Good afternoon. Thank you for attending today's Enfusion Third Quarter Fiscal Year 2021 Earnings Call. My name is Tania, and I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to our host, Brian Murphy. Please go ahead. .

Good afternoon, and welcome to Enfusion's Third Quarter Earnings Call. With me today are Thomas Kim, CEO; and Steve Dorton, CFO. A complete disclosure of our results can be found in our press release issued earlier today, which is available on the Investor Relations section of our website.

Today's call is being recorded, and a replay will be available following the conclusion of the call..

Comments made on this call may include explicit or implied forward-looking statements relating to the company's financial results, operations and performance, including expectations regarding market opportunity and market conditions, future financial results and drivers thereof, products, customer demand, operations and other matters..

These statements are subject to risks, uncertainties and assumptions and are based on management's current expectations as of today, December 2, 2021, and we undertake no obligation to update or revise these forward-looking statements whether as a result of new information, future events, circumstances or otherwise.

If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Therefore, these statements should not be relied upon as representing our views as of any subsequent date..

With that, let me turn the call over to Thomas, CEO of Enfusion. .

Thank you so much, Brian. Welcome to Enfusion's Third Quarter Financial Results Conference Call. I would like to thank you all for joining us today and for your continued interest in our story.

We're on a movement to transform the global investment management landscape with our mission-critical cloud-native SaaS software and technology-powered services.

The movement is taking shape and, as evidenced by our Q3 performance, adding 59 new clients in the quarter and increasing our ARR to just below $120 million, which is a 49% increase from September 2020..

Our community of investment managers spanning across alternative and institutional investment management, who rely on us every day to efficiently power their portfolio management, trading and middle- and back-office investment operations continues to grow, surpassing 680 firms across the world as of September 30, 2021..

This is an exciting time for Enfusion. In Q3, we added 2 new independent directors, Jan Hauser and Kathleen DeRose, as a continued investment in our evolution as a public company. We are thrilled to share our third quarter results with you in detail.

But before doing so, I think it may be helpful, given this is our first public earnings call, to spend some time providing an overview of the company and the industry that we're excited to serve..

We believe Enfusion's durable business model and strategy that has led our annual recurring revenue to grow from $33.1 million for the month ended December 31, 2017, to $93.4 million for the month ended December 31, 2020, representing a compound annual growth rate of 41.4%, is driven by 2 core principles.

One, deliver the most innovative and impactful mission-critical, cloud-native SaaS software and technology-powered services to solve investment managers' evolving business and operational challenges, ultimately helping to improve their profitability.

And two, deliver a world-class differentiating client experience, which we have done, as evidenced by our consistent net dollar retention rate of over 110%..

These guiding principles permeate throughout our business, helping us address challenges faced by the investment management industry today.

As the industry continues to grow with assets under management now exceeding $100 trillion, so has business and operational complexities, whether from evolving investment strategies, heightened competition, evolving regulation, globalization, enhanced cybersecurity threats and the need for better accessibility to mission-critical technology, all of which drive investment managers to find more innovative ways to adapt and compete such as heightened demand for solutions that create efficiency and unify investment management businesses..

As a result, we believe Enfusion's innovative and impactful end-to-end multi-tenant software, which is tightly coupled with technology-powered services, addresses these challenges and presents an opportunity for Enfusion to capitalize on the industry's unprecedented pace of change and need for modernization.

In fact, we believe the investment management industry is in the midst of a generational shift. .

Although technology can take the lead in solving many of these rapidly changing demands, most of the solutions available today fall short of helping the investment managers seamlessly and holistically address their challenges.

As a result, market participants are seeking technology partners that can quickly address and meet their evolving business needs..

Combining our award-winning technology, client-first approach, deep competitive moat and scalable SaaS unit economics, we are uniquely positioned to solve client demands by unifying mission-critical systems into one front-to-back solution, coalescing the underlying data into a single data set and bridging our clients' software needs with middle- and back-office technology-powered services..

Given our unique position, we are able to remain focused on evolving our community of global investment managers by continuing to grow our strong position with hedge funds and bringing more institutional asset managers into our community of clients.

We use the meaningful relationships forged with our client partners to further land and expand with our portfolio of products and services and increase the adoption of our technology-powered services..

To fully understand the value proposition of our overall solution, let's talk a bit more about the underlying problems investment management firms are facing.

