity, which are offered to institutional investors in Irish USIPs, Cayman offshore, and single managed account formats, either as a standalone investment or as a multi-manager product. We're particularly excited about this win as it is a textbook example of our land and expand strategy. TRIUM launched a single new fund with Infusion in Q2 2021, as their existing solution could not handle the range of financial instruments required. After two years on the platform, TRIUM's COO chose to implement Infusion's full front-to-back capabilities across their entire portfolio, encompassing over 20 funds and accounts in Q3 2023. In Q1 of 2024, TRIUM decided to further expand its relationship with Infusion by onboarding a related entity, TCM Wealth, to our platform. We're so grateful for our growing partnership with TRIUM. The timing of the wins this quarter was not a coincidence. We saw several conversion wins that were aided by our ability to rapidly release new versions of our software, thus being able to respond to clients' ever-evolving needs. We can't overemphasize the competitive edge of Infusion's multi-tenanted SaaS model. If you were at our investor day, you heard a few of our clients explain how they don't want to orchestrate and manage software system upgrades, nor do they want to have to wait months or years to have the latest version. This past quarter, Infusion rolled out 205 enhancements and features across our portfolio management and order management systems. And all of our clients benefited from these upgrades simultaneously, ensuring everyone is constantly running the latest version of our platform. Moving on to market expansion, as Oleg mentioned earlier, 44% of our Europe, Middle East, and Africa business came from outside the UK in Q124, which is up from 27% in Q123. This is in line with our plan to expand into continental Europe. Many of you had the opportunity to meet Lotta Tonsberg at our investor day, where she moderated a fireside chat with two of our clients. Lotta runs our European sales team, and under her leadership, we're seeing deeper market penetration, a trend we expect to continue. For example, the ICP expansion was the fifth consecutive quarter in which we won new business in Scandinavia. Lastly, I'd like to touch on our overall services. As we mentioned last quarter, we have accelerated the onboarding cycle. As someone who has had to manage many upgrades and switches over my career on the buy side, I understand how important switching costs are to our clients. We believe that the cost to switch to Infusion, both in time and effort, is already materially lower than our competitors. We continue to focus on this by putting emphasis on our inbound and outbound interfaces as well as our flexible reporting solution. Getting clients up and running faster and more efficiently than ever has wide-reaching benefits. One obvious one is as we onboard clients faster, we're able to recognize revenue more quickly. As an additional benefit, we've seen that clients with high onboarding satisfaction scores can be more receptive to purchasing additional products or services from us. While clients' onboarding satisfaction scores are at a three-year high, we continue to respond to our clients' feedback and find ways to continue to improve our service here. And now, I'll turn back to Oleg to discuss market dynamics.

As for market dynamics, we're seeing an inflection from year-end fund closures in December to new fund launches in January. We have been seeing capital flows shift. out of China and Hong Kong and into Singapore, India, Japan, and Dubai, although we believe Hong Kong remains the core operating hub for fund managers. We observed more activity in Dubai recently, as it has been a destination for both intellectual and investment capital, and we're evaluating opportunities in this market. China was a little quieter during this first quarter due to the Lunar New Year. as well as some funding delays from newly launched investment funds in the UK. We expect to see activity ramp up after these events. And now, let me discuss our strategic focus. We are pleased with the start of 2024 with healthy new client growth and customer onboarding satisfaction at three-year highs. The Infusion team remains laser-focused on product innovation, customer satisfaction, and creating superior value for our shareholders. We continue to view our best return on investment capital as an investment in our product and people, which has been in motion and will continue throughout 2024. Our product team and software engineers are relentlessly working in synchrony to deliver new capabilities and workflows for our clients with a focus on traditional asset managers. Our focus on operational efficiencies throughout product platform development is designed to provide our clients with more capabilities to self-customize their systems and enable our team to deliver best-in-class client services in a cost- and time-efficient manner. We believe this will result in shorter completion times, minimize help desk interaction and wait times, and greater customer satisfaction. In closing, I'm delighted with our first quarter results, but even more pleased with our team's ability to execute. We have the product offering to win new business and to land and expand with our current accounts. Our strategic roadmap and revenue trajectory afford us the ability to invest in our account management and managed service teams as we simultaneously expand Infusion's platform and product capabilities. When added together, we believe this creates value for our clients and accelerates scale, expands margins, and drives efficiency. We believe our disciplined approach to capital allocation and the relentless focus on our technology capabilities puts Infusion on the path to be a Rule of 40 company over the medium term. I will now turn the call over to Brad to discuss our financials.

