Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Enfusion's Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to turn the call over to Ignatius Njoku, Head of Investor Relations, to begin..

Good morning, and thank you, operator. We welcome you to Enfusion's Third Quarter 2023 Earnings Conference Call. Hosting today's call are Oleg Movchan, Enfusion's Chief Executive Officer; and Brad Herring, Enfusion's Chief Financial Officer.

Please note, our quarterly shareholder letter, which includes our quarterly financial results have all been posted through our IR 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 and are available under Investor Relations section on our website. Actual results may differ materially from any forward-looking statements we make today.

These forward-looking statements speak only as of today, and the company does not assume any obligation or intent to update them following today's call. except as required by law. In addition, today's call may include non-GAAP measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures.

Reconciliation to the nearest GAAP measure can be found in today's quarterly Shareholder Letter, which is available on the company's website. With that, I'd like to turn the call over to Oleg to begin..

Good morning, and thank you for joining us today to discuss our results in the third quarter of this year. I'm pleased to announce that Enfusion business delivered another solid quarter for both revenue and profitability. Value creation engine has gained in momentum.

Our disciplined go-to-market strategy is validated by persistent market capture and expansion across target segments in the face of ongoing macroeconomic uncertainty. We continue to execute against our large market opportunity, take market share, expand our global footprint and improve our profitability.

Our value proposition remains intact, validated by healthy client additions, improving net dollar retention, increase in average contract value and expanded margins. I'm very excited about the formal launch of Portfolio Workbench, which empowers portfolio managers to seamlessly integrate Portfolio construction processes with operational workflows.

Innovation is embedded in our culture and is at the core of our strategy. This product release not only represents a pivotal moment in our journey to support the largest and most complex institutional clients but also underscores our commitment to technological development and a best-in-class client experience.

I will share more details on this in a moment. Although we're not immune to macro headwinds, I'm more optimistic than ever about our future. We'll continue to grow above market rates and taking business from resourcing centers, fragment and expensive solutions.

Enfusion continues to prove that it deserves to be a platform of choice for investment management organizations of any scale and complexity. Ultimately, our results are the evidence that Enfusion's business model is truly global, scalable and adaptable.

Enfusion remains well positioned to benefit from secular industry tailwinds, while increasing its resilience to macro uncertainty. Regardless of market environment, we will continue to operate from a position of strength and iterate towards recapturing our unit growth and profitability profile.

Now let me walk you through some of our key financial metrics in the third quarter. Revenue grew 13% to $44.4 million as we continue to execute on our go-to-market strategy and product road map. Adjusted EBITDA was $8.2 million and represented an 18.5% margin.

We continue to improve our margin profile, benefiting from strong expense control and operating leverage. We added 37 clients this quarter, bringing the total client count to 842 and increased our ACV to $217,000, representing 2.4% quarter-over-quarter and about 8% year-over-year growth.

Brad will discuss our financial results in more detail in a few moments. Now I would like to share a few notable client additions, validating our execution framework as we expand across geographies and market segments.

In the Americas, revenue grew 10% year-over-year reflecting ongoing market share gains with larger fund managers despite macro headwinds. I'm thrilled to share that Enfusion signed a bottom-pace alternative manager with approximately $2.5 billion in AUM. The firm opted out of upgrading its legacy OMS given the resource challenges.

As a result, the system became obsolete after several years. Unlike the legacy provider, our team was able to understand the complexity of the clients' workflows and design a well-suited solutions.

Notably, this conversion resulted in Enfusion providing both software and managed services, as a much more cost-effective alternative compared to using in-house resources. Enfusion also signed a New York based loan-only asset manager focused on emerging and frontier markets.

In this competitive takeaway, Enfusion is consolidating the investment managers patchwork of disparate solutions, which required manual processes for communication between systems. As a result, the in-house solution became exceedingly complex, drove higher maintenance costs and demanded more IT resources.

By implementing Enfusion's platform, the asset manager benefits from our fluid front-to-back solution inclusive of the new launch Portfolio WorkBench tightly integrated with both golden source of true data sets and workflows, result in a minimized operational risk and material cost reduction.