The majority of solutions available to investment managers today are pieced together as a patchwork of task-specific point solutions provided by disparate vendors or a mismatch of internally developed solutions, legacy technology combined through acquisitions or cost-prohibitive solutions accessible only to the largest investment managers..

To the extent available solutions are cloud-enabled, many were originally designed for on-premise installations and later migrated to the cloud individually via discrete code streams, which ultimately retains the inflexible and inefficient single-tenant infrastructure limitations that have made non-cloud-enabled solutions costly and inefficient such as the need to make changes for each client individually rather than delivering changes to all clients simultaneously..

These limitations lead to error-prone, laborious and cost maintenance with difficult security requirements.

As a result, many investment managers spend considerable time and resources simply managing legacy stitched together or disparate systems, fragmented data, [ intricate ] communication networks, which increase the complexity of already convoluted workflows.

Having an understanding of the challenges asset managers are facing, now let's discuss why we're winning as evidenced by our third quarter results..

As a multi-tenant cloud data solution, we're able to update all clients in one deployment, which allows us to quickly expand our offering, geographic reach and innovate as opposed to costly and time-consuming tenant-by-tenant deployment.

The architecture also allows us to apply one data set to all systems, allowing clients to better communicate across departments and reduce the risks associated with disjointed data..

Where some solutions might operate on a stagnant data file, increasing uncertainty and limiting historic analysis, our solution gives clients the ability to communicate trade orders, produce a full suite of accounting statements, utilize our extensive reporting and analytics capabilities, construct and analyze portfolios and performance metrics with granularity and in real time, enabling better informed investment decision-making.

When you add all this up, our solution delivers investment managers a tailored suite of tools and investment content designed to help solve their evolving business and operational challenges through next-generation technology..

We have discussed why we believe we're winning. Now let me walk you through our strategy to continue winning. As I stated earlier, the investment management business is undergoing change at an unprecedented pace.

Yet, despite the meaningful demand for next-gen technologies, the needs of the industry remains served primarily by legacy point solutions that don't adequately address the challenges investment managers face..

We estimate that our total addressable market exceeds $19 billion today. According to IDC, spend on software and IT services by investment management front-office and operation functions was estimated at $11.5 billion in 2020 and is expected to grow 6% annually to $14.4 billion in 2024.

On top of that, internal IT spend was estimated at $5.7 billion in 2020. We also see an incremental opportunity related to the $2 billion IDC estimates investment managers spend on traditional hardware infrastructure..

That spend can be targeted by our solution as our clients migrate their technology and processes to our platform, which we host. In addition to selling subscriptions through demand generated by our global marketing and direct sales efforts, we supplement our internal efforts by leveraging a broad network of global relationships and channel partners.

This approach is global..

Geographically speaking, approximately 32% of 2020 net revenue was generated outside of the Americas. Going forward, we see attractive untapped opportunities within emerging and developed markets. As such, we're currently opening an office in China and have recently opened an office in Australia.

We expect to continue reviewing strategic opportunities to expand our global footprint throughout Europe, Latin America and Asia Pacific. To support our global community of clients, today, we are globally operating in 10 offices across 8 countries, including the office we recently opened in Australia. In Q3, we added 159 employees globally..

We believe these efforts are validated by our outstanding third quarter, during which we signed 59 new clients, including notable wins in each APAC, EMEA and the Americas.

Our global client base continues to expand into adjacencies with 14 client signings coming from institutions, family offices, private equity and other with broad product adoption across Portfolio Management System, Order and Execution Management System or OEMS and technology-powered managed services..

In addition to new client signings, we see existing clients increasingly demand more depth of service, leading to appealing upsell opportunities, including 3 meaningful upsells across large hedge funds and private equity firms. This was an exciting third quarter and a successful first quarter earnings announcement for Enfusion as a public company.

We are excited about our performance and all the relationships we forged during the time. It has also been a wonderful experience meeting and engaging with our shareholders..

Now before I hand it over to our CFO, Steve Dorton, I'd like to take an opportunity to thank all of our employees across the world. I'm humbled by our unwavering commitment to our clients and Enfusion. I'm continually impressed and inspired by your dedication and conviction to make a lasting contribution to the investment management industry.

Thank you for all your incredible work. We certainly would not be here without you..

With that said, I'd like to hand it over to our CFO, Steve Dorton. .