Thanks, Oleg, and thanks, everyone, for joining us this morning. On behalf of Infusion's 1,100-plus global employees, I have the privilege to report another solid quarter that reflects market leading growth combined with continued expansion of our profitability profile. For the first quarter, we generated revenue of $48.1 million, an increase of 17% over the same quarter last year. This quarter's revenue performance continues the trend of expanding our growth rate by adding 260 basis points over the growth rate we reported for Q4 of 2023. Referring back to the discussions we had in our last earnings call and at our investor day, On the designation between front and back book, the 17% growth rate in the quarter consisted of approximately 14% contribution from the front book and approximately 3% of growth coming from the back book. While both of these figures are within the expected ranges we discussed at our investor day meeting, we are watching the patterns in the back book drivers as Q1 churn and downgrades came in slightly higher than the normal seasonal pattern we would have expected to see. As a reminder, I would encourage listeners on the call to review the materials from our Investor Day that lay out our discussion on front and back book revenue projections, and those materials are posted on our IR website. First quarter ARR was $190.5 million, up 14% year over year, and 3% higher than what we reported in the fourth quarter of last year. As a quick reminder from our last earnings call, going forward, we are only reporting a single NDR figure that captures both voluntary and involuntary terms in order to simplify our messaging to investors. Our NDR for the quarter was 103%, which is up 80 basis points from what we reported last quarter. As we talked about last quarter, the consolidation of UBS and CS will continue to impact our NDR until it annualizes in Q4 of this year. The impact of the UBS CS consolidation on Q1 was a headwind of 60 basis points compared to 70 basis points last quarter. We are still targeting an NDR to expand to 106 to 107% as we close out 2024. Our reported adjusted gross profit increased by 17% year-over-year to $32.6 million. This represents an adjusted gross margin in the quarter of 68% which is down 40 basis points from Q1 of last year. The year-over-year margin impact represents a combination of slightly higher infrastructure costs to support our push-up market in the traditional asset manager segment, combined with improved operating leverage from client service and onboarding personnel. Adjusted EBITDA for the quarter was $9.2 million, up 61% compared to Q1 of 2023. This represents an adjusted EBITDA margin of 19%, which is up over 500 basis points from the same period a year ago. The improvement over Q1 of last year was due to increased scale from our SG&A functions, reduced provisions on receivables, and lower spend on third-party service providers. Referencing the margin guidance we provided in our Q4 call, where I discussed a target of 16% to 17% for the quarter, I would like to call out that there was approximately 150 basis points of margin benefit or roughly $600,000 in the quarter from non-recurring savings that will not repeat throughout the remainder of the year. Adjusted free cash flow for the quarter was negative $1.2 million. The decrease in adjusted free cash flow from Q4 of 2023 is due to the timing of our 2023 annual incentives that were paid out in the first quarter. For the trailing four quarters, our adjusted free cash conversion was 47%. Note that there was a one-time $1.5 million distribution payment made to FTV Capital that we discussed in Q2 of 2023, which reduced our free cash flow conversion by 4%. Gap net income for the quarter was negative $800,000, which results in a gap EPS of negative one penny per share. Similar to last quarter, We do not have anything significant to report with respect to our balance sheet or capital structure. We ended the quarter with approximately $33 million in cash and cash equivalents with no outstanding debt. Our cash balance combined with $100 million of capacity on our revolver gives us adequate liquidity to support both our organic and inorganic growth objectives that we discussed at our investor day in March. Moving on to guidance, I will reiterate the full-year guidance we provided in our previous call. As a reminder, that guidance included revenues between $200 and $210 million, adjusted EBITDA between $40 and $45 million, and a free cash conversion rate between 50 and 55 percent. For modeling purposes, we continue to expect stock-based compensation to land between $19 and $20 million for the full year. With that, we'd like to open it up to call to questions. Operator, please go ahead.