In EMEA, revenue grew 29% year-over-year as the market continues to embrace our differentiated offering. We're excited about our momentum in the region as we diversify our revenue portfolio moving to larger and more complex markets and expand into new regions.

For example, we stand with another London-based multibillion-dollar global institutional asset manager. The fund manager outgrew its legacy incumbent provider and faced multiple challenges, including manual trade allocation and an adequate cash reconciliations.

They selected Enfusion because of the robust front-to-back platform, allowing them to streamline and automate their workflow and scale as they grow. With Enfusion, the client now has a unified view across all funds and product, can, execute swift trade instructions and benefits from our multi-asset class NAV generation capability.

We also signed a large newly launched debt manager, the largest distressed specialist launched in recent history, demonstrating our ongoing success with credit strategies.

They selected Enfusion platform because of its flexibility to support the company's future growth and robust major support across various asset classes as well as workflow automation. Importantly, we continue to expand our geographic presence in Europe.

I'm thrilled to announce that we entered into an agreement with Oslo-based Investment Manager which runs a loan-only equity strategy. The manager is part of a newly formed entity with a large, well-known team with a significant track record. This particular client will be leveraging Enfusion software and managed services offering.

We also won a mandate from a South African-based loan-only fund. This client lends to leverage Enfusion software and services to streamline their workflow and realize cost savings. In APAC, we grew revenue by 13% year-over-year. We're seeing early signs of improvement in the launch market and getting traction with our upmarket motion.

For example, we signed a Hong Kong based global macro alternative manager. The fund manager was looking for a platform to enable them to launch quickly with robust end-to-end architecture and a single source of truth for data and operations.

Additionally, by partnering with Enfusion, the fund manager leverages Enfusion's value at risk and other risk measurement and reporting capabilities. Finally, we entered into an agreement with another recent fund launch, an Australian alternative asset manager based in Sydney.

The fund manager chose Enfusion because they were looking for a flexible platform that would facilitate a timely launch and set up the company for future scale from day one. Let's move to some updates on the product front. As I've said many times, innovation is one of our core values and has always differentiated Enfusion from our competition.

It is embedded in our culture and permeates throughout everything we do on a daily basis. I'm thrilled to announce the recent formal launch of our Portfolio WorkBench, a highly intuitive capability that enables investment managers to rebalance their portfolios across multiple strategies and investment vehicles.

By leveraging in-grid portfolio editing and an intuitive user interface, Portfolio WorkBench works in concert with our OMS functionality and allows PMs to easily manage performance and risk against the benchmark.

As a result, PMs can test pre-trade compliance rules, monitor post-trade compliance, and model upcoming subscriptions and redemptions across multiple investment vehicles within one user interface without concerns about data integrity. The Portfolio WorkBench is a strategic product launch for several reasons.

First, Portfolio WorkBench is a critical component in our stated strategy to move upmarket to larger and more complex asset managers, that expands our traditional operational capabilities into the decision-making segment of the workflows in a way that is tightly integrated with decision implementation.

Second, it's an intermediate step to support investment managers to deploy both proprietary and third-party risk models facilitating their portfolio optimization and the risk management frameworks.

It has important implications for both passive managers that are tracking benchmarks with periodic rebalancing and active managers focused on outperforming benchmarks by taking active positions. This will drive more quantitative and systematic portfolio construction in addition to heuristic and manual portfolio adjustments.

Third, Portfolio WorkBench continues to build on Enfusion's all-in-one product philosophy, where we insist on eliminating fault lines across all segments of investment management workflows. With just another set of functionality, that is a fluid and natural extension of the existing platform.

Lastly, it further expands our competitive advantage by widening our mold from legacy competitors, responding to market demand including client retention and expanding Enfusion value proposition. Here is just one of many examples of our Portfolio WorkBench allows us to expand into the loan-only segment.

It was a key element that helped us convert a large emerging markets equities and credit focused manager that initially went with one of our competitors. In addition to Portfolio WorkBench, Enfusion rolled out 366 additional enhancements and features across our portfolio management and OEMS.

