Introducing Enfusion: ENFN

I’d like to first give the obligatory thank you for the creators and everyone who shares on the board. This is my first (but hopefully not last post). I came across a recent IPO that I have found interesting, but is not as hypergrowth as many others on this board. Hopefully, it is relevant (target 30-35% long-term, but wondering if that is a conservative estimate initially so they beat expectations as many companies tend to sandbag).

The company is Enfusion, ticker ENFN. It is a Chicago-based company and their focus is on providing a cloud-based portfolio management and risk system for portfolio managers, as well as middle and back office services to investment companies. It went public on October 21 with approximately a 2B valuation. Their goal is to be an end-to-end solution for hedge funds, private equity, family funds, mutual funds, and on. It is fully cloud-native and a SaaS company.

It was founded by Tarek Hammoud (Executive Chairman - stepped down as CEO in March 2020) and Stephen Malherbe (Managing Partner). Both previously worked for Citadel Investment Group. The CEO is Thomas Kim who has multiple CEO roles.

Client growth has gone from:
2018: 352
2019: 448 27%
2020: 542 17%
6/30/2021: 635 17%* I believe this includes 1 1/2 years based on what I can discern, so new customers would be slower than 17% YoY

As of Q2 2021 they had 108MM in ARR with 98% being recurring. In 2020, they had adjusted churn of just .9% (actual churn higher, but they remove involuntary cancellations - and it has been going down) and a 120% NRR. Gross margins were 73% and 32% Adj. EBITDA (profitable).

In the first half of 2021 had 38% revenue growth and 44% in ARR for based on Q2. Net dollar retention rate increased from 109% in Q2 2020 to 122% Q2 2021.

To me all these metrics show acceleration from 2019 to 2020 to the first half of 2021. Gross margin in 1H 2021 took a slight dip 73.6% vs 73.3% but both are ahead of 71.3% in 2019 and 73.2% for FY2020. The other thing I like about the company is it is already profitable.

Their long-term growth target is 30-35% with 77.5%-80% gross margin.

Road show presentation: https://s28.q4cdn.com/473052227/files/doc_presentations/2021…

Website: https://enfusion.com/

Prospectus: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001868912/3e78bb7…

Reasons I’m interested:

  1. Moderately high growth with room for continued expansion.
  2. TAM should continue to grow. AUM surpassed $110T globally and will is likely to continue to grow. They believe their current TAM is 19B for which they only have 108M market share.
  3. Already profitable.

1st Earnings call is December 2nd.

Would love additional input on or off board from more seasoned eyes.

Small starter position. Also of note: very thinly traded.

20 Likes

the first thing i noticed is that it is not founder led anymore. why did founder leave at this early stage? the other thing you mentioned that current ceo has multiple role.

these two would be deal killer for me.

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Thank you for your response. Both founders are still involved, but not leading as the CEO.

Here is the PR from when the new CEO was hired: https://www.prnewswire.com/news-releases/enfusion-announces-…

And in terms of roles, I meant to say that he has held multiple CEO positions prior to coming to Enfusion, not that he currently holds multiple roles - sorry for the error.

2 Likes

ok looks cheap to me.

mcap is 1470M.
q2 arr is 108M with 37% YOY growth.

I am going to assume 8.5% qoq for 4 quarters here. this gives me something like this:

q1 99.54
q2 108.00
q3 117.18
q4 127.14
451.86

so p/s = 1470/451.86 = 3.25

now here is my question why is market not giving it higher multiple for 37% growth in an environment where all our stocks have lofty valuations. but maybe 8.5% qoq is too low to make “Saul” grade stock. still this looks cheap to me.

1 Like