Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Enfusion Second Quarter 2024 Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. Following speakers’ remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded.

I would now like to turn the call over to Bill Wright, Head of Investor Relations to begin..

Good morning, and thank you, operator. We welcome you to Enfusion's second quarter 2024 earnings conference call. Hosting today's call are Oleg Movchan, Enfusion's Chief Executive Officer; Brad Herring, Enfusion's Chief Financial Officer; and Neal Pawar, Enfusion'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 intend 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. During the second quarter, we had the pleasure of interacting with many of our investors who attended the William Blair Conference in May and the Morgan Stanley and Jefferies conferences in June.

We're grateful for a terrific turnout and hope that everyone walked away from those engaging discussions with as many insights as we did. For those of you who couldn't make it to the William Blair or Morgan Stanley conferences, a webcast can be found on the Investor Relations section of our website.

You can also find the full Investor Day presentation from earlier this year on the Investor Relations section of our 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 second quarter of 2024. I would like to personally thank all shareholders for their vote of confidence at our Annual Shareholder Meeting on June 12.

It's a great privilege to represent Enfusion as both a Board member and the CEO, and I greatly appreciate all your trust and support. We believe we have the right management team in place with the ability to execute on our long-term strategy.

As you know, from our second quarter 2024 earnings release published earlier this morning, we reported a solid quarter and reiterated our 2024 full year guidance. We also remain on track to deliver on our medium-term guidance, which is to achieve a revenue growth rate of 20% plus over the 2025-2027 period.

On the call today, we will share several proof points that confirm Enfusion's continued move up-market, adding new clients from the outside of the hedge fund segment in the insurance and banking sectors, while deepening our relationship with our existing client base.

I'm also pleased to share that similar to last quarter, our client onboarding satisfaction scores continue to remain at three year highs. As the company scales over the next several quarters, we plan to invest in our services platform, empowering our clients and enhancing our service delivery model as we move up-market.

We have more than 1,100 employees working to ensure that Enfusion's platform will be the last upgrade our clients will ever need. Now let me walk you through some key financial highlights from the second quarter. Our economic trajectory remained on track in Q2 '24 with $49.5 million in revenue, representing 16% year-over-year growth.

Q2 2024 adjusted EBITDA totaled $10.1 million, translating into a healthy adjusted EBITDA margin of 20.5%. Brad will provide a deeper dive on financials later. We signed 39 new clients in Q2 2024, up from 33 last quarter. This brings our total client count to 879.

During the quarter, the seasonally strong launch market in Q1 2024 carried through and accelerated. Many of these funds were naturally drawn to Enfusion's platform. Hence, 64% of our wins in the second quarter were launches, including four wins from established firms.

We continue to expect the launch and conversion mix to balance out more with a higher percentage of conversions in the back half of 2024. Q2 ACV increased sequentially from $226,000 to $228,000, another firm record representing 7.5% year-over-year growth.

Fund launches this quarter were strong, resulting in healthy bookings growth on both sequential and annual basis. We believe that Enfusion remains the go-to platform provider of the hedge fund community due to high client satisfaction, best-in-class service and a strong referral base.

Fund conversions, which have higher seat counts and higher AUM are typically larger and more complex firms with higher ACVs. Our strategy is to move up-market, winning larger asset managers, providing a more stable revenue profile, and offering additional product functionality and managed services.

While targeting larger and more complex firms, we intend to continue to protect our core hedge fund segment of the market as these firms come to us organically, translating in lower customer acquisition costs. Shifting gears, let me provide you with a few notable client wins across geographies from this quarter.

In the Americas, revenue grew 15% year-over-year, in line with Q2 2023. We are pleased to report that we saw a pickup in U.S. fund launches from Q1 continue into Q2. Just like last quarter, this trend is more than compensated for closures and consolidations witnessed earlier. When put together, the U.S.

market has shown broad resiliency with specific call out to credit fund launches. On that note, we had a strong year of credit wins in 2023 as of the end of Q2 were running slightly ahead of that pace year-to-date. Beyond the U.S.

market, Canada has been showing notable strength in Q2 2024, bringing in a larger account wins, and we are seeing an improved pipeline there. Now let me highlight several exciting cases of new client wins that serve as proof points of Enfusion's ability to expand our market share in the institutional asset management segment.