The frequency and scope of the software updates is an important dimension of our competitive advantage and value creation mechanism. With that, I would like to highlight 2 other important enhancements the team released this quarter.

The first is Bloomberg real-time mobile support, which connects Bloomberg's real-time pricing in their terminals with third-party applications so that the investment team can stay connected, leveraging Enfusion's mobile apps.

The other is native support for an OTC product, [indiscernible], which provides investors with a cost effective and optimal way to obtain data exposure to corporate bonds and leverage loan markets. Enfusion's front-to-back platform remains well suited to support complex instruments and solve for simplicity that legacy vendors simply cannot.

These new features are the result of long-term efforts by our product and engineering teams to deliver value-added capabilities, highly requested by our clients. Now moving on to market dynamics. We see some green shooting managers planning to launch new hedge fund. However, the overall launch dynamics remain the low historically.

Be that as it may, while we continue to successfully protect and expand our hedge fund home turf, our book of business is increasingly less dependent on launches. Importantly, Enfusion continues to benefit from secular tailwinds as the entire investment management industry is reevaluating its software stack, workloads and related costs and risk.

Our upmarket motion keeps gaining momentum as we continue to scale our technology, execute on our product road map and listen to our clients.

All of this is reflected in our recent robust market share gains and continued shift in the revenue mix away from launch of store conversions and away from pure hedge fund managers for institutional investment managers. As like I have said multiple times, Enfusion is a pain killer, not a vitamin.

As a side benefit of killing our clients fee, we inflict an increasing amount of pain on our competition. Now let me review some key elements of our long-term strategy. Our strategic position continues to evolve as we unlock new market opportunities and diversify our client base towards institutional asset managers and asset owners.

Enfusion is a business in transition, and we continue to prove our business model as we optimize our go-to-market strategy, shorten the sales cycle and increase velocity of our onboarding process. Naturally, all of that drives TAM expansion, improvement in durability and speed of our growth, margin expansion and client retention.

Importantly, this framework is designed to protect our business economics from excessive macro headwinds. As evidenced by our performance over the last year, we continue to spread our growth wins globally, shifting our book of business away from minor center cities and targeting regions where competition is in.

We continue to maintain our focus on returning to Enfusion's historical financial profile.

Enfusion value creation machine is back to its normal virtuous cycle as we exercise surgical precision in our pipeline generation, operational excellence of our client services, product innovation, optimization of our revenue strategies and relentless fiscal discipline. In conclusion, we delivered solid third quarter results.

We remain focused on sales execution, moving up market and expanding our global footprint. I'm very grateful to all my Enfusion colleagues for hard work, passion and focus on our clients. I will now turn the call over to Brad to discuss our financials..

Thanks, Oleg, and thank you, everyone, for joining us today. Speaking on behalf of the entire Enfusion management team, I'm glad to report yet another quarter of top line growth, combined with strong profitability and cash flow generation. For the third quarter, we generated revenue of $44.4 million, an increase of 13% over the same quarter last year.

Just as we reported last quarter, these results represent a slowdown in our historical growth rates. However, we're seeing some positive indicators in our underlying growth algorithm.

First, bookings in both new fund launches and conversions continue to be strong as the sector continues to look for effective and efficient solutions to manage back-office tasks.

Second, the quality of our pipeline continues to improve as we expand our market opportunities by deploying new product features such as portfolio benchmarking and additional capabilities around credit. Finally, we are starting to see some favorable trends in the underlying revenue drivers within our back book.

Specifically, we are seeing both improvement in net organic growth as well as lower churn. Third quarter ARR was $177.9 million, up 12% year-over-year and 4% higher than what we reported just last quarter.

As a result of the trend improvements in the back book I mentioned, net dollar retention in the quarter, excluding involuntary churn, was 107% while net dollar retention, including involuntary churn, was just over 102%.

For both NDR measures, this is the first quarter in the previous 4, where we see NDR increases, which leads to confidence that the headwinds related to the macro challenges facing the sector are either stabilizing or modestly reversing. Adjusted gross profit increased by just over 9% year-over-year to $30.2 million.