To ask a question, simply press star, then the number one on your telephone keypad.

Your first question is from the line of Michael Infante with Morgan Stanley. Please go ahead.

Hi, everyone. Thanks for taking our question. Oleg and Neil, I'm curious how you're thinking about resource allocation with the Salesforce generally. You obviously talked about some of the different geographic revenue exposure. But I'm curious, like, ability to sort of toggle that depending on what you're seeing in various regions would be helpful.

Yeah, hi, this is Neil.

In terms of the Salesforce right now, we're obviously looking to expand, particularly in Europe. We see a lot of opportunity there in our core segment and, you know, the recent wins that we talked about on the call a few minutes ago. You know, are a result of our continued emphasis in that region. Fortunately, we're not doing that at the expense of other regions. And so, you know, I would say, you know, in Asia Pacific, we're not growing our investments in our region. Salesforce significantly. Obviously, you know, for macroeconomic reasons that Oleg talked about, things have slowed down a little bit there. And in the U.S., we're still pushing as we continue to grow into the sort of higher ACV, more complex, larger client segments. So very much a focus on North America and Europe and, yeah, continuing to invest.

That's helpful. Appreciate it. And nice to see the KPI acceleration really across ARR, NDR, and ACV. I wanted to ask on the full year outlook. I know it's somewhat early in the year, but given the performance in the quarter, particularly on profitability, I was curious how you would frame the previously provided outlook for us and whether or not the outperformance in the quarter either leaves you more convicted in the 24 outlook or potentially tracking towards the higher end of it. Thanks.

Hey, Michael. This is Brad. I'll take that. One of the things I did mention on the call, we did have a few non-recurring type things that helped us on profitability in the quarter. I mentioned that in the call specifically. Outside of that, I think first quarter end is a little early to declare victory. We look good. We like the way the trends are playing out, but we're a little bit cautious on a couple of little things I mentioned around where we saw churn and some other things come in for the first quarter. But we feel really good about our guidance for the full year. And we're just going to see how that plays out. But we just want to be, you know, we don't want to get ahead of ourselves this early in the year.

Makes sense. Thanks, guys. Your next question is from the line of Dylan Becker with William Blair. Please go ahead.

Hey, guys. It's Faith on for Dylan. I'm just looking at that ACV metric. Given your guys' push upstream with larger asset managers, what's the importance of these customers, and how should we expect the balance of ACV growth versus maybe new logo ads going forward? Is it going to be fairly balanced given the long-tail opportunity, or what's the right way of thinking about this?

Hi, Fred. It's Oleg here. Of course, naturally, as we move upstream and sell into more complex, larger funds, institutional asset managers, you know, ATV will go up. You know, I would encourage, you know, you and everyone else to think about ATV in a very, in a more granular way. You know, we have a large chunk of customers that pay us about $500,000, but a lot of our clients pay us, you know, $250,000 a year or less. And so that portion of our portfolio over time will shrink, But, you know, it will shrink disproportionately. And so the idea is the averages are sort of difficult to interpret across the entire client base. So we are very focused on growing the portion of the portfolio with larger clients. But in this particular case, you know, one of the reasons ACV went up is because some of the clients with much lower ACV churns and, of course, mathematically yields higher ACV as well.