Thanks, Thomas, and thank you to everyone for joining us today. First and foremost, I'd like to reiterate Thomas' comments recognizing the entire Enfusion team for the hard work, vision and dedication that went into our journey to become a public company. Put simply, we wouldn't be here today without all of you.

I'd also like to welcome and thank our new shareholders. Given your role and expertise in the investment management industry, we view your partnership as particularly telling..

As Thomas mentioned earlier, we had a strong third quarter with solid execution across the business. Before I go into detail about the quarter, given it's our first public earnings call, I'd like to briefly touch upon our business model.

We have a highly attractive Software-as-a-Service model that combines industry-leading platform with technology-powered services enabled to facilitate client integration and shorten start-up time..

Our contract pricing is driven by a combination of cumulative users, number of solutions implemented and utilization of our tech-powered services. Our customer contracts are typically structured as 12-month evergreen agreements that can be canceled with a 30-day notice.

The vast majority of our total revenue is recurring, between 98% and 99% for the past 2 fiscal years, which provides high visibility into future performance due to our strong value proposition, differentiated solution and client success model..

Now let's turn to third quarter results. Total revenue in the third quarter was $29.045 million, up 46.8% year-over-year. Recurring revenue was $29.026 million, up 49.2% year-over-year. Our growth was driven by a combination of new logo wins and healthy customer expansion activity.

ARR in September 2021 was $119.8 million, up 49.3% year-over-year and up 11% since June 2021. ARR, or annual recurring revenue, represents the annualized value of active platform and managed services subscriptions from our recurring software products and technology-powered service in the last month of the period.

Our ability to upsell to our existing customers continues to drive strong net dollar retention, excluding involuntary churn, which was 125.9% in the third quarter compared to 122.4% last quarter and 110% in the year-ago period..

Net dollar retention, including involuntary churn, was 122% compared to 117.9% last quarter and 104% in Q3 2020. This metric will vary from quarter-to-quarter, but we have continued to see strong momentum within our existing customer base, and we continue to upsell our products successfully.

As we look into the fourth quarter, we expect this metric to decline by mid- to high single digits on a percentage points basis as the anniversary of our 2020 OEMS price increase implemented in November and December of last year rolls off.

It's worth noting that we are particularly pleased with our ARR and the number of new clients added in the quarter, which we believe is indicative of the increasing importance of our end-to-end solution in the industry..

During Q3, we signed 59 new clients, which marks another strong quarter. We expect this trend to continue as we broaden our reach into more regions and client segments with a strong product offering. We are proud to say that the addition of 59 new clients brings us up to a total of 686 clients in total as of September 30..

Third quarter gross margin is strong, but is lower than past periods as we continue to invest and scale our operations. In Q3, gross margin was 72.1%. This compares to gross margin of 72.7% a year ago.

Our gross margin is expected to continue to decline slightly for the coming quarters as we continue to invest and scale with our growing number of clients and ARR..

Turning to expenses. Our sales and marketing expenses for the third quarter were $4.9 million or 16.9% of total revenue compared to $2.1 million or 10.4% of revenue a year ago. We've made significant investments in sales and marketing throughout 2021 and expect to continue to invest to expand our market reach.

Technology and development expenses for the third quarter were $2.6 million or 9% of revenue compared to $1.6 million or 8.3% a year ago. We are continuing to invest in our research and development team to further our product offering in terms of scope and depth as we hire more developers and expand our product management team..

General and administrative expenses for the third quarter were $8.5 million or 29.4% of revenue compared to $4.5 million and 22.8% of revenue a year ago. Our G&A expenses in 2021 were driven by the continued evolution of our executive and management team and the addition of professional hires as part of our public company preparedness.

We expect general and administrative expenses to be at or near the same percent for the full year 2021, but to decrease as a percent of revenue as we continue to scale our operations over time..

Income from operations was $4.9 million for the quarter or 16.9% of revenue compared to $6.2 million or 31.2% of revenue a year ago. Net income for the third quarter was $3.3 million or 11.3% of revenue compared to $5.6 million and 28.2% of revenue a year ago.

These results were driven by increased investment in the business, as I just mentioned, along with increased interest expense for the quarter of $1.5 million this year versus $0.4 million for a year ago..

Turning to the balance sheet and cash flow statement. We ended the third quarter with $8.4 million in cash and cash equivalents and term debt outstanding of $98.75 million. In October, upon completion of the IPO, the outstanding term debt was fully paid down.