This represents an adjusted gross margin of 68%. As we've talked about in previous earnings calls, we expect adjusted gross margins to remain between 68% and 70% for the next several quarters as we continue to invest in our client onboarding and servicing capabilities in support of our growth strategy.

Adjusted EBITDA for the quarter was $8.2 million, up over 50% compared to Q3 of last year. Against current quarter revenues, this represents an adjusted EBITDA margin of 18.5% up 460 basis points from the same period a year ago, and this is largely consistent with what we reported in Q2.

Our end quarter results represent a 53% pass-through rate on incremental revenues. For the quarter, we generated adjusted free cash flow of $9.5 million compared to $6.9 million in the same period a year ago.

Cash flow conversion in the quarter of 116%, was higher than normal due to the timing of various cash inflows and outflows that is somewhat typical for the third quarter.

While the quarterly conversion rates will fluctuate, we remain confident in our ability to convert approximately 50% of our adjusted EBITDA into free cash flow on a rolling 12-month basis. GAAP net income for the quarter was $2.7 million compared to $2.6 million in the same period last year.

Against our fully diluted share count of 127.8 million shares, our current quarter net income results in a GAAP EPS of $0.02 per share. With respect to our balance sheet and capital considerations, there are a few items from the quarter to discuss.

First, we ended the quarter with approximately $32 million in cash and cash equivalents and no outstanding debt. Second, with our partners at Bank of America, we have recently secured a revolving credit line of $100 million with an additional $50 million available contingent on certain conditions.

This line was exclusively put in place to provide access to liquid capital should we identify strategic targets that could help accelerate our growth trajectory. Finally, we are pleased to say that we completed the distribution of shares to holders of our management incentive units that were connected to our 2021 IPO.

The most notable impact of completing these distributions is that all tax withholding obligations related to these shares are now fully satisfied. Moving on to guidance. We are reaffirming the revised revenue and adjusted EBITDA figures that we provided in our Q2 earnings discussion.

Just to confirm, that was a range of $170 million to $175 million for full year 2023 revenue in a range of $30 million to $32 million for full year 2023 adjusted EBITDA. With that, we'd like to open up the call to questions. Operator, please go ahead..

[Operator Instructions] We'll take our first question from James Faucette at Morgan Stanley..

It's Michael Infante on for James. I wanted to ask on Portfolio WorkBench. Obviously, currently in beta expected to go GA by the end of the year. Oleg, I think you called that out as a driver of a win or 2 in the quarter.

But I'm curious how you would characterize the early feedback thus far from clients and perhaps how it's priced and the potential uplift from an NDR perspective over the medium term?.

Thanks, Michael. Great question. So this one of the products. I just want to emphasize it again. It's not something that we went to the -- our design lab and created without consulting with our customers. Actually, it's a result of many conversations. We simply responding to what market is asking us to do, and on one hand.

And on the other hand, it's a part of our deliberate and purposeful strategy to create a product offering for institutional asset managers and move our traditional portfolio that is a mix, as you know, between middle and back office offering, more toward investment decision-making as opposed to investment decision implementation part.

And so that's the strength of the product where it doesn't exist on a stand-alone basis outside of the core system, then there is another layer of integration that brings those orders into overall core. It's actually a part of the fluid Enfusion like ecosystem.

And so once the decision is made, which is what Portfolio WorkBench is all about, it's been seamlessly executed within our OEMS. So it's basically, again, it's a response to what market has been asking us to do and the result of multiple iterations that the product team and the technology team has performed with our clients.

Naturally, it will -- we believe it will make a serious impact on our client retention capability. I mean, look, the reality of it is Enfusion is becoming as opposed to just operational support platform.

It's also becoming a collaboration platform, where portfolio managers, the very people that think about how to position the portfolio, allocate capital, allocate risk, continue to interact with analysts, continue to interact with front-office teams portfolio -- excuse me, order management capabilities, traders and so on and so forth.

And so that part is facilitating that collaboration, that part is facilitating that interaction and therefore, reinforces the quintessential nature of the platform and thereby translates into the high retention rates..