Okay, awesome. Thanks for the color. And then if I could squeeze in one more. Just thinking about the partnership ecosystem angle, as you expand your value proposition and address more components of these traditional asset manager workflows, I'm wondering how you guys think of leveraging this channel to support incremental capacity or value services that you can offer customers through different integrations?

So, great question. So, a couple of things I'll say, and maybe Neil can chime in here. So... in a couple of years. On one hand, those relationships keep us, giving us clients is just a pure referral type relationships and we do it both ways. Different entities refer clients to us and vice versa. The other way we think about it is when we actually have a joint value proposition with another solution provider and we go to market together and enhance or accentuate value proposition to the client. And there is abundance of examples there. We're talking about some entities to help us sell content, help us on risk models, help us sell data, and vice versa. We've seen opportunities where we have those partners where they provide certain capabilities, like optimizers, risk models, performance attribution, where they see clients that still live in this outdated compartmentalized technology world where we can bring value to the table.

Yeah, maybe just to add to that, this is Neil. I'll give you a couple of examples here. So there's a company called FundApps that we have a partnership with. They provide trade reporting to regulators. It's a great example of leveraging sort of, you know, the partnership with them to quickly add capabilities that we don't need to build ourselves and that we can quickly provide to our clients but with a deep integration. Clients would much prefer to use industry-tested data pipelines and connections and not have to manage sort of a myriad of numerous, you know, data vendor connections themselves. Another great example is Backstop. It's a CRM solution used within the hedge fund community that we've integrated into the platform. So we have a number of others like this, and we're investing in building more because we think this is a really sensible way to provide value to our clients.

All right. Thank you.

Your next question is from the line of Jeffrey Lane with Stifel. Please go ahead.

Hi, guys. Thanks for taking the question here. It's Parker. You know, you referenced switching time and costs being lower with infusion. Has that been the primary impediment for these asset managers that you're looking to convert in the past, or is there other dynamics at play?

So, let me start now. You know, in our usual session, you know, Neil will... complement my answer. So the impediments, you know, many things, right? Both risk and cost of translation. And, you know, when we talk to larger clients, it's almost that the pain that they currently incur, and everybody acknowledges this, that they do incur a lot of pain with everything they run, should exceed their sort of concern about risk. and visibility into our onboarding process, then they just cannot help but make a choice and decide to switch. We also approach this in a modular fashion. So, you know, in addition to our ability to onboard clients, you know, in a comprehensive way, we offer sort of just the same way we do with products, kind of lend and expand approach, where we either onboard a portion of the organization when it's broken down by asset class, by product, by division, and then goals sort of horizontally. Or we start with a portfolio management system, sort of our traditional default approach, and then we continue to integrate both up and down to OMS and accounting. But switching costs are super important. We're investing in products and platforms that enable us to do data migration and onboarding work much more efficiently. And on the flip side, enable clients to use exactly the same tools to self-service and do

Yeah, just to add to that, Oleg, I would say that our average implementation time over the past four quarters for clients who are switching or converting to Infusion has ranged between seven to nine months, which we think is pretty good. There's obviously more work we want to do to bring that down, but it's worth mentioning that for clients who are switching to non-SaaS companies, just procuring hardware can be 50 to 80% of that timeframe alone. And then when you factor in the potential supply chain shortages, you know, with chips, and we saw this over the pandemic, and now with the AI computing demand, trying to just get the hardware to run this software can often eat up the majority of that timeframe. Obviously, as a SaaS native platform, that's not a challenge for us. And our clients are able to reap the benefits by getting onto the platform sooner.

Very interesting. Neil, maybe just to stay with you here, you called out some nuances in the APAC market. I was wondering if you could go a layer deeper there on what those nuances look like and how they impact your view on the market opportunity and, more importantly, deal cycles that you're seeing in that region.

