Enfusion, Inc. - Quarter Report: 2022 June (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40949

Enfusion, Inc.

(Exact name of registrant as specified in its charter)

Delaware

87-1268462

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

125 South Clark Street, Suite 750

Chicago, Illinois 60603

(Address of Principal Executive Offices)

(312) 253-9800

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of Exchange on which registered
Class A common stock, par value $0.001 per share	ENFN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐	Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 9, 2022, the registrant had 113,070,805 shares of common stock outstanding, consisting of 67,001,652 outstanding shares of Class A common stock and 46,069,153 outstanding shares of Class B common stock.

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TABLE OF CONTENTS

		Page
	SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	3
Part I.	FINANCIAL INFORMATION	5
Item 1.	Condensed Consolidated Interim Financial Statements (Unaudited)	5
	Condensed Consolidated Interim Balance Sheets	5
	Condensed Consolidated Interim Statements of Operations	6
	Condensed Consolidated Interim Statements of Comprehensive (Loss) Income	7
	Condensed Consolidated Interim Statements of Preferred Units, Stockholders’ Equity and Members’ Deficit	8
	Condensed Consolidated Interim Statements of Cash Flows	9
	Notes to Condensed Consolidated Interim Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
Part II.	OTHER INFORMATION	33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
	Signatures	37

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations, financial condition, business strategy, plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks, and changes in circumstances that are difficult to predict. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements concerning the following:

●

our future financial performance, including our revenues, costs of revenues, gross profit or gross profit margin and operating expenses;

●

the sufficiency of our cash, cash to meet our liquidity needs;

●

anticipated trends and growth rates in our business and in the markets in which we operate;

●

our ability to maintain the security and availability of the products and services that comprise our solution;

●

our ability to increase the number of clients using our solution;

●

our ability to sell additional products and services to and retain our existing clients;

●

our ability to successfully expand in our existing markets and into new markets;

●

our ability to effectively manage our growth and future expenses;

●

our market opportunity and the potential growth of that market, our liquidity and capital needs and other similar matters;

●

our ability to maintain, protect and enhance our intellectual property;

●

our ability to comply with modified or new laws and regulations applying to our business;

●

the attraction and retention of qualified employees and key personnel;

●

our anticipated investments in sales and marketing and research and development;

●

our ability to successfully defend litigation brought against us;

●

the increased expenses associated with being a public company;

●

the impact of the COVID-19 pandemic and other global financial, economic, and political events on our business and industry; and

●

our ability to compete effectively with existing competitors and new market entrants.

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You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in Item 1A. Risk Factors in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q. And while we believe such information provides a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Interim Balance Sheets

(dollars in thousands)


	As of		As of
	June 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current Assets:
Cash	$	56,559	$	64,365
Accounts receivable, net		28,771		18,223
Prepaid expenses		3,634		6,030
Other current assets		1,287		1,060
Total current assets		90,251		89,678
Property and equipment, net		16,093		13,051
Other assets		3,783		3,356
Total assets	$	110,127	$	106,085

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	879	$	2,528
Accrued expenses and other current liabilities		8,963		5,578
Total current liabilities		9,842		8,106
Other liabilities		479		538
Total liabilities		10,321		8,644
Stockholders' Equity:
Class A common stock, $0.001 par value; 1,000,000,000 shares authorized, 67,001,652 and 65,583,289 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		67		66
Class B common stock, $0.001 par value; 150,000,000 shares authorized, 46,069,153 and 47,470,971 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		46		47
Additional paid-in capital		240,501		226,717
Accumulated deficit		(180,896)		(171,209)
Accumulated other comprehensive loss		(582)		(325)
Total stockholders’ equity attributable to Enfusion, Inc.		59,136		55,296
Non-controlling interests		40,670		42,145
Total stockholders' equity		99,806		97,441
Total liabilities and stockholders' equity	$	110,127	$	106,085

See Notes to Condensed Consolidated Interim Financial Statements.

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ENFUSION, INC.

Condensed Consolidated Interim Statements of Operations

(dollars in thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
REVENUES:
Platform subscriptions	$	33,560	$	24,324	$	65,111	$	46,747
Managed services		2,396		1,729		4,626		3,263
Other		584		396		944		792
Total revenues		36,540		26,449		70,681		50,802

COST OF REVENUES:
Platform subscriptions		9,065		5,709		18,376		11,661
Managed services		1,668		1,015		3,283		1,843
Other		114		53		171		82
Total cost of revenues		10,847		6,777		21,830		13,586
Gross profit		25,693		19,672		48,851		37,216

OPERATING EXPENSES:
General and administrative		18,302		7,457		40,597		13,838
Sales and marketing		7,575		4,264		16,007		7,422
Technology and development		3,722		2,041		8,524		4,243
Total operating expenses		29,599		13,762		65,128		25,503
(Loss) income from operations		(3,906)		5,910		(16,277)		11,713

NON-OPERATING INCOME (EXPENSE):
Interest expense		(1)		(1,410)		(7)		(2,802)
Other income (expense)		1		—		4		—
Total non-operating income (expense)		—		(1,410)		(3)		(2,802)

(Loss) income before income taxes		(3,906)		4,500		(16,280)		8,911
Income taxes		219		249		369		551
Net (loss) income	$	(4,125)	$	4,251	$	(16,649)	$	8,360
Net loss attributable to non-controlling interests		(1,703)		—		(6,962)		—
Net (loss) income attributable to Enfusion, Inc.	$	(2,422)	$	4,251	$	(9,687)	$	8,360

Net loss per Class A common shares attributable to Enfusion, Inc.:
Basic and diluted	$	(0.03)			$	(0.13)
Weighted Average number of Class A common shares outstanding:
Basic and diluted		84,581				83,989

See Notes to Condensed Consolidated Interim Financial Statements.

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ENFUSION, INC.

Condensed Consolidated Interim Statements of Comprehensive (Loss) Income

(dollars in thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net (loss) income	$	(4,125)	$	4,251	$	(16,649)	$	8,360
Other comprehensive loss, net of income tax:
Foreign currency translation loss		(353)		(16)		(439)		(77)
Total other comprehensive (loss) income		(4,478)		4,235		(17,088)		8,283
Comprehensive loss attributable to non-controlling interests		(1,849)		—		(7,144)		—
Total comprehensive (loss) income attributable to Enfusion, Inc.	$	(2,629)	$	4,235	$	(9,944)	$	8,283

See Notes to Condensed Consolidated Interim Financial Statements.

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ENFUSION, INC.

Condensed Consolidated Interim Statements of Preferred Units, Stockholders’ Equity and Members’ Deficit

(dollars in thousands)

(Unaudited)


												Accumulated
	Class A			Class B				Additional				Other				Total
	Common Stock			Common Stock				Paid-in		Accumulated		Comprehensive		Non-Controlling		Stockholders'
	Shares		Amount	Shares	Amount			Capital		Deficit		Loss		Interest		Equity
March 31, 2022	65,583,289	$	66	47,470,971	$	47	$	233,607	$	(178,474)	$	(375)	$	41,837	$	96,708
Net loss	—		—	—		—		—		(2,422)		—		(1,703)		(4,125)
Stock-based compensation, net of taxes paid	—		—	—		—		4,441		—		—		3,135		7,576
Share exchange	1,401,818		1	(1,401,818)		(1)		2,453		—		—		(2,453)		—
Issuance of restricted shares	16,545		—	—		—		—		—		—		—		—
Foreign currency translation loss	—		—	—		—		—		—		(207)		(146)		(353)
June 30, 2022	67,001,652	$	67	46,069,153	$	46	$	240,501	$	(180,896)	$	(582)	$	40,670	$	99,806