Maybe just on some of the strategic commentary you made, obviously, good to see the incremental credit facility, the health of your balance sheet and the free cash flow generation that you guys are having.

But how are you thinking about the capacity for near-term M&A? I'm more curious about the types of assets and/or geographies that you would be interested in?.

Sure. Great question. So we have -- I mentioned a couple of quarters ago, first of all, very deliberate in what we are looking at as far as our M&A targets are concerned. Our thesis of all-in-one system, fluid one -- one fluid up here in set of code, framework, workflows remains intact.

Therefore, the bar for finding something where we have completely blinding the obvious value creation proposition technology stack compatibility.

And of course, culture feed is pretty challenging, right? On the other hand, because of our system is so open and so flexible, it does facilitate interest in place, both in terms of scale, where we can bring something onboard that will simply accelerate our -- either accelerate our travel from a growth perspective within the core product strategy or from a scope perspective where we would position the business within areas we're simply not such as private equity markets or private credit market.

But from that perspective, it's not so much geographical approach, we are global. We're looking at things, both in Europe and in U.S. Of course, in the U.S., there is plenty more to look at. But it's more related to a choice, whether it's a scale deal where we look along our vertical and see what our technology platform allows us to bring onboard.

Or we look at this from a scope perspective, where we're seeing what's available from modern technology perspective that would allow us to get into areas where Enfusion is not currently represented or doesn't have capabilities to sell..

We'll take our next question from Faith Brunner at William Blair..

I wanted to start on the international side. You guys are seeing strength, especially in EMEA. And I was just wondering how you're thinking about this opportunity, how you guys are thinking about allocating resources and your competitive positioning to sustain momentum in these areas..

Well, big focus for us. Thank you for the question. I mean as you've seen for the last couple of quarters, it's been a strong driver of our growth, 29% year-on-year growth this quarter. We see a lot of opportunity there. People typically think about EMEA as one monolithic market. From our perspective, it's anything but.

Every country in Europe is relatively unique in terms of go-to-market strategy, in terms of how people think about technology, how people think about buying decisions, who are the gatekeepers in the industry and so on and so forth.

And so our strategy is nuanced, and I have to give credit to our both revenue team and product team thinking through those nuances and designing that go-to-market strategy to attack those markets.

Those markets also, from our perspective, tend to be less competitive and less crowded, more stale, slower and therefore, in some sense, ripe for disruption by companies like Enfusion.

They still either relying on a lot of legacy systems, legacy infrastructure, homegrown proprietary or relying on relatively clunky, obsolete legacy providers, where people are still babysitting capabilities and spending tens of millions of dollars without significant ROI.

So we're very excited about the opportunity, both Europe and Middle East, very interesting. And as you've seen, we're gaining traction in multiple countries, France, Norway, of course, we're seeing opportunities in U.K. as well. It's still a home turf.

We still are obviously controlling pretty large market share around money center cities like London, and of course, outside EMEA, like Hong Kong and New York. But again, our strategy is very deliberate, to rebalance portfolio mix away from those centers towards markets where we're much less represented and our competition is not as high.

But also rebalanced our book of business as, if you track our performance over the last 3, 4 years, this is why the revenue is so stable. Sometimes when Asia doesn't work, U.S. picks up slack. When U.S. is slowing down, we're rebalancing towards Europe, and we will continue to do that going forward..

And if I could sneak one more in here. Just a lot of strength in multi-strategy to it, you guys are a beneficiary of capital flows.

So wondering how you're thinking about these fund types of clients and their overall willingness to get infrastructure up and running quickly?.

I'm so sorry, I did not get the first part of your question.

Could you repeat that?.

Just as you're continuing to see strength in multi-strategy, asset managers, so and so, how are you thinking about lines and their willingness to kind of adopt broader solutions..

I got it. So that's an interesting one because the multi-strategy, multi-manager businesses, to some extent, actually represent a challenge for us because they have very custom blends of different things.

And actually, to the extent that they're competing for talent, oftentimes, it's nearly impossible for them to impose specific system requirements and people that are coming in with people coming in with a team that has some kind of history with another system, some kind of a preconceived notion how they like their workflows to be organized.