Well, let me first maybe make a comment just on some of the nuances I was referring to, and then perhaps Oleg can talk more about the macro picture that we saw when we were together in APAC last week. What we've noticed as we talk to clients in the region is that even just when you look at the way swap trades are financed there, you look at some of the compliance rules there, they're very different. If there was one message that we heard loud and clear, and we hear this from our European clients as well, It's that, you know, the EU is not one country and APAC is not one country. And so as we went across those regions and sort of talked to clients in each region, we recognized that there are just differences in the way products trade and the way they're financed that we need to make sure the system can handle so that, you know, especially those who are using us for their accounting roles, do not have to do a lot of adjustments at month end to try and, you know, line their books relative to their custodians or their, you know, prime brokers or admins. So, you know, those market nuances are a lot of the nuances I was referring to. But I think your question is the right one, which is there's also a sort of macro economic trend that we witnessed, particularly in APAC. And I'll hand it over to Oleg to answer. to share his thoughts on that.

Thanks, Neil. So yes, so, you know, Parker, it's a consistent theme, people on the back of fundamental concerns about geopolitics, China economy slowdown, and just being able to extract and protect capital in the region. You know, we're seeing capital leave in China and Hong Kong and places like Singapore and Italy and Australia in some cases. And also from an investment opportunity perspective, investment managers that typically kind of presented themselves as, you know, sort of getting exposure to APAC as one holistic region, they tried to differentiate within that block and focus on countries like India and Japan versus, you know, just being highly levered to China and Hong Kong. However, having said that, we still see that the Hong Kong remains, you know, pretty strong operating base For many APEC-centric managers, as you know, we have a very strong brand equity in Hong Kong specifically, but as we reiterated multiple times, we expand our presence around Hong Kong to cover APEC broadly and, of course, shifting our attention to the Middle East as part of our EMEA portfolio. Got it.

Thanks for the feedback here.

Your next question is from the line of Kevin McVey with UBS. Please go ahead.

Great. Thank you. Hey, I know you talked about seven to nine months of implementation time. Any sense of, you know, the fees associated with that and the cost savings? Has that changed much just, you know, given some of the deficiencies you've been bringing to bear? Hi, Kevin. Can you repeat the question we're putting here, if we live all? Yep, just the cost of the implementations. I know you talked about seven to nine months. What's been the average implementation cost and, you know, what type of cost savings are your clients seeing as you folks drive more and more efficiencies in the channel?

Well, look, I mean, implementation costs vary from client to client. It's, you know, again, the kind of seven to nine months is an average number as well. You have to sort of peel it back a little bit and see, you know, what complexity of different clients actually, how it drives the cost. I don't think it can be just summed up to dollar amounts. We'll look at the relationship with clients on a holistic basis. So it just becomes part of it. I will probably emphasize the actual risk assessments. And to clients, sometimes it means that if they want to take a little longer, instead of nine months, they want to take 12 months. just to make sure everything's smooth and everything is in production and they can go live, they will take longer. So when people think about, I mean, Neil spent his lifetime thinking about this risk. When they think about that portion, a lot of different things factor into it. It's hardware, it's software, it's data sets, how much data you need to actually migrate from the legacy systems to us, what modules you want to migrate. So it's multidimensional. question, but we sort of price that elements of the, you know, of our relationship with the clients from holistic perspective, not on a standalone basis.

And maybe the only thing I'd add to what Oleg said is, you know, where we see the most savings for clients. It's often hard to tell exactly what the savings are because obviously, you know, we don't get much transparency into what they're pre-existing cost structures were. But having been on the other side of the table, I can tell you that when a client adopts our portfolio management tools, our order management tools, and our accounting tools, they're obviously going to see a much bigger savings because they're typically replacing three or more independent systems that they have to keep synchronized and reconciled and mutually consistent, which they can then replace with a single IBOR that fuels all three of those key components. So there is obviously a scaling factor to those savings given, you know, depending on how wide a range of our product set they adopt.

That's very helpful. And then, Brad, you just reminded us of the $600,000 of non-recurring savings in the quarter. What exactly was that?