Operating cash flow for the 9 months ended September 30, 2021, was $5.5 million compared to $12.6 million a year ago. We have and will continue to invest in our sales and marketing functions with the goal of capturing market share as evidenced by our rapid growth in both revenue and ARR..

Finally, let's turn to guidance. For the fourth quarter, we expect revenue to be $30 million to $30.5 million and income from operations to be in the range of negative $293 million to negative $294 million, which will be composed primarily of stock-based compensation expense incurred in connection with our IPO..

I will now turn it back over to Thomas for closing remarks. .

Thanks, Steve, and thank you, everyone that has joined us today. We are proud of how we performed in Q3. The opportunity before us is massive, and we're just scratching the surface.

Our platform has positioned us to capitalize on the generational shifts our clients are facing by providing them with innovative, technology-driven solutions that enable them to focus on what they do best..

I'd like to close by reiterating my gratitude to our employees and partners as well as the customers and communities that we serve for giving us this opportunity. Now let's turn it over to our operator for Q&A. .

[Operator Instructions] The first question is from the line of James Faucette with Morgan Stanley. .

Congratulations on a big few months in Enfusion's business evolution and history.

I'm wondering if you can talk a little bit -- and I think you mentioned this in some of the prepared remarks, but just kind of revisit and expand on what the proportion of new client bookings in the quarter are coming from conversion versus launches and kind of what that sales cycle is looking like, particularly now that you've gone through the IPO process and maybe expanded the awareness of Enfusion.

.

That continues to grow. One, thanks for the -- for your question. But as we go into -- further into the year, it continues to -- we continue to see a majority of our new clients coming in are conversions versus launches.

And so again, as we were going through the IPO process and everything else in 2019 and in 2020, we were seeing a majority were launches. And now as we're adding into 2021, we are continuing to see a majority of our new clients are more and more conversions. .

Thanks, Steve. Just to add to that, James, what I would say is, is that our business continues to be high velocity across the alts and the institutional segment. And so our sales cycle continues to be accelerated as a result of what the cloud-native SaaS technology has to offer.

And so we're continuing to see accelerated sales opportunities effectively being found in the quarter, landed in the quarter and implemented in that same quarter across our segments. And we expect that to continue as we continue with our journey. .

The next question is from the line of Gabriela Borges with Goldman Sachs. .

I'll echo my congratulations on a really nice quarter and a very successful IPO.

Coming back to, T.K., the comments you were making on the demand that you're seeing, I'd love if you could compare and contrast for us any nuances in what you're seeing in the pipeline now versus maybe a year ago?.

What I would say is, is that the pipeline continues to be strong. We're seeing an increased level of institutions entering into the pipeline and evolving nicely.

We're also continuing to see increases in adjacencies within all of our segments, whether that be within the alts or the institutions and it's continuing to play out the way that it has over the course of the past couple of years, and we expect that to continue..

And so just to give you a little bit more color on some of those adjacencies. And so though we are strong and continue to get stronger in the hedge funds, we are starting to see more private equity firms enter into our pipeline as well as family offices.

On the institutional side, we continue to see the traditional asset managers, the mutual funds entering into the fray. And the pipeline continues to be strong on all those parameters. .

Maybe just one follow-up on the hedge fund piece of this in particular.

Could you give us an update on some of the progress you're seeing with expanding into larger hedge funds?.

Same thing.

As the broader market understands or gets to understand more and more what the power of a front-to-back solution really integrated as one solution and accessible through the data as cleanly as we make it available, I think that the reality of the benefits of that are starting to -- or continue to cascade into larger and larger firms, which is the reason why we're also seeing our client base become bigger within the conversion space..

And so as we are seeing increased activity within the institutions, we are seeing equally the increased activity within larger hedge funds. We expect that to continue, as I mentioned earlier, as we continue to step through this. .

The next line is from Kevin McVeigh with Crédit Suisse. .

Let me add my congratulations as well. Really, really nice. I wonder if you could unpack the revenue growth, just maybe directionally how much was new logos versus upsell of existing clients. I wanted to start there. And then even within the ARR obviously, just a super, super outcome in terms of where the ARR came in relative to what we had modeled.

So maybe just [ try in ] that as well. .

Yes. If I could, I'll start with the number of new logos added during Q3 was 59 new clients. So those are new firms to Enfusion. And as you put that to the number of new clients that we added in Q1 and Q2, that comes out to be 165 new clients that we've added.