January 1, 2022	65,583,289	$	66	47,470,971	$	47	$	226,717	$	(171,209)	$	(325)	$	42,145	$	97,441
Net loss	—		—	—		—		—		(9,687)		—		(6,962)		(16,649)
Stock-based compensation, net of taxes paid	—		—	—		—		11,331		—		—		8,122		19,453
Share exchange	1,401,818		1	(1,401,818)		(1)		2,453		—		—		(2,453)		—
Issuance of restricted shares	16,545		—	—		—		—		—		—		—		—
Foreign currency translation loss	—		—	—		—		—		—		(257)		(182)		(439)
June 30, 2022	67,001,652	$	67	46,069,153	$	46	$	240,501	$	(180,896)	$	(582)	$	40,670	$	99,806


								Other
	Preferred Units			Members’ Deficit				Comprehensive		Total
	Units	Amount		Units	Amount			Loss		Members’ Deficit
March 31, 2021	53.774	$	167,523	47.968	$	(231,410)	$	(273)	$	(231,683)
Net income	—		2,247	—		2,004		—		2,004
Foreign currency translation loss	—		—	—		—		(16)		(16)
Distributions to members	—		(1,401)	—		(1,188)		—		(1,188)
June 30, 2021	53.774	$	168,369	47.968	$	(230,594)	$	(289)	$	(230,883)

January 1, 2021	53.774	$	165,515	47.968	$	(233,347)	$	(212)	$	(233,559)
Net income	—		4,419	—		3,941		—		3,941
Foreign currency translation loss	—		—	—		—		(77)		(77)
Distributions to members	—		(1,565)	—		(1,188)		—		(1,188)
June 30, 2021	53.774	$	168,369	47.968	$	(230,594)	$	(289)	$	(230,883)

See Notes to Condensed Consolidated Interim Financial Statements.

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ENFUSION, INC.

Condensed Consolidated Interim Statements of Cash Flows

(dollars in thousands)

(Unaudited)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net (loss) income	$	(16,649)	$	8,360
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		2,955		1,672
Provision for bad debts		459		174
Amortization of debt-related costs		13		148
Stock-based compensation expense		20,350		—
Change in operating assets and liabilities:
Accounts receivable		(11,007)		(3,466)
Prepaid expenses and other current assets		1,316		(1,481)
Accounts payable		(1,970)		763
Accrued expenses and other liabilities		3,326		1,633
Net cash (used) provided by operating activities		(1,207)		7,803
Cash flows from investing activities:
Purchases of property and equipment		(5,263)		(4,401)
Net cash used in investing activities		(5,263)		(4,401)
Cash flows from financing activities:
Payment of Member distributions		—		(2,745)
Payment of withholding taxes on stock-based compensation		(897)		—
Net cash used in financing activities		(897)		(2,745)
Effect of exchange rate changes on cash		(439)		(80)
Net decrease in cash		(7,806)		577
Cash, beginning of period		64,365		13,938
Cash, end of period	$	56,559	$	14,515
Supplemental disclosure of non-cash investing activities:
Accrued Property, Plant and Equipment	$	321	$	—
Supplemental disclosure of cash flow information:
Interest paid in cash	$	—	$	2,712
Income taxes paid in cash	$	333	$	—

See Notes to Condensed Consolidated Interim Financial Statements.

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ENFUSION, INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

Note 1 Organization and Description of Business

Enfusion, Inc. (“Enfusion” or the “Company”) is a leading provider of cloud-based order and execution management, portfolio management and risk systems. Enfusion’s clients include large global hedge fund managers, institutional asset managers, family offices and other institutional investors. Enfusion provides its clients with innovative real-time performance, risk calculations, and accounting capabilities for some of the most sophisticated financial products. The Company is headquartered in Chicago, Illinois and has offices in Chicago, New York, London, Dublin, Hong Kong, Singapore, São Paulo, Mumbai, Bengaluru, and Sydney.

Enfusion, Inc. was incorporated in Delaware on June 11, 2021 for the purpose of facilitating an initial public offering (“IPO”), which was completed on October 25, 2021, and other related transactions in order to carry on the business of Enfusion Ltd. LLC.

Enfusion, Inc. has three wholly-owned subsidiaries: Enfusion US 1, Inc., Enfusion US 2, Inc. and Enfusion US 3, Inc.; as well as a substantial financial interest in Enfusion Ltd. LLC and its majority-owned subsidiary, Enfusion Softech India Private Limited, as well as the wholly-owned subsidiaries of Enfusion Ltd. LLC: Enfusion Systems UK Ltd, Enfusion HK Limited, Enfusion Software Limited, Enfusion (Singapore) Pte. Ltd., Enfusion do Brasil Tecnologia da Informacao Ltda, Enfusion (Australia) Pty. Ltd. and Enfusion (Shanghai) Co., Ltd. Enfusion, Inc., through its control over the managing member of Enfusion Ltd. LLC, manages and operates Enfusion Ltd. LLC’s business and controls its strategic decisions and day-to-day operations. As such, Enfusion, Inc. consolidates the financial results of Enfusion Ltd. LLC, and a portion of Enfusion, Inc.’s net income will be allocated to non-controlling interests to reflect the entitlement to a portion of Enfusion Ltd. LLC’s net income by the unitholders that held Enfusion Ltd. LLC’s common units prior to the Company’s IPO and following the reorganization transactions (the “Pre-IPO Common Unitholders”). As of June 30, 2022, Enfusion, Inc. owned approximately 59% of Enfusion Ltd. LLC.

Note 2 Basis of Presentation

Principles of Consolidation

These statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the Company’s financial position and results of operations, and all adjustments are of a normal recurring nature. The operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022. The condensed consolidated interim financial information should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The unaudited condensed consolidated interim financial statements include the accounts of Enfusion, Inc. and its wholly or majority-owned subsidiaries. All intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated interim financial statements and accompanying notes. Actual results could differ from those estimates. The effect of the change in the estimates will be recognized in the current period of the change.

In order to better align with industry standards, the Company revised the presentation of its condensed consolidated interim statement of operations for the three and six months ended June 30, 2021 to reclassify certain

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immaterial expenses to cost of sales for Platform subscriptions. These expenses were previously classified in cost of sales for Managed services and Other revenues. This change in presentation has no effect on our gross profit or other consolidated results. In addition, the Company revised the presentation of certain credit charges that were previously recorded in Other revenues to reclassify these charges to Platform subscription and Managed services revenues, respectively. This change in presentation has no effect on the Company’s total revenues or other consolidated results.

Note 3 Summary of Significant Accounting Policies

A description of the Company’s significant accounting policies is included in the audited financial statements within its Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes in the Company’s significant accounting policies during the three and six months ended June 30, 2022.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification 606 (“ASC 606”), Revenue from Contracts with Customers. The Company derives its revenues primarily from fees for platform subscription and managed services provided to clients. Revenues are recognized when control of these services are transferred to the Company’s clients in an amount that reflects the consideration the Company expects to be entitled to in exchange for these services. Revenues are recognized net of taxes that will be remitted to governmental agencies applicable to service contacts.

Historically, platform subscription contracts have typically had a one-year term and were cancellable with 30 days’ notice. Beginning in the first quarter of 2021, our default platform subscription contract has had a multi-year term and did not allow termination for convenience, though each contract has and can be negotiated with varying term lengths, with or without a termination for convenience clause. Clients are invoiced each month for the services provided in accordance with the stated terms of their service contracts. Fees for partial term service contracts are prorated, as applicable. Payment of fees are due from clients within 30 days of the invoice date. The Company does not provide financing to clients. The Company determines revenue recognition through the following five-step framework:

●

Identification of the contract, or contracts, with a client;

●

Identification of the performance obligation in the contract;

●

Determination of transaction price;

●

Allocation of the transaction price to the performance obligations in the contract; and

●

Recognition of revenue when, or as, performance obligations are satisfied.

Platform subscription revenues

Platform subscription revenues consist primarily of fees for providing clients with access to the Company’s cloud-based platform. Platform subscription clients do not have the right to take possession of the platform’s software, and do not have any general return rights. Platform subscription revenues are generally recognized ratably over the period of contractually enforceable rights and obligations, beginning on the date that the client gains access to the platform. Installment payments are invoiced at the end of each calendar month during the subscription term.

