Enfusion expands offerings as revenue growth slows (NYSE:ENFN)

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A fast version of Enfusion

infusion (New York Stock Exchange: ENFN) went public in October 2021, raising approximately $319 million in gross proceeds from an initial public offering priced at $17.00 per share.

The company offers investment management software as a service through its cloud-based system to investment managers around the world.

I am on hold for ENFN given its apparent full valuation and slowing revenue growth on worsening macroeconomic conditions.

Infusion Overview

Headquartered in Chicago, Illinois, Enfusion was founded to develop a feature set of investment management software for portfolio management purposes.

The management is headed by Chief Executive Officer, Thomas Kim, who has been with the firm since March 2020 and was previously in the management of Bridgewater Associates.

The company’s main offerings include:

  • portfolio management

  • Order Execution

  • Accounting/General Ledger

  • Analytics

  • Technology-driven services

  • Express Infusion

The firm pursues client relationships through its direct sales and marketing team and informally through referral partners.

Enfusion earns its revenue through its SaaS recurring subscription software platform, and customer contracts typically run for one year.

Enfusion Market and Competition

Based on a 2021 market Investigation report According to Market Primes, the global market for investment management software was estimated at $3 billion in 2019 and is projected to reach almost $4.5 billion by 2025.

This represents an expected CAGR of 10.2% between 2019 and 2025.

The main drivers of this expected growth are users’ desire to automate repetitive tasks so they can focus on maximizing portfolio performance and creating more sophisticated approaches.

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Additionally, assessing risks and exposures and being able to efficiently report and share information with stakeholders will drive demand for more capable solutions.

Major competitors or other industry participants include:

  • SS&C

  • state street

  • SAP

  • BNY Mellon (Eagle)

  • SimCorp

  • black rock

  • FIS

  • north trust

  • Others

Enfusion’s Recent Financial Performance

  • Total revenue per quarter has increased according to the following chart:

Total revenue for the 9th quarter

Quarter 9 Total Revenue (Alpha Search)

  • Gross profit per quarter has followed the same path as Total Revenue:

9 Quarter Gross Profit

9 quarter gross profit (looking for alpha)

  • Selling, general and administrative expenses as a percentage of total revenue for the quarter have been on an upward trend as revenue has increased (the high amount in the fourth quarter of 2021 was due to stock-based compensation related to the initial public offering):

9 Quarter Sales, G&A % of Revenue

9 Quarter Sales, G&A % of Revenue (Search Alpha)

  • Operating income per quarter has generally been close to break-even for most of the last 9 quarters:

9 quarter operating income

9 quarter operating income (looking for alpha)

(All data in the charts above is GAAP)

Since its initial public offering, ENFN’s share price has fallen 32.1% versus the US S&P 500 Index’s decline of about 15.7%, as the chart below indicates:

52 week share price

52-week share price (seeking alpha)

Rating and other metrics for Enfusion

Below is a table with the relevant figures of capitalization and valuation of the company:

Measurement (TMT)


Business Value/Sales


Revenue growth rate


Net profit margin




Market capitalization


company value


Operating Cash Flow


Earnings per share (fully diluted)


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(Source – Looking for Alpha)

Comment on the infusion

In its latest earnings call (Source – Seeking Alpha), which covers Q2 2022 results, management highlighted the increasing recruitment of new institutional asset manager clients and the diversification of its client base.

The firm has also launched Enfusion Express, a lightweight version of its flagship system that is aimed at smaller fund managers with less than $100 million in assets under management (AUM).

Management intends to leverage its partner channel to help distribute this system to a broader market and allow smaller managers to grow to eventually ‘seamlessly transition to the comprehensive end-to-end Enfusion solution’.

Looking at their financial results, total revenue was up 38% year-over-year, while Adjusted EBITDA (which typically excluded stock-based compensation and one-time items) was $5.4 million.

The company’s net dollar retention rate was 121.9% (excluding churn), indicating strong product-to-market fit and good sales and marketing efficiency.

GAAP operating loss was $3.9 million for the quarter as the company has generally produced near operating break-even for the majority of the last 9 quarters.

For the balance sheet, the company ended the quarter with $56.6 million in cash and equivalents and no debt.

During the last twelve months, free cash used was $18.2 million.

Looking ahead, management expects full-year 2022 revenue growth to be 35% at the midpoint of the range and adjusted EBITDA margin to be 12.7% at the midpoint.

As for valuation, the market is pricing ENFN at an EV/Sales multiple of around 6.8x.

The SaaS Equity Ratio of publicly traded SaaS software companies showed an average EV/Revenue Forward multiple of around 6.9x as of September 30, 2022, as the chart here shows:

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SaaS Capital Index

SaaS Capital Index (SaaS Capital)

So by comparison, the market currently values ​​ENFN at about the same value as the broader SaaS Capital Index, at least as of September 30, 2022.

A primary risk to the company’s outlook is the lengthening of sales cycles in the hedge fund area of ​​its market, typically due to changes in macroeconomic conditions.

A possible bullish catalyst for stocks could include a gradual easing of interest rate hikes by the US Federal Reserve, which could result in better financial market conditions for its clients and prospects.

Going forward, it looks like revenue growth is expected to slow slightly, so I wonder if ENFN’s higher growth days are behind it.

While the company is close to operating breakeven, its stock appears fully valued compared to a broader basket of SaaS companies.

I’m not optimistic about broad economic trends over the next year, so I’m on hold for ENFN given its apparent full valuation and slowing revenue growth.

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