And then as you look at our net dollar retention, as you look at the upsell and the opportunity across the board, we are seeing higher adoption in Q3 versus where we were in June for all areas, including OEMS, Managed Services, market data and across the board, so -- and analytics. .

That's super helpful. And then just real quick, it looked like the growth on the revenue was super, super strong.

But any delta between the Managed Services and the subscriptions? And should we think about that outpacing the Managed Services as a proxy for the platform subscription growth or any sensitivity around that, because obviously, the Managed Services are admittedly off a lower base, so really, really strong growth?.

Yes. I mean across the board, we're continuing to see higher adoption as we're seeing new clients. We're also seeing them coming in and adopting at a higher rate, both OEMS and Managed Services across the board.

And that's both with -- primarily with the new clients as they're coming on, but also we're seeing higher adoption from our existing clients as well. .

Just to add to that a little bit more context, you kind of have to zoom out and appreciate both the software and Managed Services and what that means for our client partners and the industry overall..

And so if you have an operating system that basically has the front-to-back software and then you have the Managed Services as a bridge to that software that we own and operate that we make available to our clients that use the software, we have the ability to basically offer a complete package almost out of a box to our clients that allows them to have full flexibility to pick and choose what they need, but more importantly, pick and choose on the things that they can effectively outsource to us so that they can focus on their core business..

This combination is a very unique sort of offering when you put it into that context.

And we believe that as the broader market begins to more understand that, that the adoption on Managed Services will not only grow, but it will also fuel our ability to sell more software as a complete operating system across the alts and the investment management space. .

The next question is from the line of Koji Ikeda with Bank of America. .

Congrats on the IPO and your first quarter as a public company. Just to kind of build on some of the previous questions here, the 59 new clients, I think that's the most quarterly adds ever for you guys, definitely in our model, so congrats on that.

I guess the question is, what was driving such a good new customer add metric this quarter from a go-to-market perspective? You guys weren't even public during the third quarter. So the IPO process wasn't really a driver there, I think. .

Koji, it's a great question.

Listen, at the end of the day, the product and the service, it speaks for itself, right? The strength behind what we're offering and the strength that we're seeing in terms of the client partners that we're landing is indicative of where the market has gone, the consistency in terms of the quality of the products and service that we deliver.

And it's just resonating within the community and the community is feeding on itself..

And so it's not a surprise to me that we're winning at the adoption levels that we're winning. It is what we expect to see happening as we continue down this journey. And I would say that the outcomes of the 59 new clients that we brought in is largely in line with what we saw in the prior quarters, and it's just working.

The market is there, and the market is basically realizing the difference between cloud-native, SaaS, multi-tenant versus those things that are trying to be that, the best they can through legacy technology that's going to be a few steps behind. .

Got it, Thomas. And I guess I want to ask you the flip side to that question. Now you are a public company.

How has that process been from maybe driving new company awareness? So has the velocity of inbounds or how the discussions with your prospects or people in your pipeline, has that changed at all?.

It's been awesome. That's the best way that I can describe it. It has exceeded my expectations in terms of the exposure that we were strategically looking for.

As a profitable company, we were always focused on the public listing as an opportunity to highlight and accelerate what we do best and to highlight and accelerate the value and the impact that we could have in helping the overall landscape transform..

And so we are continuing to be in a unique situation where all of the amazing institutional investors that we had an opportunity to speak to are actually potential clients. And so we were very excited, continue to be very excited in terms of the exposure that, that gives..

And I'm pleased and honored to say that, that exposure has added to our pipeline, and it's added to our pipeline at the level of the larger institutions that we were actively -- continue actively looking to bring on.

And I think that the education that it brings to the market, while we were telling the story and while we continue to just tell the story, has just been -- I think it's been very well received, and I expect that to continue. .

The next question is from the line of Bhavan Suri with William Blair. .

Thomas, Steve, and team really, really nice job. So let me echo the comments that everyone else has made.

I guess I want to touch quickly just on a follow-up that Koji asked, which is when you look at the larger customers and you've seen sort of the larger traditional institutional management firms select you, they've obviously got a bunch of different systems in there, right, competing systems, whatever from Advent or whomever.

And when they select you, I'd love to think through or get some color on how that process works.

Are you coming in at the portfolio side, the accounting side?.