For example, I'm thrilled to announce that Enfusion signed a U.S.-based health and life insurance company that will move approximately $2 billion of internally managed AUM to the Enfusion platform.

Enfusion's mobile app will allow the investment team to make decisions regardless of the allocation, while providing the operations team a real-time view into the trading activity.

We believe that the unification of these workloads across the teams into one consolidated framework provides this client with a platform to enable collaboration and scale the internally managed assets. In particular, Enfusion improves the transition process to T+1 settlement and automate regulatory compliance oversight.

We have stated throughout the year, we have been pushing hard to win more institutional asset managers and our team has been delivering great execution of this strategy. Today, I'm excited to announce that Enfusion signed Strategic Global Advisors, SGA as a client.

SGA is a Newport Beach, California-based women-owned institutional asset management firm with around $3 billion in AUM and AUA. SGA employs a bottom-up quantitative investment process across several loan-only equity strategies.

SGA selected Enfusion as their team was looking for a new technology partner to help them drive operational efficiencies across the front office that could scale with them into the future.

SGA will utilize Enfusion's OEMS broadly, including Portfolio Workbench for cash flow rebalancing, pre-trade compliance, systematic APIs as well as newly released cash letter reporting. This is a very exciting win as we continue to build momentum in the institutional asset management space.

SGA chose to leave their long-term technology provider because of Enfusion's modern, SaaS-native itechnology architecture, commitment to partnership and more predictable total cost of ownership. Turning to Asia Pacific. Revenue grew 10% year-over-year, which compares to 14% growth last year and 13% growth in Q1 '24.

As you recall, last quarter, we called out some geopolitical and macroeconomic headwinds in APAC. Despite its regional headwinds persisting, we maintain our growth trajectory by expanding market share and gaining more traction with large traditional asset management firms, both stand-alone and captive.

For example, we are very excited to announce that one of the largest banks in China became an Enfusion client in Q2 2024. This client is an asset management division of one of the top 10 banks by total assets in China, top 20 in Asia and top 30 globally.

This partnership represents a proof point that the Enfusion platform can serve clients beyond typical asset managers and hedge funds. The client will initially focus on fixed income and will eventually expand to other asset classes on their platform.

This bank has undergone a very rigorous evaluation of providers and has selected Enfusion as they require a true front-to-back solution that will provide a lower total cost of ownership versus in-house and third-party solutions.

Lastly, Enfusion was able to complete Phase 1 of their requirements within three weeks' time, including integration with an external system, demonstrating the agility, the quality of our onboarding process. As part of our expansion in APAC this quarter, I am pleased to share another milestone for Enfusion.

We won our first client in New Zealand, a global equity investment management firm with close to $1 billion under management, which evaluated Enfusion for almost two years. And after a very thorough due diligence process, decided to onboard Enfusion and stop using one of our largest competitors.

This win is a reflection of our continued effort to expand our APAC book of business and make it less reliant on Hong Kong in light of the macro headwinds referenced earlier this year.

I'm also happy to note that several recent wins in APAC have allowed us to further diversify and improve our client base as two-third of the wins in APAC in Q2 2024 were outside of the hedge fund segment.

We diversified our overall portfolio mix in APAC significantly over the past several quarters, while alternative asset managers represented 81% of our APAC portfolio at year-end 2023, this now accounts for only 45% of our client base at the end of Q2 2024. Turning towards EMEA.

Revenue grew 28% year-over-year in Q2 2024 as we continue to expand our business in the region, significantly above average trends and above our internal historical trends.

Our EMEA team maintains the strong momentum, which results in expanding the client base, which in turn will drive greater brand awareness and upsell opportunities as well as the more balanced global growth profile.

It is important to note that our EMEA business growth mix becomes increasingly diversified geographically as we have deliberately expanded our book of business to make it less U.K.-centric and capture the expanded opportunity set in the Continental Europe, Middle East and Africa.

Europe remains a very diverse yet opportunistic market as reflected by our strong results over the past few quarters. We specifically called out Scandinavia last quarter for continued strength, and we are now seeing success in Switzerland for two quarters in a row. I am pleased to share our continued expansion in Switzerland this quarter.

