Learnings from the latest SaaS IPO — Enfusion

Enfusion is a smaller software company that just went public. Below are some of the highlights from their prospectus. The key learnings we took away: you can be small and go public (the last lower revenue business to go public was Livongo, a few years ago), dont structure contracts the way they do.

What they do. “Enfusion is a global, high-growth software-as-a-service provider focused on transforming the investment management industry. Our solution is designed to eliminate technology and information barriers, empowering investment managers to confidently make and execute better-informed investment decisions in real time.”

Pricing is complex. “we charge our clients fees comprised of various components such as user fees, connectivity fees, market data fees and technology-powered service fees, all of which take into account client complexity and that is subject to contract minimums. Our total net revenues were approximately 98.0% and 98.7% recurring subscription-based during the years ended December 31, 2020 and 2019.”

Clients are assigned to a team, not just a CS rep. “we assign each client a dedicated service team that works with them from the moment of onboarding and throughout their contract lifetime. The continuity in the servicing team assigned to each client ensures that our clients are continuously interfacing with dedicated Enfusion employees”

They’re small for a public, and profitable. “Our total net revenues were $79.6 million and $59.0 million for the years ended December 31, 2020 and 2019, respectively. We had net income of $4.1 million and $12.7 million in the years ended December 31, 2020 and 2019, respectively.”

The market is small, even though it’s global. “We believe we are the leading cloud-native, SaaS provider to the global emerging fund and hedge fund sector. For the year ended December 31, 2020, we generated approximately 67.9% of our total net revenues in the Americas and approximately 32.1% of our total net revenues outside of the Americas.”

Very nice customer retention. “Our Net Dollar Retention Rate was 119.6% and 111.3% for the years ended December 31, 2020 and 2019, respectively.”

But it’s not a clean calculation as it excludes bankruptcies of clients. “We define involuntary cancellations as accounts that were cancelled due to the client no longer being in business. We identify involuntary cancellations to be excluded from our Net Dollar Retention Rate calculation.”

Gross retention is excellent. “Our Revenue Churn Rate for the years ended December 31, 2020 and December 31, 2019, was 5.2% and 10.1%, respectively.” That includes bankrupt clients, so it’s a clean measure.

Contracts are poorly structured. “Most platform subscription contracts have a one-year term and are cancellable with 30 days’ notice. Installment payments are invoiced at the end of each calendar month during the subscription term. We have a limited number of contracts that are non-cancellable. We have determined the impact of these contracts is not material on our pattern of revenue recognition.”

Covid was good for them. “While the COVID-19 pandemic has significantly affected the global economy, it has not significantly affected financial results for the year ended December 31, 2020 or the six months ended June 30, 2021. While COVID-19 had a temporary nominal impact on client dialogue, it altogether reinforced our value proposition and amplified the need for our clients to be able to operate systems remotely”

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