And so the platform has to be dynamic and flexible enough to absorb the team without necessarily imposing those technical workflow constraints.

On the other hand, precisely because they captured such enormous economies of scale they have virtually unlimited technology budget, and therefore, their ability to run a lot of proprietary things to satisfy -- to develop and run a lot of proprietary things to satisfy their firm-wide requirements is also much higher.

And so the cost pressures are, in some sense, a secondary there. From my perspective, it's much more driven by what makes sense for the business. On the other hand, those firms have become big magnets for talent and therefore, they actually are pressing down on the number of launches naturally.

SPMs who are looking to launch, they make a choice, whether they go into loan and they launch a fund or they go on a platform like one of those multi-manager platforms, and they just get a seat and get capital allocated and just begin trading. And so from that perspective, we have a pretty strong nucleus of clients like that.

But in some sense, this is not a market where we see unlimited growth. What is interesting, though, when you see some recent announcements on the subject, more traditional fully integrated asset managers typically start competing with those and actually allocate capital internally. And this is where we come in.

This is we -- our blend of multiple capabilities, middle, back, and front office actually matters because those guys care about costs and they care about scale, and they actually start coming in into those markets with much more palatable cost structure that makes more sense for investors..

We'll move next to Alexei Gogolev at JPMorgan..

This is Elyse Kanner on for Alexei Gogolev. So my question was talking about your average onboarding period kind of how you plan to reduce this to better compete with other players in the space..

Yes, big area of focus for us. We think about that part is not just cost structure part or pulling revenue forward part, but also as a competitive advantage. Typically all onboarding framework and onboarding cycle is much shorter than that of our competitors in that space, specifically legacy providers that have on-prem installs.

And so even if you mentioned capabilities, we typically win business precisely because our onboarding is much more reliable and much shorter than that of our competition. And in terms of leveraging that, there's only one way to do it.

You design the organization the right way and you build technology capabilities around that so that your team is much more effective and efficient. So that's what drives the cost down. This would enhance the velocity of the process..

And then real quick on EBITDA margin. So I know your guidance remained the same.

I was wondering if 20% plus EBITDA margins are sustainable for the next 2 years and where you see the trajectory of margins going perhaps back to 40% from there?.

This is Brad. I'll take that question. We've talked about expanding margins. It's also why we mentioned -- I mentioned the pass-through rates when we talk about incremental revenue as how much of that is flowing through EBITDA. So we've targeted a 45%, 55% pass-through rate. So what that translates into certainly is margin expansion.

So we've targeted exiting this year around 20%, and we certainly see those numbers not only sustainable but also show the ability to expand those margins, both in the near term and in the long term.

We're not setting necessarily targets to say when we'll get to 30%, 40% margins from an outlook perspective, but we certainly have the ability to take where we'll exit this year and expand those further into 2024..

Our next question comes from Parker Lane at Stifel..

Nice to see the reiterated guide and the improvement in NDR quarter-over-quarter.

Brad, curious as we head into the fourth quarter here and into 2024, what are your expectations around the trend line of NDR? Do you think we get back to the levels we were at last year, you talked about quality of the pipeline improving and maybe some stabilization out there. Just curious where we should expect that to go..

It's a great question. We spend a lot of time looking at it. Just like you, I was very pleased to see that NDR trajectory turn in the quarter to start kind of flipping the other direction. We posted the 107 number when you exclude -- we targeted that number getting back at least to a 110.

I think reality is, it's probably a number that stabilizes in the 110 to 115 rate over time. When it gets there is going to be an interesting question. I certainly I'm appreciative to see the trend going in the right direction.

I think it's probably going to hover around these levels for the next maybe a quarter or 2, but I do think that 110, 115 number is a sustainable target once we get past that..

Parker, Oleg here. Thank you for the question. I just want to pile on Brad's comments. So another thing is important to think about is we try as hard as we possibly can to control what we can control. And you're absolutely right.

Big driver here is that we -- again, I have to give credit to our revenue organization and client services organization about this maniacal focus on disciplined execution of the sales, making sure we understand the clients' problems.