Yeah, the biggest one had to do with The provision for receivables, we did a really good job in the last two quarters of 2023 with our collections. So that then translates into the calculations you use for your reserves. So we actually ended up in a credit position on our provision for the quarter that's actually reduced it. We don't see that kind of continuing. We're going to go back to normal provisioning against our open receivables, which is a very small number. But given the fact of how good it was in Q3 and Q4 from a collection perspective, it actually took us from a debit to a credit position in Q1. I just don't see that recurring, so we wanted to call that out. Thank you.

Your next question is from the line of Alexey Gogol with APM.

Please go ahead.

Hi, Oleg. At the investor day, you mentioned that you already possess quite a lot of ability to cover traditional asset managers and sort of those asset classes.

But you were saying that you need further product build-out for investment decision-making processes. So could you maybe talk about the product build-out here, and when do you think you can meet those customer needs?

Yes, sure. Actually, I will let Neil to dive into that. I would say there are two elements here, just broadly. One thing is investment decision-making part that you just mentioned that has to do with on one hand, absorbing information about expected returns, both at asset class level and at the security and instrument level, and incorporating that into portfolio construction, and then translating that into portfolio implementation stuff, which is, as we discussed many times, this is what portfolio workbench is all about. Right now, it's been released in first version, where you basically can do heuristic portfolio construction at hawk and grid, and then you apply compliance rules and then rebalance the portfolio accordingly. The next stage will be a little more sophisticated, and the benchmark will be taken into account so you can actually rebalance portfolios on a relative basis, and then we will evolve the process to allow for more quantitative-driven, systematic portfolio optimizations with constraints. So this is sort of portfolio construction. And then the portfolio implementation piece dimension has to do with just scaling the system so that we can apply much more complex pre- and post-trade compliance rules, much more complex compliance logic, and much more complex and high-level scale allocation capability where we, you know, not just dealing with prorata allocation for, like, 20 SMAs for a hedge fund, but with, like, 50,000, 100,000 accounts, each of which can, you know, have its own investment guidelines, constraints, you know, limits and so on and so forth. So on that front, we definitely have a lot of work to do. But, you know, the good news for us is that architectural system is set up very well. So it's just a matter of us investing time, money, and, you know, making the product better.

Yeah, I think, Oleg, you covered most of it. The only things I would add, I would say, is, you know, especially in that institutional segment, we have a lot of demand for institutions to be able to do a lot more self-service On the platform today, there are a number of things. For example, in our compliance suite where to make a change, you have to log a ticket with our support desk and we make the change for you. Larger, more complex clients want more control over that themselves. That's something that we're starting to roll out. And then just maybe to quickly address your question on the timeline aspect, as we've mentioned, the fact that we do weekly releases is We're pushing these things out incrementally all the time. I mean, it's going to take us a couple of years for us to be able to say we handle every single nuance of every single market for every single client type. But the good news is as we onboard more clients, That tends to drive our prioritization queue because we want to make sure that we have the functionality that they need to go live. And then as we add those features to the platform, other clients get the benefit of it, and it makes the platform more attractive for future clients to be onboarded to.

Great. Thank you for that, Neil. And Brad, if I could maybe ask you about the comment you made regarding the elevated churn in the first quarter. Does that impact your outlook for the normalized churn level that you mentioned earlier in the year? I think it was about 4% to 5%. No, it doesn't.

There's normally a seasonal pattern of churn in Q1. That tends to be the highest churn quarter as customers kind of go through the previous year and who survives and who doesn't. It was a little higher, but what I'd call out, the count number was a little higher than we anticipated, but the impact wasn't as much as you would have associated with those counts, because what churned out was really small clients. So it's a combination of who churned and then what's the impact of that churn. So that's what we're watching closely. We just wanted to call it out to say there's something we're looking at.

Great. Thank you very much.

Thank you, Alex.

Your next question is from the line of Gabriella Borges with Goldman Sachs. Please go ahead.