Managed services revenues

Managed services revenues primarily consist of client-selected middle and back-office services provided on our clients’ behalf using the Company’s platform. Revenue is recognized monthly as the managed services are performed, with invoicing occurring at the end of the calendar month.

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Other revenues

Other revenues consists of non-subscription-based revenues, such as software enhancements developed for individual, sponsoring clients, but received by all clients, and data conversion and services that integrate a client’s historical data into our solution. The Company recognizes revenues as these services are performed with invoicing occurring at the end of each month.

Service contracts with multiple performance obligations

Our service contracts with clients can include multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. However, all distinct performance obligations within a contract are satisfied over a similar period of time with the same measure of progress. Accordingly, each distinct performance obligation within a contract has the same pattern of revenue recognition. The Company has determined that implementation services are not distinct from the ongoing platform subscription services due to the highly specialized knowledge required to execute on our solution. Such services are recognized with the platform subscription services revenue over time.

Remaining performance obligations

For the Company’s contracts that exceed one year and do not include a termination for convenience clause, the amount of the transaction price allocated to remaining performance obligations as of June 30, 2022 and December 31, 2021 was $28.5 million and $23.4 million, respectively. The Company expects to recognize this amount over the next one to five years.

Disaggregation of revenue

The Company’s total revenues by geographic region, based on the client’s physical location is presented in the following tables (in thousands):


	Three Months Ended June 30,
	2022				2021
Geographic Region	Amount		Percent		Amount		Percent
Americas*	$	23,339	63.9	%	$	17,141	64.8	%
Europe, Middle East and Africa (EMEA)		4,639	12.7	%		3,263	12.3	%
Asia Pacific (APAC)		8,562	23.4	%		6,045	22.9	%
Total revenues	$	36,540	100.0	%	$	26,449	100.0	%

*	The Company’s total revenues in the United States were $22.8 million and $16.6 million for the three months ended June 30, 2022 and 2021, respectively.


	Six Months Ended June 30,
	2022				2021
Geographic Region	Amount		Percent		Amount		Percent
Americas*	$	45,277	64.1	%	$	33,399	65.7	%
Europe, Middle East and Africa (EMEA)		8,949	12.6	%		5,976	11.8	%
Asia Pacific (APAC)		16,455	23.3	%		11,427	22.5	%
Total revenues	$	70,681	100.0	%	$	50,802	100.0	%

* The Company’s total revenues in the United States were $44.3 million and $32.6 million or the six months ended June 30, 2022 and 2021, respectively.

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Accounts Receivable

As of June 30, 2022 and December 31, 2021, no individual client represented more than 10% of accounts receivable. For the three and six months ended June 30, 2022 and 2021, respectively, no individual client represented more than 10% of the Company’s total revenues.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the guidance in former ASC 840, Leases, to increase transparency and comparability among organizations by requiring recognition of right-of-use assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements (with the exception of short-term leases). In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new Leases (Topic 842) standard. ASU 2016-02, as subsequently amended for various technical issues, is effective for private companies and emerging growth companies in fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, and early adoption is permitted. For leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements, lessees and lessors must apply a modified retrospective transition approach. While the Company expects the adoption of this standard to result in an increase to the reported assets and liabilities, it has not yet determined the full impact the adoption of this standard will have on its consolidated financial statements and related disclosures. However, the Company expects the adjustment to retained earnings to be immaterial.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13, as subsequently amended for various technical issues is effective for annual reporting periods beginning after December 15, 2022, for private entities and emerging growth companies. The Company is evaluating the impact of this standard on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for private entities and emerging growth companies in fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, with early adoption permitted, including adoption in an interim period. The Company is evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on its consolidated financial statements.

Note 4 Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):



	June 30, 2022		December 31, 2021
Computer equipment and software	$	17,195	$	14,163
Software development costs		7,423		4,866
Leasehold improvements		1,897		1,947
Furniture and fixtures		542		540
Total property and equipment, cost		27,057		21,516
Less accumulated depreciation and amortization		(10,964)		(8,465)
Total property and equipment, net	$	16,093	$	13,051

As of June 30, 2022 and December 31, 2021, property and equipment, net located in the United States was $13.7 million and $10.4 million, respectively. The remainder was located in our various international locations. Included in property and equipment are the capitalized costs of software development. Software development costs capitalized during the three months ended June 30, 2022 and 2021 were $1.4 million and $501 thousand, respectively. Software development costs capitalized during the six months ended June 30, 2022 and 2021 were $2.6 million and $1.0 million, respectively.

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Depreciation and amortization expense related to property and equipment, excluding software development costs, was $849 thousand and $516 thousand for the three months ended June 30, 2022 and 2021, respectively. Depreciation and amortization expense related to property and equipment, excluding software development costs, was $1.6 million and $1.0 million for the six months ended June 30, 2022 and 2021, respectively. Amortization expense related to software development costs was $507 thousand and $305 thousand for the three months ended June 30, 2022 and 2021, respectively. Amortization expense related to software development costs was $915 thousand and $577 thousand for the six months ended June 30, 2022 and 2021, respectively.

Note 5 Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	June 30, 2022		December 31, 2021
Accrued compensation	$	7,041	$	3,180
Accrued expenses		1,354		1,182
Accrued taxes		568		1,216
Total accrued expenses and other current liabilities	$	8,963	$	5,578

Note 6 Operating Leases and Service Agreements

Operating Leases and Service Agreements

The Company leases office space in various locations under operating lease agreements in the normal course of business, which expire at various dates through 2025. Certain operating leases are secured with cash security deposits or letters of credit.

The Company has service agreements for the use of data processing facilities. These service agreements expire at various dates through 2023. Monthly base payments as of June 30, 2022 range from $6 thousand to $16 thousand.

Future aggregate minimum rental payments under the noncancelable operating leases and service agreements noted above, excluding the Company’s share of real estate taxes and other operating costs, are as follows (in thousands):


	Amount
2022 (remaining six months)	$	2,111
2023		3,344
2024		2,385
2025		901
Total	$	8,741

Total expense related to these lease agreements, which is included in Cost of revenues and Operating expenses, was $1.2 million and $2.2 million for the three and six months ended June 30, 2022, respectively, and $1.0 million and $1.9 million for the three and six months ended June 30, 2021, respectively.

Note 7 Commitments and Contingencies

The Company records accruals for contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated based on historical claim activity and loss development factors. No accruals for contingencies were recorded as of June 30, 2022 and December 31, 2021, respectively.

Note 8 Preferred Units, Stockholders’ Equity and Members’ Deficit

Prior to the organizational restructuring consummated in connection with the Company’s IPO and the application of the net proceeds therefrom (the “Reorganization Transactions”), Enfusion Ltd. LLC was organized as a limited liability company owned by its members, each of whose membership interests consisted of an equal number of: (i) “Economic

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Units”, which represented a Member’s economic interest in Enfusion Ltd. LLC; and (ii) “Participation Units”, which represented a Member’s right to participate (vote) in the affairs of Enfusion Ltd. LLC.

As a limited liability company, the Enfusion Ltd. LLC issued more than one class of Units. The Class A Units were considered to be Members’ Equity, whereas all of the other Unit classes were considered to be Preferred Units because of provisions in the Company’s former Operating Agreement that conferred certain rights and privileges to the members owning these Units, such as voting rights, redemption rights and liquidation preferences.

Holders of the Class C-1, C-2 and D Preferred Units had the option to require the Company to redeem their Units. In accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity, outstanding Class C-1, C-2 and D Preferred Units were classified outside of permanent equity and within temporary equity due to their optional redemption features and liquidation preferences.

In connection with the Reorganization Transactions, the Amended and Restated Operating Agreement of Enfusion Ltd. LLC (the “LLC Operating Agreement”) was amended and restated to, among other things, modify its capital structure by reclassifying each of the outstanding Class A Units and C-1, C-2 and D Preferred Units into a new class of LLC interests (or “Common Units”) through a stock split on a 1,000,000 to 1 basis. The number of Common Units outstanding following the Reorganization Transaction reflect the 1,000,000 to 1 stock split. Pursuant to the adoption of the LLC Operating Agreement, Enfusion US 1, Inc., a newly-formed wholly owned subsidiary of Enfusion, Inc., was appointed the sole managing member of Enfusion Ltd. LLC.