And then how do they start pulling out those various pieces that exist that aren't integrated that are sort of kind of crudely integrated, spaghetti code and start replacing you? So maybe walk us through how that process works? And are you seeing that accelerate? Are you seeing them say, okay, we should put this multi-tenant SaaS offering in as holistically faster? Or is it still sort of piecemeal as they go through the various large-scale operations they have?.

That's a great question, Bhavan. So I'll go backwards in. We are seeing it accelerate. We expect to continue to see it accelerate.

Unilaterally, I would say on the majority of opportunities that we are invited to talk about and to explore with clients has largely been focused or starts with the Portfolio Management System and the accounting, which tends to be, call it, the central nervous system of everything. It's also probably the hardest component to solve for.

Once you solve for that well, everything else is just easier to basically leg into..

And so generally speaking, we have best-in-class portfolio management and accounting systems, where the accounting in the GL is literally embedded into the fabric.

And so when we're able to do that, it moves very, very fast through that -- through the other pieces on that because you're not doing further implementations that require further data migrations and what have you, Bhavan..

So overall, we're reducing the time to implementation and reducing the risks associated that investment managers need to consume, which is then accelerating not only the discussions, but the opportunity to deprecate legacy systems that are the core of the problems within these larger institutions..

And so if you zoom out, some of these institutions will have lots of different systems that they've procured or created for themselves. And in that, they've sort of bent and twisted these things to do unnatural things.

That has created the need for these organizations to have outsized operational costs and workflows that are handicapping them in terms of their ability to go and take advantage of business opportunities that they need to do so quickly..

And so when they're -- when the underpinning of their problems is focused on that, when we're introduced or invited to talk about how we can help solve for those problems, the appetite to move very fast, to try and figure out how these things can coexist in some instances with things that they absolutely need and our ability to basically bring those things to light and light them up faster is just adding to the broader nature of -- I understand what cloud native and multi-tenant actually means.

I can see it and touch it faster..

And as a result of that, they're just moving faster in healing some of the tensions that they've had in their technology and the [ debt ] that they've carried over the years.

Does that help, Bhavan?.

Yes. No, that was super helpful. And I guess one for both of you, just around some of the volatility we're seeing. There is a good number of your clients that are sort of equities-based. There's quite a bit of [indiscernible] I'm sure. Everybody is [indiscernible] the market. I guess, help us think about sort of what visibility you have.

And again, I know you aren't giving guidance, but visibility into next year and visibility to sort of the sustainability of growth, I think that would be really helpful. .

So it's a great question. And so the best way to think about that, Bhavan, is we're [ not a ] nice to have, right? And so volatility or not, we are mission-critical, right? And we're mission-critical across the front to back.

And so if you are an investment manager, in whichever segment that you fall into, alts or institutions, you need the ability to construct portfolios, you need the ability to account for the activity that's going on, and you need the ability to transact, right?.

And when you wrap all that around, you need the ability to reconcile your investment books in a real-time basis every single day. And that's what we do.

And whether the markets are volatile, whether the markets are undergoing the rest, what we've learned is, is that it's when the markets are volatile and when clients are in duress where we shine the most as their partners..

And so the guidance that I would give you at least on a qualitative basis would be that due to the nature of the mission criticality of the services and products that we deliver and the manner in which we deliver it, we expect that -- we don't expect that those market conditions will impact the needs of what we deliver. .

The next question is from the line of Chris Donat with Piper Sandler. .

Steve, just wanted to go back. You referenced the price increase in November and December of 2020 on the OEMS side, because just as we look back to the fourth quarter of 2020, there was, like on a quarter-on-quarter basis, a decent acceleration there.

So as we think about the fourth quarter of 2021 and the revenue guide there, can you help us quantify the impact of the pricing change a year ago or maybe give us some metrics or color around how that's sort of affecting the year-on-year comparisons? Because it seems like it's certainly worth paying some attention to. .

Yes, for sure. And so last year, in Q4, we were able to put in a pricing increase that was around -- it did, to your point, increased our net dollar retention rate by around, let's call it, 9 points or so. And that was done primarily for -- what we did was we implemented a price increase only for the prime broker.

So it did not impact our end client, and we were able to do that within a matter of about 6 weeks in the months of November and December..

And now we have continued to see the net dollar retention continued to grow quarter-over-quarter. But in Q4, we are going to see that price increase roll off. And so we will expect a slight decline as you look at our net dollar retention rate..