Hi, good morning. Thank you. Perhaps for Oleg or Neil to start, remind us how you think about the monetization strategy around portfolio workbench. How much does it help you in terms of deal sizes when you lend? How much does it contribute to NRR? Just a little bit on how you think about charging for that.

Well, thank you very much. This is actually a topic du jour for us at Infusion. So, as you know, traditionally, our pricing model has been very simple and sort of generic, right? It's basically price per license, price per seat, and then we make money on broker connections. So, as we enrich the platform and make it, you know, more sort of, I would say, multi-layered, right, we need to strike a balance between the fact that, you know, we have, like, a SaaS platform technology or SES architecture-driven SES model with the fact that now, instead of just making the system better, we're actually developing premium features and differentiated features that actually not all clients use or not all clients actually value. Not all clients would be willing and able to pay for. So we are kind of doing a wholesale revision of how we actually go to market in particular for larger clients. So this is a big, big topic of discussion for us. It definitely will result in one way or the other. It will result in even more granular pricing, even more, you know, in better economics for us, but also better alignments for the clients, right? Because we can't simply just continue to make the system better without reflecting it in

Yeah, and maybe just to add to that, in a more immediate sense, you know, the new features in the portfolio workbench are helping us win new business that we wouldn't normally win if we didn't have this functionality. So that's already contributing to our revenue story. It's also given us the opportunity to expand our relationship with existing clients. So we've had clients look at the functionality and then want to add that you know, to their suite and thus that adds more seats within that client and thus also drives additional revenue. And then obviously for us, we're also getting tremendous validation on the product market fit for that product, which, you know, while that in itself doesn't directly contribute to revenue, it gives us tremendous conviction that we're moving that product in the right direction and making it fit for purpose for obviously this larger segment that we're growing into.

Yeah, just to give you all for clarity, this is in all the logic that I just got and Neil just outlined. It's not portfolio workbench specific, obviously. And I hope that's understood. It's just across the board, we have other, you know, differentiated product offerings in the pipeline that are not, you know, generic. And so the same framework will and should apply when we price those layers of functionality on the flow of our business.

Right. No, thank you. I appreciate the call. The follow up is for Brad on how to think about the seasonality of the business. And specifically, as we see companies move up market, sometimes that seasonality tends to shift more back off weighted because larger deals tend to get done more on the back off of the year. Is that something that you're observing or have observed over the last couple of years with your pipeline? And help us think about how you think about the changing seasonality of infusion as you move up market.

No, it's a great question. If you think about it, let's talk about it in the front book, back book, you know, delineation we've used before. In the back book, you don't see much seasonality other than what I mentioned. Q1 tends to be the quarter where customers kind of reassess their cost structure, whether it's they survive or not, which is the churn comment I made, but also whether they do some downgrading along the way. That typically is a little bit more heavily weighted in the first quarter, even in the first half of the year. When you go to the front book, there's definitely some seasonality there. You tend to see less front book booking in the Q4, I'm sorry, in Q1, you know, as customers are coming out of the prior year. And then that begins to pick up more in the back half. You know, but what Neil mentioned earlier, when you get into some of the implementation times, that get longer with the asset managers, it begins to monetize for us a little smoother. So what you don't see is necessarily a bunch of bookings in the second half of the year, and then revenue gets accelerated in the second half of the year because the revenue from those longer-term booking clients that take longer to board tends to drag out, you know, for what we mentioned, seven to nine months. So while there's some seasonal pattern in the booking itself, how it affects revenue is not near as significant.

Yeah, I would like to actually emphasize that because this is an analogy we've seen in the past. You asked how we think about it on a go-forward basis. In the past, this analogy has been more related to hedge funds, to launches, to closures, to capital flows in and out of the space. As we go into more traditional segments, what Brad just described, I would expect to be prevalent framework for us from a seasonality perspective. As bookings sort of stagger, the onboardings will stagger as well, right? And so once we kind of dial in and perfect that machine, hopefully the onboardings themselves will start flowing up to the revenue, and we will start converting bookings into revenue in a way that is much smoother and kind of smoothens those seasonality patterns, if you will, as part of our revenue

Thank you. Appreciate the call.