2Xideas is among the latest Swiss investment managers to partner with Enfusion and enhance their investment operations. 2Xideas is a Swiss-based independent partner-owned investment firm focused on liquid mid-cap stocks with $1.2 billion AUM.

Enfusion has been selected as the primary technology and services provider for 2Xideas to help grow and scale their loan-only equity business while taking advantage of Enfusion's highly experienced managed services team to help with their middle and back-office operations.

Let me turn to Africa as another proof point of our ability to expand our EMEA footprint outside of the U.K. and strengthen our global franchise. AG Capital is among the latest South African investment managers to partner with Enfusion and enhance their investment operations.

AG Capital provides intermediary financial services to institutions, funds and professional investors. They offer trading and execution solutions, hedge funds and hedge fund incubation services as well as prime services.

Enfusion has been selected to run AG Capital hedge fund business, which includes funds across local and domestic, direct and alternative investments with strategies across long term equity, fixed income and global macro.

Furthermore, Enfusion has enhanced our partnership with Apex, the largest alternative fund administrator in the country, using a major pain point for some managers transitioning from other platforms. Overall, we view the region as a promising technical opportunity.

At this time, I'd like to have Neal Pawar, our COO, make a few comments on products and partnerships..

Thank you, Oleg. As many of you know from Investor Day, my focus since joining Enfusion has been to execute on our up-market strategy.

We believe we will succeed by addressing the full investment process needs of our clients, which includes expanding functionality to allow Enfusion to become more deeply relied upon and providing clients with the last upgrade they will ever need.

As you may have seen, we issued a product announcement on August 2nd that highlighted the latest portfolio management functionalities released within our Portfolio Workbench tool.

The newest version adds support for rebalancing across multiple models, seamless integration with portfolio optimizers and innovative mobile functionality, giving PMs the ability to easily manage performance and risk against benchmarks and model portfolios from a single screen on any device.

Our mobile offering is gaining popularity with our clients, and we are continuously enhancing its capabilities. This Portfolio Workbench release reinforces Enfusion's commitment to innovation and user-centric design, enhancing PM's decision-making processes to achieve better performance.

The new features to Portfolio Workbench include several new enhancements and use cases around how PM's rebalance portfolios across multiple models as well as optimize decision-making and advanced functionalities.

We're very excited to provide these highly requested features to all our clients, including both alternative and traditional asset managers. As a reminder, if you're a client, that every week Enfusion releases its SaaS software to all clients.

In the second quarter of 2024, we released a total of 267 software enhancements, including Portfolio Workbench enhancements, expanded functionality for fixed income rebalancing and innovative cash ladder report and much, much more.

The beauty of the Enfusion cash ladder is that it is fully integrated into our front-to-back platform and synthesizes on-hand cash balances, the impact of unsettled trades, upcoming corporate actions and asset servicing, forward subscriptions and redemptions and more importantly, model the impact of unexecuted orders sitting in the OEMS.

Altogether, this is an example of better decision analytics to help our clients make better portfolio construction decisions. And the cash ladder functionality was requested by clients and prospects, particularly in the institutional asset management space.

Keep in mind that all our clients benefit from these enhancements simultaneously ensuring everyone is constantly running the latest version of our platform. Our multi-tenanted SaaS model is based on one investment book of record and it's a competitive edge that cannot be understated.

As part of our market strategy, we are investing in our software and services platform to improve service delivery and have made several key hires year-to-date. Developing our enterprise support model allows us to support a larger institutional client base and improve the capabilities we deliver to our clients.

We have several initiatives completed and underway to enhance the client model, optimizing workflows by relentlessly focusing on lowering the number of clicks, manual steps and interactions with Enfusion's team to perform common functions. This initiative should empower our customers and our employees to spend their time on higher-value tasks.

Our culture of innovation has been a talent magnet for us as it allows Enfusion to be an attractive destination for world-class talent. We have recently added two experienced hires to our team, Chris Sturhahn and Daniel Gastel.