Amendment and Restatement of Certificate of Incorporation

In October 2021, the Company amended its certificate of incorporation. The amended and restated certificate of incorporation of Enfusion, Inc. provides for 1,000,000,000 authorized shares of Class A common stock, 150,000,000 authorized shares of Class B common stock and 100,000,000 shares of preferred stock. Each share of the Company’s Class A common stock is entitled to one vote per share and is not convertible into any other shares of the Company’s capital stock. Holders of shares of the Company’s Class A common stock are entitled to receive dividends when, as and if declared by the Company’s board of directors. Upon the Company’s liquidation, dissolution or winding up and after payment in full of all amounts required to be paid to creditors, and subject to the rights of the holders of one or more outstanding series of preferred stock, as applicable, having liquidation preferences, the holders of shares of the Company’s Class A common stock will be entitled to receive pro rata the Company’s remaining assets available for distribution. Each share of the Company’s Class B common stock is entitled to one vote per share and is not convertible or exchangeable for a share of Class A common stock or any other security. Holders of the Company’s Class B common stock do not have any right to receive dividends or to receive a distribution upon a liquidation, dissolution or winding up of Enfusion, Inc.

Preferred Stock

The Company’s board of directors has the authority, without further action by the Company’s stockholders, to issue up to 100,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting, or the designation of, such series, any or all of which may be greater than the rights of Class A common stock. As of June 30, 2022, the Company has not issued any shares of preferred stock nor has the Company’s board of directors established the rights and privileges related to any series of preferred stock.

Note 9 Stock-Based Compensation

The Company recognized total stock compensation expense for the three and six months ended June 30, 2022 of $7.7 million and $20.4 million, respectively.

In connection with obligations to issue Class A common stock to former holders of Award Units under the Company’s former Change in Control Bonus Plan, the Company paid approximately $1.4 million of tax withholding obligations for federal and state payroll taxes. Of that amount, $897 thousand related to employee payroll tax withholdings

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and has accordingly been recorded as a reduction to additional paid-in capital. The Company’s stock compensation expense was recognized in the following captions within the consolidated statements of operations:


(in thousands)		Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Cost of revenues	$	341	$	695
General and administrative		4,969		13,907
Sales and marketing		1,491		3,484
Technology and development		867		2,264
Total stock compensation expense	$	7,668	$	20,350

Total unrecognized stock compensation expense related to unvested restricted stock units (“RSUs”) and contingently issuable shares of Class A common stock that will vest within one year of the IPO contingent upon continued employment requirements (“Contingently Issuable Shares”) was $40.6 million as of June 30, 2022, which is expected to be recognized over a weighted-average period of 2.2 years from the date of grant.

In connection with the IPO, the Company adopted the 2021 Incentive Plan (the “Plan”). The Plan provides for grants of stock options, stock appreciation rights, restricted stock, restricted stock units, bonus stock, dividend equivalents, other stock-based awards, substitute awards, annual incentive awards and performance awards intended to align the interests of participants with those of the Company’s shareholders.

During the three months ended June 30, 2022, there were 84,000 stock options granted under the Plan, at a weighted average exercise price of $9.86 per option. As of June 30, 2022, there was approximately $523 thousand of unrecognized equity based compensation expense related to these stock options, which is expected to be recognized over a weighted-average period of approximately 3 years. The total fair value of the stock options that vested in the three months ended June 30, 2022 was immaterial.

The assumptions used for the options granted under the Plan during the three months ended June 30, 2022 were as follows:


Assumptions
Expected volatility		64.54%
Expected term of award		6.5 years
Risk-free rate		3.39%
Dividend yield		0.00%

In connection with the IPO, the Company also adopted the 2021 Employee Stock Purchase Plan (“2021 ESPP”). Under the 2021 ESPP, eligible employees may be granted options to purchase shares of Class A common stock at the lower of 85% of the fair market value of the stock at the time of grant or 85% of the fair market value at the time of exercise. As of June 30, 2022, no options were granted to employees under the 2021 ESPP.

Note 10 Net Income (Loss) Per Class A Common Share

Basic loss per share is computed by dividing net loss attributable to Enfusion, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted loss per share is computed giving effect to all potentially dilutive shares. Diluted loss per share for all periods presented is the same as basic loss per share as the inclusion of potentially issuable shares would be antidilutive.

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Prior to the IPO, the Enfusion, LLC membership structure included Common Units and multiple classes of Preferred Units. The Company analyzed the calculation of earnings per unit for periods prior to the IPO using the two-class method and determined that it resulted in values that would not be meaningful to the users of these Condensed Consolidated Financial Statements. Therefore, earnings per share information has not been presented for periods prior to the IPO on October 20, 2021.

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share of Class A common stock is as follows:


	Three Months		Six Months
(in thousands, except per share amounts)	Ended June 30, 2022		Ended June 30, 2022
Numerator:
Net loss	$	(4,125)	$	(16,649)
Less: Net loss attributable to non-controlling interests		1,703		6,962
Net loss attributable to Enfusion, Inc.		(2,422)		(9,687)
Adjustment to income (loss) attributable to common stockholders		(234)		(978)
Numerator for Basic Earnings per Share	$	(2,656)	$	(10,665)
Denominator:
Weighted-average shares of Class A common stock outstanding		66,287		65,935
Vested shares of Class A common stock and RSUs		18,294		18,054
Weighted-average shares of Class A common stock outstanding--basic		84,581		83,989
Net loss per share of Class A common stock--basic and diluted	$	(0.03)	$	(0.13)

The following number of potentially dilutive shares were excluded from the calculation of diluted loss per share because the effect of including such potentially dilutive shares would have been antidilutive:


	Three Months		Six Months
(in thousands)	Ended June 30, 2022		Ended June 30, 2022
Class B common stock		46,770		47,121
Contingently issuable shares of Class A common stock		406		652
Restricted stock units		3,562		3,561
Stock options		84		84
		50,822		51,418

Shares of Class B common stock do not share in earnings and are not participating securities. Accordingly, separate presentation of loss per share of Class B common stock under the two-class method has not been presented. Shares of Class B common stock are, however, considered potentially dilutive shares of Class A common stock. After evaluating the potential dilutive effect under both the treasury stock method and if-converted method, shares of Class B common stock were determined to be anti-dilutive and have therefore been excluded from the computation of diluted earnings per share of Class A common stock.

Note 11 Income Taxes

The Company is taxed as a corporation for income tax purposes and is subject to federal, state, and local taxes on the income allocated to it from Enfusion Ltd. LLC based upon the Company’s economic interest in Enfusion Ltd. LLC. The Company is the sole managing member of Enfusion Ltd. LLC and, as a result, consolidates the financial results of Enfusion Ltd. LLC.

Enfusion Ltd. LLC. is a limited liability company taxed as a partnership for income tax purposes. Enfusion Ltd. LLC does not pay any federal income taxes, as income or loss is included in the tax returns of the individual members. Additionally, certain wholly-owned entities taxed as corporations are subject to federal, state, and foreign income taxes in the jurisdictions in which they operate, and accruals for such taxes are included in the Condensed Consolidated Financial Statements. For periods prior to the IPO, the Company’s taxes represent those of Enfusion Ltd. LLC.

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The Company’s effective tax rate for the three months ended June 30, 2022 and 2021 was (5.6)% and 5.5%, respectively. The Company’s effective tax rate for the six months ended June 30, 2022 and 2021 was (2.3)% and 6.2%, respectively. In the three and six months ending June 30, 2022, respectively, the Company’s effective tax rate differed from the U.S. statutory tax rate of 21% primarily due to non-controlling interest and having a full valuation allowance in the U.S. Conversely, in the three and six months ending June 30, 2021, respectively, the Company’s effective tax rate differed from the U.S. statutory tax rate of 21% primarily due to the pass-through income generated.