Now a couple of things to point out. One is, as we look at our price increases, one, we do have an annual price increase built into our contract. So as our clients get to their annual renewal, there is already a price increase that is put in, right? Beyond that, we do think that there is some opportunity for other price increases in the future.

And as we go through this, we will just make sure that, that is, one, it will likely be tailored around specific products or specific modules as we go forward.

Does that give you kind of the insight that you're looking for?.

Yes, exactly. And you even got ahead of my second question on your philosophy on price increases. So I appreciate that. Then just on the expense side for the income statement. Thinking about the -- I think, 159 employees you added in the quarter. We've heard from some other firms out there that it is getting more competitive and expensive.

There's inflation out there also in terms of hiring.

Is that something we should be thinking about going forward, particularly as you expand more in Asia and Australia and other geographies? Or are you sort of normal and steady state in terms of hiring and cost of new employees?.

So I think we've invested in our business across the board. How I would contextualize your question and give a little guidance would be philosophically, we're always in the search for the best talent that we can find in the market globally.

To the extent that we can find that talent, with individuals that fit our principles and our values, we will aggressively look to attract the best folks that we can find that will help us add perspective and diversity and experience and bring the necessary skills to help generate new ideas that help us to further our ability to have the kind of impact that we're currently having today and then some..

And so we find ourselves in a very strong position where talent is coming in our direction as a result of the exposure and the impact that we're having. And we're going to continue to lean in on that and look for the right folks that can help evolve some of the vision that we have..

On the -- and I just want to wind it back a little bit on the price increases. Listen, how I would think about price increases that we have the capability to do, we measure price increases on impact, right, and the value that we deliver to our partners. We don't look at price increases just for the sake of price increases.

I think there's no durability in that way of thinking..

We have strong unit economics where we have extreme pricing power. But everything will be tethered toward the value that we deliver and the value that we should receive in delivering those products and services in that way.

And I think that there's parity in how our partners think about it, which is the reason why when we have done our last increase that it was able to be done so quickly.

Does that help?.

Okay. Yes, yes. It certainly does, and I appreciate the follow-up on the pricing philosophy. .

The last question is from Parker Lane with Stifel. .

Congrats on a very solid first quarter out of gate. Tom, there's a lot of different personas that are served by your platforms, different solutions and modules.

Who do you find the biggest advocate inside of the investment managers typically is to push for a change of systems and move into the cloud?.

That's the -- it's a great question, and that's the beauty of the front and back that we have to offer.

And so if you zoom out just for a second, what our clients are trying to solve for is as their assets under management grow, they're looking for better profitability, right? What's happening, generally speaking, is, is that the profitability is not correlated to the assets under management growth that they're seeing.

And that's creating some level of challenges and duress..

And so when leadership in our clients' organizations are looking to solve problems at that most basic level, the nature of the front to back that we have to offer, the personas that are getting involved to make the decisions, well, first of all, it's diluting any one individual's ability to basically say yes or no, and it's spreading it across the organization, all the way from the CEO to the portfolio manager, the CIO, to the traders and even the ops people..

And so in more times than not, as we come across being invited to explain the value proposition that we offer, the personas are spread across the business and technology and infrastructure. And in many ways, the operations people and the finance people are equally as passionate about pushing for us, as is the CIO or the trader..

And so we're seeing a healthy dose of the personas being spread across. And we're actually quite excited about that because in doing that, we're seeing the impact that we're having throughout the investment management firm from front to back.

Does that help, Parker?.

That's great feedback. Yes, great feedback there. Maybe one last one. Really solid net dollar retention here and very low churn.

If we think about the reasons that those customers that churned decided to do so, can you walk us through maybe the number 1 or 2 different solutions that are either moving towards? Or what the reason that they ultimately decided that they weren't getting enough value from Enfusion was?.

So if I can, real quick. So again -- once again, the vast, vast majority of any churn that we see is from involuntary. And so today -- and the involuntary is firms that are no longer investing, that are no longer in business. So they're not using our platform. And so when you look at beyond the involuntary, it is extremely, extremely low. .

[Operator Instructions] There are no additional questions waiting at this time. I will now pass the conference over to the presenters for any closing remarks. .

Thank you all for taking the time to speak with us. It's great to share our performance. And we look forward to having further conversations and updates for you in the very near future. Have a wonderful evening. .

Thank you. .

That concludes the Enfusion Third Quarter Fiscal Year 2021 Earnings Call. Thank you for your participation. You may now disconnect your lines..