Chris joins us as our Chief Product Officer, having most recently worked at Axioma, SimCorp and previously worked at Barclays, Bloomberg and BlackRock. Daniel joined as our Head of Transformation also from BlackRock. I'd now like to hand it back to Oleg to discuss market dynamics and strategy..

Thank you, Neal. As for market dynamics, the strong launch market continued into Q2 2024 and investors maintain their support of the current hedge fund allocations. As such, we saw healthy demand for both launches and conversions in the segment.

On the other hand, our geographical expansion in EMEA, the new win in New Zealand as well as notable wins in the insurance and banking segments reflect the ongoing interest from large institutional and traditional players to decrease the total cost of ownership and upgrade for the less time, their current platform.

China and Hong Kong markets continue to show capital outflows. However, Enfusion continues to take market share there, exceeding industry growth. Conversions were lower mix this quarter as this accounts have much larger ACVs and the opportunity to compete is more staggered based upon the timing of contract renewals.

We continue to closely monitor the competitive landscape and remain very excited about our positioning. Enfusion consistently demonstrated that despite some short-term volatility, our economic profile remains resilient to macro forces over the long term, given the secular nature of the demand for modern and cost-effective investment technology.

I would be remiss if I didn't mention dynamics that we observed in the private market segment. Many of the Enfusion hedge fund clients, both credit-focused and multi-strategy funds are already involved in this asset class and seeing a growing opportunity set.

As we see investors allocating more capital to private credit and managers deploy capital they've already raised, the operational challenges related to the portfolio management as well as middle and back office remain formidable.

To that end, we are working with our existing and potential clients to enhance our current functionality supporting the asset class and assessing platform enhancements that accelerate our product road map here, both organically and inorganically.

An important part of any modern investment process is leveraged in both internal and third-party data sets to create more insights into performance and risk. This is exactly where our visual analytics product comes in.

Just like Portfolio Workbench and other related functionality, the next generation of our analytics product will be tightly integrated into the overall platform and help our clients improve quality of their investment decision-making and risk management.

In conclusion, we are delivering a world-class product to our existing customers in fueling up-market motion with products and services that position the company to win larger and more profitable new business. As our notable client wins show we're taking share in both new and legacy territories while expanding into segments new to Enfusion.

Importantly, we will continue to invest in our business and our people to fuel future growth. Enfusion is a unique platform with unparalleled scale.

And just as we did 14 years ago, we're faced with a generational opportunity to disrupt the investment technology landscape for all institutional clients and support all investment workloads for generations to come. I will now turn the call to Brad to discuss our financials..

We presented a number of proof points to underscore our strength in onboarding new logos, whether that be via conversions of competitive platforms or new launches. As we talked about at Investor Day, the long-term benefit from these new front book onboardings will continue to provide the lion's share of our growth in the future.

However, the current market backdrop introduces volatility in our back book as our existing customers look to manage costs by either slowing down incremental spend or managing seat and connection counts.

We remain optimistic of the growth capabilities of our back book noticeably because the growth generated from that segment has improved five full percentage points from its lows of last year. Recovery to more normal levels in our back book metrics would generate an additional 2 percentage points to 4 percentage points of growth contribution.

Given the current levels of market volatility, it's simply too early to make the call just when that recovery will materialize. Regarding profitability, we continue to practice disciplined capital deployment that is made evident by our ability to deliver market-leading top line growth while at the same time continuing moderate expansion in margins.

With that backdrop, we are again confirming our initial full year guidance of revenues between $200 million to $210 million, adjusted EBITDA between $40 million to $45 million and a free cash conversion ranging from 50% to 55%.

For modeling purposes, we continue to expect stock-based compensation to land between $19 million and $20 million for the year. We'd now like to open up the call to questions. Operator, please go ahead..

Thank you. The floor is now open for questions. [Operator Instructions] Your first question comes from the line of Michael Infante of Morgan Stanley. Your line is open..

Great. Thanks for taking my question. Oleg and Neal, great to see the continued product innovation on the Portfolio Workbench and cash laddering front.

I'd be curious, if you could frame the impact for us just in terms of how these product enhancements are either improving win rates translating to higher levels of ACV, a prime contract signing or maybe what the quantum of bookings and the pipeline from these new initiatives looks like? Thanks..