We -- our solutions engineering team involved during the early stages, client services team involved -- gets involved in early stages and therefore, not just the velocity -- back to the previous question by Alexei, not just the velocity of our onboarding is higher, but the quality is higher.

And therefore, we continue to reignite this virtuous cycle of creating happy clients, and therefore, retention is higher..

We'll go next to Crispin Love at Piper Sandler..

Just first on revenue growth, which is decelerated recently and just a challenging landscape here.

Curious on your views for near to intermediate trends, and if you think that growth may have bottomed in the third quarter and could begin to inflect higher in approach and perhaps surpass 20% in 2024, just given your comments about optimism for the future here..

Thank you for the question. So we're pretty constructive. I mean, we think that the bottom is probably -- we've seen this. Again, we don't have a crystal ball. I don't know what the macro environment is going to look like in '24.

What gives me comfort personally is our ability to peel it, as you know, you can grow or sustain this growth rates through multiple sources. And we all know that the asset management industry at large, right, is going to grow in single digits. And maybe at best is going to be anywhere between 4% to 5% depending on the segment.

So how do you grow at 20% plus so you can do it 2 ways.

You can either create very aggressive market share capture, which is precisely where our focus today, which is also precisely where Enfusion's sort of what I would call downside convexity has been when macro headwinds are strong, we always rebalanced and took business away from competition, thereby sustaining the growth and actually captured market share when the market is really good again.

Assets are flowing and the returns are high. Funds are launched. We are back to our hyper growth stage again. And so this is sort of our tactical solution number 1. Tactical solution number 2 could potentially be an M&A strategy. But again, as I said before, we are very careful and surgical about that aspect of growth.

At the end of the day, it also is about profitability from our perspective as much as it is about growth. I understand your question is about top line. But what we are trying to do is balance both top line and bottom line and oftentimes, as you know, those 2 are connected..

This is Brad. Let me just add. A little bit of ways of the way we look at our growth algorithm. If you think of -- even if we bottomed out here and caught the mid-teens, from a kind of market share and macro level growth rate, which I will kind of chime in, is still substantially better than our competition because of our share grabs.

So start off with mid-teens, you pick up another 300 to 500 basis points out of NDR because we've mentioned we're running a little bit lower on NDR than we would have historically.

And then tack on another 300 to 500 basis points for additional product capabilities and additional market opportunities that we're expanding with things like portfolio workbench with things like credit, with things like new geographies we're going to go into. You compile those numbers, you can easily get back into this 20% sustainable growth rate.

So that's kind of the way we dissect it and the way we look at it..

I definitely appreciate the color there and just balancing the top and bottom line. Second question for me is just can you give an update on net incremental seat license trends at current clients, are they positive but slowing here? Just curious what you're seeing in the current environment and the drivers there..

Yes, this is Brad. I'll take that one, too. So this is kind of supporting my commentary about a little bit of a trend shift we've seen in that net organic growth. So we actually are starting to see, a term we use called upsells, where our existing clients are adding seats at a faster pace than they are declining seats.

Over the last couple of quarters, when we saw those reductions in NDR, we saw that trajectory flip a little bit as most of our customers were resetting their cost base. We are starting to see on a net basis, that organic growth number is turning substantially more positive than it has in the last couple of quarters.

So they're not necessarily massive increases in seat counts, but we certainly are seeing, as clients are expanding their own fund capabilities, they are picking up seats at a much faster pace than they are declining seats. So that's a nice trend that we saw and it's representative in that NDR number picking up 100 basis points..

We'll move next to Gabriela Borges at Goldman Sachs..

This is Callie Valenti on for Gabriela.

I wanted to start on kind of how you feel about your current investment levels and what kind of macro signals would lead you to increase investments potentially? Or are you just comfortable with your current investment level in a world where macro increases, and you feel like you can take advantage of that opportunity?.

That's a great question, Callie. So it kind of hinges back to Oleg's comment a minute ago about balancing top line growth and profitability. We always have a list of investments that we feel like we could prioritize should the economic environments present the opportunities.