Thanks, Gabriel.

Our next question is from the line of Koji Ikeda with Bank of America. Please go ahead.

Yeah. Hey, guys. Thanks for taking the questions. I wanted to circle back on the guidance, you know, the reiteration of the guidance range of 200 to 210 million for this year. And the reason why I ask is the guidance tells really two stories here. You know, the low end of the guide, growth deceleration story for 2024. While the high end is a much more attractive story of growth acceleration. So, you know, as I look at the key metrics here, ARR, NRR, clients and average contract value, maybe help us, you know, pick one or two of those metrics as the key metrics going forward to help us try and get where you could end up in the 2024 guidance.

Hey, Koji, this is Brad. I'll take that. You know, it's exactly why we put a range on it. You know, there's still, you know, we're one quarter in. We've still got three quarters left to play out. So we want to, you know, we're watching a lot of things. We're watching our booking patterns. We're watching the back book. We're watching our front book revenue production. You know, any one of those in combination, you know, starts to give some insight on full year. ARR is a good number to look at. You know, that's a good indication of how the book is performing in and of itself. But, you know, we're a little bit noncommittal at this point to kind of place it in the range, or we certainly wanted to make sure we reaffirmed our guide to provide confidence to this group that we do feel comfortable with the range we provided, but we've still got a long way to go. So, you know, I would look at ARR. I would look at the patterns in NDR. I mean, that's probably the two best numbers I would look at if I was in your seat.

Yep. Nope, that makes sense. Thank you for that. And a follow-up and maybe, you know, just kind of digging in deeper on the demand environment, just from a holistic level, let's say the markets are very similar, you know, to what we've been seeing over the past six months, and we'll just project that out over the next 24 months. Does that potentially change the way you think about the growth algorithm for the business?

No, it doesn't. Not at all. I mean, it's the same... The same approach, the same machine you have, you know, we discussed it, you know, on multiple occasions. Basically, client retention plus net new growth. And, you know, we just have to get better at, you know, retaining clients and capturing more economics with the clients. And that will, you know, get us to, you know, rule of 40 combined with new sales and institutionalized management market. It's a relatively simple growth algorithm.

And maybe just to add, we're seeing, you know, clients still are under fee pressure. They're still under budget constraints. And so when they look at their total cost of ownership of their systems, they're still looking for ways they can operate their platform more efficiently. And obviously Infusion gives them an option to do that in a very different way. And so, you know, we don't see that changing in the foreseeable future. And we think that that works well given our business model.

Yeah, and look at our, you know, how our know book mix evolves over time and how we balance you know launches versus conversions like this quarter you know we had a pretty good order in terms of launches you know there is nothing to be ashamed of we control that market space we defend the market share we grow market share there although as you know our strategic direction is to expand around that you know apex slow down you know, EMEA reaccelerated. So, you know, there is this diversification benefit that, you know, our strategy delivers. You know, can the world potentially fall apart and everything would, you know, go bad? Of course, we've all lived through 98, 2008 and COVID environment. And as we discussed, you know, especially in those situations, oftentimes it's a great opportunity for Infusion to shine and capture the, you know, downside convexity profile of our business.

Got it. Thanks, guys. Thanks for taking the questions.

And at this time, there are no further questions. I will turn the call back over to Oleg for any closing remarks.

Well, thank you so much for the insightful questions, for the framework, for sort of keeping us on our toes and, you know, focus on what matters. We, of course, remain very excited about what Infusion is, what it's going to be. We feel strongly that we are differentiated vis-a-vis our competition. There's a lot of work to do for us to capture full potential of what this company can be. But we're absolutely focused on creating shareholder value and making sure we deliver our promises to the shareholders.

This concludes today's Infusion's first quarter 24 earnings conference call.

Thank you for joining. You may now disconnect.