Michael, thanks for the question. Good morning. I will let Neal to handle this question..

Yeah. Hi. I think the way to think about this is the Portfolio Workbench in particular, but also some of the other features that we've mentioned like the cash ladder. These are table stakes for institutional asset managers.

When we set out our strategy in our Investor Day earlier this year, we talked about wanting to move into that segment in a much larger way and capture more of that serviceable addressable market. And what we've been steadily doing is closing down any gaps that we had in our platform in order to be fit for purpose for that segment.

The work ventures already allowed us to win a number of clients in that space. And now that we've got the cash ladder out there, too. We're continuing to make great traction. And one way to really think about it is that as the Portfolio Workbench gets used by more and more clients is integration into the OMS is key.

In a lot of large institutional asset managers, the workflows are very distinct and separate. And so as you flow from a portfolio rebalance into the trade execution of that, there's a number of hops and steps and reconciliations that need to take place.

The beauty of an integrated workbench alongside an Order Management System allows sort of a seamless integration front to back so that any change in a portfolio automatically flows into its execution venues.

This is allowing us to have a really good pipeline of asset management opportunities, and it's really key for us as we move to grow into that space..

Yeah. So I just wanted to draw your attention to how this is a huge factor for us to increase our footprint on the front office side and front book economics, how it drives it. So as Neal pointed out, this integration, which we always highlighted is our competitive advantage. It really pulls portfolio manager's eyes towards the OMS.

And therefore, when people use our portfolio construction tools, immediate benefits of having OMS integrated into this workflow becomes very obvious. And so the top line that exists between the third-party OMS and our Portfolio Workbench, it just obvious. So that's how we look at it..

Helpful. Thank you, both. Brad, just a quick one for you. I think you mentioned some favorable trends just in terms of churn specifically. Can we just unpack that point a little bit further. I think last year in the second quarter and churn was down about 24% sequentially from 1Q to 2Q.

I think if I have my numbers correct, it was down about 7% sequentially this quarter. So just curious how you're thinking about the impact of churn on the back book and if you need to see a bit of improvement on churn in order to get that incremental 2 points to 4 points of back book improvement? Thanks..

No, sure. Thanks, Michael. So churn certainly has recovered here in the last couple of quarters. If you look at the way the back book is performed, churn has a little room to go, but it's pretty close to actually where we would expect it on a revenue basis. I think the real topic we talked about in the back book has to do with that upsell.

So while churn is a meaningful impact, it's certainly kind of normalized back to where it's not the real kind of long pole in the tent in the back half of the year. It's recovered basically to pretty close to where it should be.

There's some other areas in the back book that we're more focused on, primarily that upsell component I mentioned in my remarks..

Got it. Thanks..

Yeah..

Your next question comes from the line of Faith Brunner of William Blair. Your line is open..

Hi, guys. Thanks for taking my question. You guys talked a lot about your ongoing move up-market and the different investments you guys have been making into your software and services. I guess, can you provide some color on the overall services ecosystem.

I guess, what role you guys see partnerships playing in this ecosystem? Are you leaning into system integrators as you move up market or any color there of how you're kind of standardizing that process?.

Yeah. Hi, Faith. Good morning. Great question. Definitely, the key players in the institutional asset side when it comes to onboarding and implementation are very different from where we're used to play, which is simpler clients, hedge funds and whatnot.

And so yes, we were in very advanced stages of conversations with consultants, advisors, third-party integrators that are often not only get engaged by clients to onboard whatever system client chooses, but they also play key role in selection of those systems.

And so it's really important to us to have these relationships deep and so that the consultants understand Enfusion story. And just to step back for a second. In the broader context, especially for large complex investment organizations, business digitization is a big, big theme. And at the end of the day, people talk about AI and all of those things.

And so what's fundamental to that exercise is having data clean all in one place. And there is literally no other software platform than Enfusion that actually has that. And therefore, these people, these organizations, they kind of see the final destination for business digitization.

And therefore, we feel Enfusion will become a system of choice when we start converting clients from larger to smaller. And this is where those consultant relationships will be key for us to succeed..