Note 12 Related Party Transactions

Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial or operating decisions. Since transactions with related parties may raise potential or actual conflicts of interest between the related party and the Company, upon the completion of the IPO the Company implemented a related party transaction policy that requires related party transactions to be reviewed and approved by its nominating and corporate governance committee.

The Company used the proceeds (net of underwriting discounts) from the issuance of 5,526,608 million shares in the IPO ($87.8 million) to purchase an equivalent number of Common Units from the Company’s Pre-IPO Common Unitholders.

In connection with the IPO, the Company entered into the Tax Receivable Agreement with the Pre-IPO LLC Members, which provides for the payment by Enfusion Inc. of 85% of certain cash tax benefits that Enfusion, Inc. actually realizes, or in some cases is deemed to realize. As of June 30, 2022 and December 31, 2021, the Company has not recorded a liability under the Tax Receivable Agreement related to the tax benefits originating from the Reorganization Transactions, IPO and subsequent purchase of Enfusion Ltd. LLC units during the year ended December 31, 2021 as it is not probable that the Company will realize such tax benefits.

On May 6, 2022, a Pre-IPO Common Unitholder delivered an exchange notice pursuant to Article XII of the LLC Operating Agreement, relating to the exchange of 1,401,818 Common Units and an equal number of shares of class B common stock for an equal number of shares of Class A common stock.

Pursuant to the terms of the LLC Operating Agreement, the Pre-IPO Common Unitholder surrendered 1,401,818 Common Units and an equal number of shares of Class B common stock. In connection therewith, the Company issued 1,401,818 shares of Class A common stock to such Pre-IPO Common Unitholder, canceled an equal number of Class B Common Stock, and received an equal number of Common Units, increasing the Company’s ownership of Common Units by 1,401,818.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reflect historical results of operations and financial position. The following discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this Quarterly Report on From 10-Q, including our unaudited condensed consolidated interim financial statements and related notes and other financial information, and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2022. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to the historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could results to differ materially from management’s expectations. Factors that could cause or contribute to such differences are discussed in the section titled “Special Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors.” We assume no obligation to update any of these forward-looking statements. All subsequent written or oral forward-looking statements attributable to us or persons acting on Enfusion’s behalf are qualified in their entirety by this paragraph.

CERTAIN DEFINITIONS

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires:

●

“Award Units” refers to Management Incentive Award Units issued under Enfusion Ltd. LLC’s Change in Control Bonus Plan.

●

“Change in Control Bonus Plan” refers to Enfusion Ltd. LLC’s former Change in Control Bonus Plan for certain members of management that provided for the payment of a cash bonus based on a specified number of Award Units in the event of a change in control transaction, as defined in Enfusion Ltd. LLC’s operating agreement. In October 2021, Enfusion Ltd. LLC’s board of managers elected to terminate such plan (and all Award Units issued thereunder) upon effectiveness of the registration statement for our IPO.

●

“Common Units” refers to the new class of units of Enfusion Ltd. LLC created by the reclassification of the LLC interests of Enfusion Ltd. LLC as part of the Reorganization Transactions.

●

“Enfusion,” the “Company,” “we,” “us” and “our” and similar references refer: (1) following the consummation of the Reorganization Transactions, including our IPO, to Enfusion, Inc., and, unless otherwise stated, all of its direct and indirect subsidiaries, including Enfusion Ltd. LLC and (2) prior to the completion of the Reorganization Transactions, including our IPO, to Enfusion Ltd. LLC and, unless otherwise stated, all of its direct and indirect subsidiaries.

●

“IPO” refers to the Company’s initial public offering, completed on October 25, 2021.

●

“Pre-IPO Owners” refer to the equity holders who were the owners of Enfusion Ltd. LLC immediately prior to the Reorganization Transactions.

●

“Pre-IPO Common Unitholders” refer to Pre-IPO Owners that held Common Units following the Reorganization Transactions.

●

“Reorganization Transactions” refer to our IPO and certain organizational transactions that were affected in connection with our IPO, and the application of the net proceeds therefrom. See “Initial Public Offering and Reorganization Transactions” in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for a description of the transactions.

Enfusion, Inc. is a holding company and, through its control over the managing member of Enfusion Ltd. LLC, operates and controls Enfusion Ltd. LLC. Enfusion, Inc.’s principal asset consists of Common Units.

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Overview

Enfusion is a global, high-growth, software-as-a-service provider focused on transforming the investment management industry. The products and services that comprise our solution are designed to eliminate technology and information barriers, empowering investment managers to confidently make and execute better-informed investment decisions in real time. We simplify investment and operational workflows by unifying mission critical systems and coalescing data into a single dataset resulting in a single source of truth. This allows stakeholders throughout the entire client organization to interact more effectively with one another across the investment management lifecycle.

Our total revenues were approximately 98.4% and 98.7% recurring subscription-based during the three and six months ended June 30, 2022, respectively, and 98.5% and 98.4% during the three and six months ended June 30, 2021, respectively. Generally, we charge our clients fees comprised of various components such as user fees, connectivity fees, market data fees and technology-powered, managed service fees, all of which take into account client complexity and that is subject to contract minimums. The weekly enhancements and upgrades that we deliver and the dedicated client service are included in the price of the contract.

To support our growth and capitalize on our market opportunity, we continue to invest across all aspects of our business. In research and development, we are focused on developing additional system functionality that will open revenue opportunities across alternative and institutional investment managers. We have also further institutionalized and increased spend in our sales and marketing efforts, both in the United States and internationally.

We operate as a single operating and reportable segment, which reflects the way our chief operating decision maker, (“CODM”) reviews and assesses the performance of our business. Our total revenues were $36.5 million and $70.7 million for the three and six months ended June 30, 2022, respectively, compared to $26.5 million and $50.8 million for the three and six months ended June 30, 2021, respectively. Platform subscriptions and managed services revenues were $36.0 million for the three months ended June 30, 2022, up approximately 38% from $26.1 million for the three months ended June 30, 2021. For the six months ended June 30, 2022, platform and subscriptions revenues were $69.7 million, up 39.4% compared to $50.0 million for the six months ended June 30, 2021. We had net losses of $4.1 million and $16.7 million for the three and six months ended June 30, 2022, compared to net income of $4.3 million and $8.4 million for the three and six months ended June 30, 2021, respectively.

Components of Our Results of Operations

Revenues

Platform subscriptions

Platform subscriptions revenues consists primarily of user fees to provide our clients access to our cloud-based solution. Fees consider various components such as number of users, connectivity, trading volume, data usage and product coverage. Platform subscription clients do not have the right to take possession of the platform’s software and do not have any general return right. Platform subscription revenues are generally recognized ratably over the period of contractually enforceable rights and obligations, beginning on the date that the client gains access to the platform. Historically, our platform subscription contracts have typically had a one-year term and were cancellable with 30 days’ notice. Beginning in the first quarter of 2021, our default platform subscription contract has had a multi-year term and did not allow termination for convenience, though each contract has and can be negotiated with varying term lengths, with or without a termination for convenience clause. Installment payments are invoiced at the end of each calendar month during the subscription term.

Managed services

Managed services revenues primarily consists of client-selected middle- and back-office, technology-powered services. We recognize revenues monthly as the managed services are performed with invoicing occurring at the end of the month. Generally, invoices have a 30-day payment period in accordance with the associated contract. There is no financing available.

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Other

Other revenues consist of non-subscription-based revenues, such as software enhancements developed for individual, sponsoring clients, but received by all clients, and data conversion and services that integrate a client’s historical data into our solution. We recognize revenues as these services are performed with invoicing occurring at the end of each month.