The good thing about the growth rates that we're able to put out is, it allows us to make not only sustaining the investments we make, but it does allow us to make incremental growth -- incremental investments in our P&L both flowing through OpEx and as well as CapEx because as you'll note some of our investment flows through is CAP software.

So we do plan, in fact, as we're building out our plan for 2024. We still have meaningful investments that we are targeting to make in 2024 based on the growth trajectories we're seeing in the macro environment. So those 2 things, to your point, are very intertwined. And we pay very close attention to them.

And candidly, if the economic environments accelerate, that allows us the opportunity to make even more investments. So they work pretty close in tandem..

And Callie, I just want to echo what Brad said and also make another point, which is -- the good news for us is that we still have a lot of white space in front of us to make investments that actually are here clear and present, not like a lot of people follow this hype with AI and machine learning and kind of having a lot of solutions out there in search of problems, so to speak.

We have very specific targeted product road map, again, credit to our engineering team and product team thinking through it in a very disciplined and careful way, where we, again, will listen to the market, and therefore, those investments that we're making, have very high ROI. So it's not just about making investments in our mind.

It's looking for investments with highest potential return on equity. And you can look at our return on equity. As you know, it's north of 30%. And this is what we are thinking about every time we deploy dollar. We think about what we're going to get back. And again, like I said, the good news for us at this point in time is not what to do with capital.

It's -- there is a lot of clear and present product opportunities that would help us capture both growth and market share..

That makes sense. And then second one from me, quick is, just wanted to hear anything about kind of how you're thinking of the Portfolio WorkBench pricing and how that compares to your other modules..

I think -- we still -- here's an interesting conundrum.

So Portfolio WorkBench is not something that we sell separately, right? As you know, we don't have pricing package where we sell an order management system separately from PMS, from accounting NGL capability and Portfolio WorkBench is something that is just part of the overall platform right now.

Going forward, we are working on different bundles, if you will, that will allow us to sort of maximize commercial relationship with our clients. Right now, Portfolio WorkBench is in this sort of -- it's a green shoot of our overall product strategy, and we will think through how to optimize that entire package.

So the point is we're not thinking about product Portfolio WorkBench as a stand-alone product that we're pricing.

But we are definitely, definitely thinking about -- number one, how it works as overall -- in the context of the overall package that our clients to buy and also how that pricing will be driven as a function of what the Portfolio WorkBench is going to work in conjunction with.

Because remember, at this point in time, it's just a tool, it's just an environment. It's just a framework, right? It still has to be if you will, parameterized and enriched by benchmark data by risk model data, by market data. And those partnerships, in turn, they drive the pricing structure of the product. And so there's a lot of dimensions here.

And rest assured, Brad and his team are hard at work and talking to our revenue team, thinking about how to capture that the best possible way..

We'll take our next question from Koji Ikeda at Bank of America..

This is Natalie Howe on for Koji. On ACV, so on an absolute basis, it grew this quarter more than it did last quarter, which is good to see, but overall, the past few quarters, the growth rate has been decelerating a bit.

Do you see that potentially stabilizing or holding in the upcoming quarters? And what could help drive growth there?.

Well, it's a natural, again, extension of our strategy. We're just landing bigger clients, longer contracts, bigger tickets, and we expect this trend to continue. Again, we play very well in lower market segments in very low market segment, just for clarity, we don't conform to price-driven competition. We still compete and capabilities, not on price.

But we keep seeing a lot of interesting opportunities in this higher ACV space. And so our overall ability to lend clients $300,000, $400,000, $500,000, $600,000 type range, is much stronger than it's been before, and we have an interesting opportunities in pipeline that is already in 7-digit type territory.

And so as we move slowly, as I said, Enfusion is a business in transition this is precisely where that transition is happening. So as we move towards that segment, you will see more and more of that..

Natalie, I will add, you might see some quarterly fluctuations in that growth rate, just depending on when clients are onboarded. So on a quarterly basis, you can see some bouncing around. I would push you to probably steer a little bit more towards looking at it kind of on a year-over-year basis, you'll get a better number..

That does conclude today's question-and-answer session and today's conference call. We thank you for your participation. You may now disconnect..