All right. Great. Thanks for the color there. And then one more quick one, if I can. We're continuing to see strong growth in the EMEA region.

So I guess, from a capital allocation perspective, what investments are you guys making to really scale those teams out there and continue capitalizing on the growth opportunities?.

Yeah. Great question.

So we've been adding to our teams in Europe, most recently also in our product management area where we're bringing more specialized product managers in our OEMS and compliance space because obviously, recognizing that Europe isn't one country and there's actually a large number of very different countries with different accounting rules and regulatory rules.

We have to make sure that we have the right talent on the ground to be able to, a, ensure that our product is a fit for all those different geographies; and b, to be able to interact with our clients and help them during onboarding and during evaluation of the platform to make sure that they can see how those functionalities work and live within the Enfusion ecosystem.

So it's a great question. It's a super important focus for us..

Your next question comes from the line of Gabriela Borges of Goldman Sachs. Your line is open..

Hi. Good morning. Thanks for taking the questions. I have for Oleg, Neal, or Brad, Talk to us a little bit about the cross-sell motion that's happening in the back book.

Are there company-specific products that you're excited to be able to get into the hands of customers that will help ramp that number? How much of this is macro pressure tied to seat count e expansion? Just a little bit of color on how much of that is within your control versus how much of it is you waiting for customers to feel better about the underlying environment?.

Hi, Gabriela. This is Neal. First, in terms of the upsell and some of the elements that contribute to that, we're putting a lot of effort in our partnerships.

We're doing a number of different partnerships with companies ranging from compliance, reporting, transaction cost analysis, other areas where we can basically connect our clients' data directly to those partner systems such that the experience for a client becomes close to seamless.

If they sign the contract and agree that they want to use a particular third-party service through Enfusion's partnership, then all they have to do is let us know, and then we can flow their data through and they can start to receive the benefit. So this is an area that we've been putting a lot more emphasis on of late.

And we'll absolutely start to yield dividends for us..

Gabriela, I'll add to that. So Neal kind of mentioned kind of the product component, but there certainly is a macro component that affects the back book. When you look at how our customers add and subtract seats or add and subtract connections, there certainly is a pattern with what's going on in the macro environment that we watch very closely.

We saw that play out last year. We talked about it pretty extensively. We don't see a lot of those changes coming through in large lumps, 10% or 20% adds or subtractions, we see a lot of onesies and two-sies.

So what we're watching very closely, especially given some of the volatility that's going on now, we'll be watching that real close over the next probably 30 days to 60 days just to see how our customers react to some of this market volatility and see what that's going to mean on the back book..

And I will just chime in with one more perspective. What we can control is also the level of engagement with our customers.

And so whether it's increased level of managed services or custom software development, this is where we try to create some additional glue where this relationship becomes both value creative and also economically beneficial for Enfusion..

Yeah, absolutely. And Brad, the follow-up to you on the guidance. So a couple of comments in the prepared remarks around you just discussed the back book and then a little bit around visibility and macro.

Give us a little bit of perspective on your thought process on maintaining the guide and how you think about the level of conservatism that's embedded in that relative to some of the comments you mentioned about the macro being maybe a little bit less visible..

Great question. We spent a lot of time kind of sorting through this. If you look at how the overall businesses perform, I don't want to lose track of just how well that front book is performing. We talked last year, if you remember, we said, look, as the macro environment gets challenged, the front book has a lot of tailwind.

It just takes a little while for that tailwind to materialize. We are starting to see that now. When you look at the back half of the year, the unfortunate side of a difficult macro could be as it was last year, where the macro takes a little bit more of a hit in the near term versus the longer-term effect on a positive side that the front book sees.

So when we sat down and look at our guide for the year, given some of the uncertainty that's played out, especially over the last, call it, week, we felt it was prudent not to kind of call the winning game here at half time. So we wanted to let a little bit more time pass, see what that back book looks like.

We'll certainly come back and revisit this the third quarter. But given that level of uncertainty, we just felt it was prudent just to leave that guide with the range that we put out there to start the year with. We feel confident with that range.

There's still some variability, obviously, with that back book component as to where we're going to land in that range. But we wanted to make sure we at least reconfirmed the range that we put out there at the beginning of the year..