Cost of Revenues

Cost of revenues consists primarily of personnel-related costs associated with the delivery of our software and services, including base salaries, bonuses, employee benefits and related costs. Additionally, cost of revenues includes amortization of capitalized software development costs, allocated overhead and certain direct data and hosting costs, and stock-based compensation. Our cost of revenues has fixed and variable components and depends on the type of revenues earned in each period. We expect our cost of revenues to increase in absolute dollars as we continue to hire personnel to provide hosting services and technical support to our growing client base. We anticipate additional expenses as a result of stock-based compensation expenses for the contingently issuable shares of our Class A common stock that will vest within one year of the IPO contingent upon continued employment requirements (the “Contingently Issuable Shares”), restricted stock units granted in connection with the IPO, and other equity awards to be issued under our equity plans.

Operating Expenses

We present stock-based compensation expense within General and administrative, Sales and marketing, and Technology and development expenses based on the individual employee’s department. We anticipate additional expenses as a result of stock-based compensation expenses for the Contingently Issuable Shares, restricted stock units granted in connection with the IPO, and other equity awards to be issued under our equity plans.

General and administrative

General and administrative expenses consist of personnel costs and related expenses for executive, finance, legal, human resources, and recruiting and administrative personnel. These personnel costs and related expenses include salaries, benefits and bonuses, fees for external legal, accounting, recruiting and other consulting services, and stock-based compensation expense. We expect certain expenses to increase as we continue to operate as a publicly traded company and expand our client base and geographic footprint.

Sales and marketing

Sales and marketing expenses consist primarily of personnel and related costs associated with our sales and marketing staff, including base salaries, employee benefits, bonuses and commissions, and stock-based compensation expense. We expect our sales and marketing expenses to continue to increase as we implement new marketing strategies and build our professional sales organization to support our client base growth and geographic expansion.

Technology and development

Technology and development expenses consist primarily of research and development activities, non-capitalizable costs of developing content and certain overhead allocations, and stock-based compensation. These costs include employee-related costs, consulting services, expenses related to the product design, development, testing and enhancements of our subscription services. We expect that our technology and development expenses will increase as we continue to enhance our platform functionality and develop new content and features.

Income Taxes

Enfusion Ltd. LLC has historically been and is treated as a pass-through entity for U.S. federal tax purposes and most applicable state and local income tax purposes. Income tax provision represents the income tax expense or benefit associated with our foreign operations based on the tax laws of the jurisdictions in which we operate.

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After consummation of the Reorganization Transactions, Enfusion, Inc. became subject to U.S. federal income taxes with respect to our allocable share of any U.S. taxable income of Enfusion, Ltd. LLC and is taxed at the prevailing corporate tax rates. Enfusion, Inc. is treated as a U.S. corporation for U.S. federal, state and local income tax purposes. Accordingly, a provision for income taxes is recorded for the anticipated tax consequences of our reported results of operations for federal income taxes.

Non-Controlling Interests

Non-controlling interests represent the portion of profit or loss, net assets and comprehensive loss of our consolidated subsidiary that is not allocable to the Company based on our percentage of ownership of this entity. Income or loss attributed to the non-controlling interests is based on the Common Units outstanding during the period and is presented on the consolidated statements of operations and consolidated statements of comprehensive income.

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Results of Operations

The results of operations presented below should be reviewed in conjunction with the condensed consolidated interim financial statements and notes included elsewhere in this Quarterly Report on Form 10-Q.

Comparison of the Three Months Ended June 30, 2022 and 2021

The following table sets forth our consolidated results of operations for the periods shown:


	Three Months Ended June 30,
(in thousands)	2022		2021

	Unaudited
REVENUES:
Platform subscriptions	$	33,560	$	24,324
Managed services		2,396		1,729
Other		584		396
Total revenues		36,540		26,449

COST OF REVENUES:
Platform subscriptions		9,065		5,709
Managed services		1,668		1,015
Other		114		53
Total cost of revenues		10,847		6,777
Gross profit		25,693		19,672

OPERATING EXPENSES:
General and administrative		18,302		7,457
Sales and marketing		7,575		4,264
Technology and development		3,722		2,041
Total operating expenses		29,599		13,762
(Loss) income from operations		(3,906)		5,910

NON-OPERATING INCOME (EXPENSE):
Interest expense		(1)		(1,410)
Other income (expense)		1		—
Total non-operating income (expense)		—		(1,410)

(Loss) income before income taxes		(3,906)		4,500
Income taxes		219		249
Net (loss) income		(4,125)		4,251
Net loss attributable to non-controlling interests		(1,703)		—
Net (loss) income attributable to Enfusion, Inc.	$	(2,422)	$	4,251

Revenues


	Three Months Ended June 30,
					Increase (Decrease)
(in thousands)	2022		2021		Amount		Percent
Platform subscriptions	$	33,560	$	24,324	$	9,236	38.0	%
Managed services		2,396		1,729		667	38.6	%
Other		584		396		188	47.5	%
Total revenues	$	36,540	$	26,449	$	10,091	38.2	%

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Total revenue was $36.5 million for the three months ended June 30, 2022 compared to $26.5 million for the three months ended June 30, 2021, representing an increase of $10.0 million, or 38.2%.

Platform subscriptions

Platform subscriptions revenue increased by $9.2 million or 38.0%, from $24.3 million for the three months ended June 30, 2021 to $33.6 million for the three months ended June 30, 2022. The increase was primarily driven by increased revenues from new clients of approximately $4.4 million. Revenue also increased for existing clients; this increase includes sales of new services and growth from existing contracts due to new users of $5 million and the full-period impact of prior period sales of $1.6 million, partially offset by reductions in revenue due to client churn.

Managed services

Managed services revenue increased by approximately $700 thousand or 38.6%, from $1.7 million for the three months ended June 30, 2021 to $2.4 million for the three months ended June 30, 2022. The increase was primarily driven by revenue from new clients of approximately $600 thousand and increases in revenue from existing clients of approximately $340 thousand, partially offset by reductions in revenue due to client churn.

Other

Other revenues consisting of software enhancements and data conversion services of $600 thousand remained relatively consistent for the three months ended June 30, 2022 over the comparative period.

Cost of Revenues, Gross Profit and Gross Profit Margin


	Three Months Ended June 30,
							Increase (Decrease)
(in thousands)	2022			2021			Amount		Percent
Cost of revenues:
Platform subscriptions	$	9,065		$	5,709		$	3,356	58.8	%
Managed services		1,668			1,015			653	64.3	%
Other		114			53			61	115.1	%
Total cost of revenues	$	10,847		$	6,777		$	4,070	60.1	%

Gross profit	$	25,693		$	19,672		$	6,021	30.6	%

Gross profit margin		70.3	%		74.4	%

Cost of Revenues

Cost of revenues increased by $4.1 million or 60.1%, from $6.8 million for the three months ended June 30, 2021 to $10.9 million for the three months ended June 30, 2022. The increase was primarily driven by an increase in payroll and payroll-related costs of $2.7 million, largely resulting from headcount additions to support our continued growth. In addition, hosting costs and data fees increased by $550 thousand over the comparative period, reflective of an increased client base and increased usage. Stock-based compensation expense of approximately $341 thousand also contributed to the increase.

Gross profit increased by $6 million, from $19.7 million for the three months ended June 30, 2021 to $25.7 million for the three months ended June 30, 2022. Gross profit margin as a percentage of revenue decreased by 4.1%. The decrease in overall gross profit margin as a percentage of revenues was primarily attributable to increased personnel costs for onboarding and client services.

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Operating Expenses


	Three Months Ended June 30,
					Increase (Decrease)
(in thousands)	2022		2021		Amount		Percent
General and administrative	$	18,302	$	7,457	$	10,845	145.4	%
Sales and marketing		7,575		4,264		3,311	77.7	%
Technology and development		3,722		2,041		1,681	82.4	%
Total operating expenses	$	29,599	$	13,762	$	15,837	115.1	%

General and administrative

General and administrative expenses increased by $10.8 million, from $7.5 million for the three months ended June 30, 2021 to $18.3 million for the three months ended June 30, 2022. The increase in general and administrative expenses was primarily attributable to stock-based compensation expense of approximately $5 million. Professional fees for accounting, consulting, legal, and tax services increased by approximately $1.1 million over the comparative period. These fees were primarily incurred to support our growth and the increased administrative complexity related to our new public company status. The remaining increase in general and administrative expenses is primarily attributable to increased corporate personnel costs and incremental public company costs such as directors and officers insurance.