Got it. Thank you..

Your next question comes from the line of Koji Ikeda of Bank of America. Your line is open..

Yeah. Hey, guys. Thanks for taking the questions. I wanted to ask kind of a follow-up to the demand question.

And so as we're heading into a period of what seems like more volatility, specifically around a potential interest rate regime change, how do you guys think about how this could affect demand? I mean, should demand stay consistent with what we've been seeing over the past several years with everything going on? Enfusion has been around for a long time and have lived through many interest regime changes in the past.

And so I just wanted to get an additional color here on how we should be thinking about demand environment heading into what should be an interest rates change?.

Yeah. Thank you, Koji. So I guess I would just first shine the light on some of what I said in the prepared remarks. I mean, I love the fact that you look back and highlighted the fact that Enfusion has been around through all this sort of generations of the market and macroeconomic environments.

And 2022 and 2023 are a case in point, right? We see a little bit of a client step and breaks and then everything kind of restarted. So while some short-term volatility in demand could impact our trajectory. Over the long term, we are a low beta business. And it's -- I use this term downside convexity where things become bad.

People actually come to us from higher cost -- higher total cost of ownership type players and actually choose us because we're that much effective -- more cost effective. I don't think the interest rates alone will explain everything. I mean we see a lot of things that trigger the carry trade. I don't want to go into macro analysis too much.

But the reality is when things are pulled back, some of the hedge funds, in particular that live on concentrated trades, there's very few differentiated ideas out there. They will maybe pause their decisions. However, I do not think that it will impact our up-market motion.

In fact, I actually -- I have a high level of conviction that it will only accentuate what we've seen recently, which is continued reevaluation of old database architectures of old kind of managed services paradigm and, of course, kind of obsolete software solutions that just very costly bulky.

And in fact, in this environment, precludes people from pivoting very quickly into their investment stance to create better risk management framework and deliver better risk-adjusted returns to the investors. So technically, I don't know over the long term, I have a high level of confidence that this business is very robust and low beta business..

Got it. Thank you, Oleg. And maybe a follow-up question for Brad. When I look at the NRR, 103%, it is up sequentially and up year-over-year. How to think about the most attractive levers over the next 12 months to drive this metric higher? And then also, I know that a component of NRR is onboarding from the back book.

So any way you can quantify how much onboarding from the back book has contributed to the NRR of 103%. Thank you very much..

Yeah. Sure. So some of the nuances that will help accelerate that number. Neal mentioned some of those cross-sell opportunities we are looking at while a lot of product is focused on generating front book onboardings, there are some product capabilities that are in the pipeline that will generate some cross-sell.

There's also some penetration rates we're working on. If you think about OEMS, managed services and modules like analytics, all those or cross-sell opportunities that will drive NDR up on that existing customer base. There's also some revisiting of some pricing discussions that we have internally. That will be another positive impact.

One of the larger impacts is still going to be how we think about our customers growing underneath us. If you go back to Investor Day, if you remember, we talk about growing our customer base kind of horizontally and vertically.

I mentioned the vertical part across an OEMS or managed services, but there's still a vertical component where we pick up additional funds from customers where we may not have a full share of wallet. So those are going to be the big -- the biggest drivers that are going to continue to expand that NDR.

I want to mention -- I said it in my remarks, we will get some pickup of that NDR when that CS, UBS impact rolls off. So we'll get a little bit of impact there, but the other -- the majority of the impact is going to come from those things I just walked through..

Thank you..

Yeah..

Your next question comes from the line of Alexei Gogolev of JPMorgan. Your line is open..

Thank you. Hi, Oleg, Brad, Neal. Could I come back -- Brad, could I come back to your 2024 backlog guidance, please.

You mentioned the improvement in churn levels where you thought it would be -- so is it fair to assume that you're still looking at 4% to 5% back book churn this year?.

Yeah. Churn is going to fall in the -- I would call it more like a 3% to 5% range. But yes, it's still in the low to mid-single digits for churn specifically..

Perfect.

And then on organic back book growth, is your assumption still around 7% to 10%, despite everything that you just mentioned earlier on the call?.

That's the number we're watching. That's still what we're targeting. It will be interesting to see how the back half of the year plays out. We were good in first quarter. We actually fell right in line with where we expected in first quarter -- second quarter.

As I mentioned on the overall back book performance, the weak component was that net organic growth piece. So we're watching that closely just to see how that plays out in the back half of the year..

And what specifically drove that slightly weaker dynamic that you expect? Is there any geography that is underperforming?.

No. It's a good question, Alexei. We spent a lot of time peeling it back and there were -- there's really no patterns into how the slowdown in that upsell component played out. It was mostly just one seat here, two seat there, one connection here, two connections there. It was no one concentration of a large group of clients.

It was no concentrations across geographies or types of clients. It was really just a small sliver coming off across the book in general. So it's a good question. And when we peeled it back, there really was no pattern, which is why we're watching it closely in the back half..

Okay. So just to reiterate, timing of NRR getting to 106%, 107% (ph) could theoretically be delayed into 2025, but no change in your midpoint of the guidance for the backlog of 4%..

That's correct..

Okay. Perfect. Thank you, Brad..

Good..

Your next question comes from the line of Parker Lane of Stifel. Your line is open..

Hi. This is Matthew Kikkert on for Parker. To start, the guidance notice is calling for accelerated EBITDA margin expansion in the second half.

Are there any specific efficiency projects that you would expect to start bearing fruit in the next two quarters? Are you expecting it to be mostly spread out or is there any specific areas where this acceleration is going to come from?.

It's generally spread out, but to call out one area, in particular, we've been doing a lot of work in what we're calling sort of self-service. And that is where there's a number of types of activities that today our clients performed through our managed service and our client support staff.

And especially as we move into the larger institutional segments, that's much more of an expectation that clients can manage those activities themselves. And so there's been an increased demand for the ability to have self-service tools to do that.

Obviously, while it also satisfying clients' demand for that, we're making ourselves more efficient because we're taking a number of activities that normally we would perform. In some cases, unpaid, and we're shifting that back to the clients at their request because they want to have greater control and integration into their system.

So that's a good concrete example of where we see some of that efficiencies. But there are obviously other examples more broadly across the platform as well..

Yeah. So what Neal just mentioned is an effort that's going to mostly manifest itself in gross margins. But then we've also got some really good scale benefits flowing through over some of our G&A functions as well. So it's really going to show up in both places. But you're exactly right. We do expect margins to continue to expand..

Okay. That's good to hear. Very helpful. And then secondly, I noticed the new fund launches increasing from 55% to 64% in the quarter.

How much impact do you expect traditional fund migrations in the second half? Do you still expect that percentage to trend down moving forward?.

Matthew, what do you mean by migrations?.

Yeah. I noticed in the shareholder letter, you mentioned the new fund launches just was 64% in the quarter.

I think last quarter, you had mentioned that number would be expected to trend down just given that funds are migrating to the platforms that are launching?.

Yes. That's right. So we see a lot of these launches that are what we call launches in disguise, where existing investment organization is launching a new product. But in some sense, the -- it's kind of a conversion. Why? Because they use something other than Enfusion to operate other investment vehicles.

And now if they add new product, they make a decision to choose something other than what they currently have in house. And we think that this is -- the launch is more of a conversion category as opposed to launch category.

And we don't expect -- number one, we don't expect the hedge fund watch environment to persist forever, right? It's a cyclical thing. And number two, again, naturally, as we migrate up-market, our larger clients will be more conversion other than launches. And typically, they already have existing infrastructure..

And just to add to that real quick. If you look at the count number, you're right, it's like a 65-35 number. If you look at it on an ARR basis, it's much more skewed towards conversion just because what Oleg mentioned, the size of those clients is significantly bigger..

Okay. That make sense. Thank you very much..

With no further questions, this concludes our Q&A session. I will now turn the conference back over to CEO, Oleg Movchan for closing remarks..

Well, thanks to all of you for great thoughtful questions and, of course, huge gratitude for our shareholders for supporting us for partnering with us and for sharing our vision that Enfusion's disruptive platform and a disruptive company. And we have reiterated our commitment to work really hard on shareholders we have to deliver value. Thanks..

This concludes today's conference call. You may now disconnect..