Sales and marketing

Sales and marketing expenses increased by $3.3 million, from $4.3 million for the three months ended June 30, 2021 to $7.6 million for the three months ended June 30, 2022. The increase was primarily attributable to stock-based compensation expense of $1.5 million. The increase was also attributable to higher personnel costs related to our continued focus on the growth of our professional sales organization, increased marketing spend, and increased commission expenses.

Technology and development

Technology and development expenses increased by $1.7 million, from $2.0 million for the three months ended June 30, 2021 to $3.7 million for the three months ended June 30, 2022. The increase in technology and development expense was primarily attributable to stock-based compensation expense of approximately $900 thousand, with the remaining increase driven by incremental personnel costs to support growth of our product development and client services groups.

Non-Operating Expense

The overall decrease of $1.4 million in non-operating expense from the three months ended June 30, 2021 to the three months ended June 30, 2022 was driven primarily by the decrease in interest expense as result of the repayment in full of the term loan in the fourth quarter of 2021 following the IPO.

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Comparison of Six Months Ended June 30, 2022 and 2021

The following table sets forth our consolidated results of operations for the periods shown:


	Six Months Ended June 30,
(in thousands)	2022		2021

	Unaudited
REVENUES:
Platform subscriptions	$	65,111	$	46,747
Managed services		4,626		3,263
Other		944		792
Total revenues		70,681		50,802

COST OF REVENUES:
Platform subscriptions		18,376		11,661
Managed services		3,283		1,843
Other		171		82
Total cost of revenues		21,830		13,586
Gross profit		48,851		37,216

OPERATING EXPENSES:
General and administrative		40,597		13,838
Sales and marketing		16,007		7,422
Technology and development		8,524		4,243
Total operating expenses		65,128		25,503
(Loss) income from operations		(16,277)		11,713

NON-OPERATING INCOME (EXPENSE):
Interest expense		(7)		(2,802)
Other income (expense)		4		—
Total non-operating income (expense)		(3)		(2,802)

(Loss) income before income taxes		(16,280)		8,911
Income taxes		369		551
Net (loss) income		(16,649)		8,360
Net loss attributable to non-controlling interests		(6,962)		—
Net (loss) income attributable to Enfusion, Inc.	$	(9,687)	$	8,360

Revenues


	Six Months Ended June 30,
					Increase (Decrease)
(in thousands)	2022		2021		Amount		Percent
Platform subscriptions	$	65,111	$	46,747	$	18,364	39.3	%
Managed services		4,626		3,263		1,363	41.8	%
Other		944		792		152	19.2	%
Total revenues	$	70,681	$	50,802	$	19,879	39.1	%

Total revenue was $70.7 million for the six months ended June 30, 2022 compared to $50.8 million for the six months ended June 30, 2021, representing an increase of $19.9 million, or 39.1%.

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Platform subscriptions

Platform subscriptions revenue increased by $18.4 million or 39.3%, from $46.7 million for the six months ended June 30, 2021 to $65.1 million for the six months ended June 30, 2022. The increase was primarily driven by increased revenues from new clients of approximately $7.1 million. Revenue also increased for existing clients; this increase includes sales of new services and growth from existing contracts due to new users of $8.6 million and the full-period impact of prior period sales of approximately $5.5 million, partially offset by reductions in revenue due to client churn.

Managed services

Managed services revenue increased by approximately $1.3 million or 41.8%, from $3.3 million for the six months ended June 30, 2021 to $4.6 million for the six months ended June 30, 2022. The increase was primarily driven by revenue from new clients of approximately $1 million and increases in revenue from existing clients of approximately $770 thousand, partially offset by reductions in revenue due to client churn.

Other

Other revenues consisting of software enhancements and data conversion services of approximately $900 thousand remained relatively consistent for the six months ended June 30, 2022 over the comparative period.

Cost of Revenues, Gross Profit and Gross Profit Margin


	Six Months Ended June 30,
							Increase (Decrease)
(in thousands)	2022			2021			Amount		Percent
Cost of revenues:
Platform subscriptions	$	18,376		$	11,661		$	6,715	57.6	%
Managed services		3,283			1,843			1,440	78.1	%
Other		171			82			89	108.5	%
Total cost of revenues	$	21,830		$	13,586		$	8,244	60.7	%

Gross profit	$	48,851		$	37,216		$	11,635	31.3	%

Gross profit margin		69.1	%		73.3	%

Cost of Revenues

Cost of revenues increased by $8.2 million or 60.7%, from $13.6 million for the six months ended June 30, 2021 to $21.8 million for the six months ended June 30, 2022. The increase was primarily driven by an increase in payroll and payroll-related costs of $5.1 million, largely resulting from headcount additions to support our continued growth. In addition, hosting costs and data fees increased by $1.3 million over the comparative period, reflective of an increased client base and increased usage. Stock-based compensation expense of approximately $695 thousand also contributed to the increase.

Gross profit increased by approximately $11.6 million, from $37.2 million for the six months ended June 30, 2021 to $48.9 million for the six months ended June 30, 2022. Gross profit margin as a percentage of revenue decreased by 4.2%. The decrease in gross profit margin as a percentage of revenues was primarily attributable to increased personnel costs for onboarding and client services.

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Operating Expenses


	Six Months Ended June 30,
					Increase (Decrease)
(in thousands)	2022		2021		Amount		Percent
General and administrative	$	40,597	$	13,838	$	26,759	193.4	%
Sales and marketing		16,007		7,422		8,585	115.7	%
Technology and development		8,524		4,243		4,281	100.9	%
Total operating expenses	$	65,128	$	25,503	$	39,625	155.4	%

General and administrative

General and administrative expenses increased by $26.8 million, from $13.8 million for the six months ended June 30, 2021 to $40.6 million for the six months ended June 30, 2022. The increase in general and administrative expenses was primarily attributable to stock-based compensation expense of $13.9 million. Professional fees for accounting, consulting, legal, and tax services increased by approximately $4 million over the comparative period. These fees were primarily associated with our transition to a public entity and the Reorganization Transactions. The remaining increase in general and administrative expenses is primarily attributable to increased corporate personnel costs and incremental public company costs such as directors and officers insurance.

Sales and marketing

Sales and marketing expenses increased by $8.6 million, from $7.4 million for the six months ended June 30, 2021 to $16 million for the six months ended June 30, 2022. The increase was primarily attributable to stock-based compensation expense of $3.5 million. The increase was also attributable to higher personnel costs related to our continued focus on the growth of our professional sales organization, increased marketing spend, and increased commission expenses.

Technology and development

Technology and development expenses increased by $4.3 million, from $4.2 million for the six months ended June 30, 2021 to $8.5 million for the six months ended June 30, 2022. The increase in technology and development expense was primarily attributable to stock-based compensation expense of $2.3 million, with the remaining increase driven by incremental personnel costs to support growth of our product development and client services groups.

Non-Operating Expense

The overall decrease of $2.8 million in non-operating expense from the six months ended June 30, 2021 to the six months ended June 30, 2022 was driven primarily by the decrease in interest expense as result of the repayment in full of the term loan in the fourth quarter of 2021 following the IPO.

Liquidity and Capital Resources

To date, we have funded our capital needs through collections from our clients and issuances of equity and debt. As of June 30, 2022, we had cash of $56.6 million and $5.0 million in available borrowing capacity under our Revolving Debt (as defined below). As of June 30, 2022, the Company was contingently obligated for a letter of credit in the amount of $0.2 million which bears interest at an annual rate of 2%. We believe that our current sources of liquidity, cash flows from operations and existing available cash, together with our other available external financing sources, will be adequate to fund our operating and capital needs for at least the next 12 months.

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Our future capital requirements will depend on many factors, including those set forth under Item 1A. Risk Factors. As a result of the IPO, we expect that our future uses of cash will also include paying income taxes and obligations under our Tax Receivable Agreement. Further, between October 20, 2022 and October 20, 2023, we estimate that we will issue an aggregate of approximately 18.6 million shares of Class A common stock, in one or more tranches, to former holders of Award Units and a non-executive employee, as previously disclosed in our 2021 Annual Report on Form 10-K under the risk factor entitled “Our obligations to issue Class A common stock to former holders of Award Units under our former Change in Control Bonus Plan could expose us to a variety of risks and will cause us to recognize significant stock-based compensation expense that will substantially impact our net income in the near term.” Their related individual tax withholding obligations will be satisfied, at our discretion, through methods that may include (i) a “sell to cover” arrangement whereby a certain number of shares would be sold into the market with proceeds from such sale remitted to us in an amount that would satisfy the withholding amount, and (ii) our withholding a certain number of the shares with a value that would satisfy the withholding amount due and using our available capital resources to pay the related tax burden, which could have a material impact on our liquidity and capital resources. Refer to Part II, Section 1 A, Risk Factors for further details.

We may in the future enter into arrangements to acquire or invest in complementary businesses, services, which could decrease our cash and cash equivalents and increase our cash requirements. As a result of these and other factors, we could use our available capital resources sooner than expected and may be required to seek additional equity or debt.

Cash Flow Information

The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated.


	Six Months Ended June 30,
						Increase (Decrease)
(in thousands)	2022		2021			Amount	Percent
Net cash (used in) provided by operating activities	$	(1,207)	$	7,803	$	(9,010)	(115.5)	%
Net cash used in investing activities		(5,263)		(4,401)		(862)	(19.6)	%
Net cash used in financing activities		(897)		(2,745)		1,848	67.3	%
Effect of exchange rate changes on cash		(439)		(80)		(359)	(448.8)	%
Net decrease in cash	$	(7,806)	$	577	$	(8,383)	1,452.9	%

Operating activities

We used $1.2 million in cash flows from operating activities during the six months ended June 30, 2022, resulting from our net loss of $16.6 million, adjusted by non-cash charges of $23.8 million (of which $20.4 million is related to stock-based compensation expense), and offset by $8.4 million of cash used in working capital activities. Cash used by working capital accounts was primarily due to increases in accounts receivable, largely related to our revenue growth.

For the six months ended June 30, 2021, we generated $7.8 million in cash flows from operating activities, resulting from net income of $8.4 million, adjusted by non-cash charges of $2.0 million, and offset by $2.6 million of cash used in working capital activities.

Investing activities

Net cash used in investing activities in the six months ended June 30, 2022 was $5.3 million, compared to $4.4 million of net cash used in investing activities in the six months ended June 30, 2021. This increase was driven by investments in property and equipment costs to support the expansion of our business.

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Financing activities

We used $897 thousand in cash flows from financing activities during the six months ended June 30, 2022, resulting from payment of withholding taxes on stock-based compensation. For the six months ended June 30, 2021, we incurred $2.8 million for distributions to members.

Indebtedness

We have a revolving debt facility with Silicon Valley Bank (the “Revolving Debt”). We did not have any outstanding revolving debt as of June 30, 2022 and December 31, 2021. As of June 30, 2022 and December 31, 2021, the available unused commitment of the revolving debt was $5.0 million. The credit agreement governing the Revolving Debt contains certain covenants with which we must comply, including a fixed charge ratio covenant and a leverage ratio covenant. We were in compliance with all loan covenants and requirements as of June 30, 2022.

Contractual Obligations and Commitments and Off-Balance Sheet Arrangements

We have service agreements for the use of data processing facilities. As of June 30, 2022, these service agreements expire at various dates through 2023. We also lease office space under operating lease agreements.

As of June 30, 2022, our contractual obligations consisted of: (i) operating lease obligations of $8.6 million, of which $2.0 million is due in 2022 and $6.6 million is due thereafter, and (ii) service agreement obligations of approximately $130 thousand, a majority of which are due in 2022.

As of June 30, 2022, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that may be material to investors.

Dividend Policy

Assuming Enfusion Ltd. LLC makes distributions to its members in any given year, the determination to pay dividends, if any, to our Class A common stockholders out of the portion, if any, of such distributions remaining after our payment of taxes, Tax Receivable Agreement payments and expenses will be made at the sole discretion of our board of directors. We currently intend to retain all available funds and future earnings and do not anticipate declaring or paying any cash dividends in the foreseeable future. Our board of directors may change our dividend policy at any time.

Tax Receivable Agreement

The payment obligation under the Tax Receivable Agreement is an obligation of Enfusion, Inc. and not of Enfusion Ltd. LLC. We expect that as a result of the size of the existing tax basis and basis adjustments acquired in the IPO, the increase in existing tax basis and the anticipated tax basis adjustment of the tangible and intangible assets of Enfusion Ltd. LLC upon the purchase or exchange (or deemed exchange) of Common Units for shares of Class A common stock or distributions (or deemed distributions) with respect to Common Units and our possible utilization of certain tax attributes, the payments that we may make under the Tax Receivable Agreement will be substantial. We estimate the amount of existing tax basis and basis adjustments acquired in the IPO to be approximately $232.9 million.

There may be a material negative effect on our liquidity if, as a result of timing discrepancies or otherwise, the payments under the Tax Receivable Agreement exceed the actual cash tax benefits that Enfusion, Inc. realizes in respect of the tax attributes subject to the Tax Receivable Agreement and/or if distributions directly and/or indirectly to Enfusion, Inc. by Enfusion Ltd. LLC are not sufficient to permit Enfusion, Inc. to make payments under the Tax Receivable Agreement after it has paid taxes and other expenses. Late payments under the Tax Receivable Agreement generally will accrue interest at an uncapped rate equal to one-year LIBOR (or its successor rate) plus 100 basis points. The payments under the Tax Receivable Agreement are not conditioned upon continued ownership of us by the Pre-IPO Owners.

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Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated interim financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these condensed consolidated interim financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures in the condensed consolidated interim financial statements. Our estimates are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions or conditions and any such difference may be material. For a discussion of how these and other factors may affect our business, see “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

The critical accounting estimates that we believe affect our more significant judgments and estimates used in the preparation of our condensed consolidated interim financial statements presented in this Quarterly Report on Form 10-Q are described under Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to our critical accounting policies or estimates from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2021.

Recent Accounting Pronouncements

See Note 3 to our condensed consolidated interim financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and, for so long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we: (i) are no longer an emerging growth company; or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risk during the quarter ended June 30, 2022. For a discussion of our exposure to market risk, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2021.

Item 4. Controls and Procedures.

Limitations on Effectiveness of Controls and Procedures

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Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2022.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended June 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

The following is intended to restate and supplement the risk factor entitled “Our obligations to issue Class common stock to former holders of Award Units under our former Change in Control Bonus Plan could expose us to a variety of risks and will cause us to recognize significant stock-based compensation expense that will substantially impact our net income in the near term,” as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. Other than the risk factor set forth below, there have been no material changes to the risk factors disclosed under the heading “1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Our obligations to issue Class A common stock to former holders of Award Units under our former Change in Control Bonus Plan could expose us to a variety of risks, some of which could cause the price of our stock to decline, and will cause us to recognize significant stock-based compensation expense that will substantially impact our net income in the near term.

We previously adopted a Change in Control Bonus Plan, which provided for the payment of cash amounts to certain eligible employees upon the occurrence of a change in control of our company. The aggregate amount of payment that could have been made to all participants under the Change in Control Bonus Plan may have been as much as 18% of the gross consideration received by us or our stockholders in a change in control transaction. The board of managers of Enfusion Ltd. LLC elected to terminate the Change in Control Bonus Plan (and all Award Units issued thereunder) effective following effectiveness of the IPO registration statement. The value, based on our valuation at the IPO, of all Award Units that are vested at effectiveness of the IPO registration statement and Award Units that would have vested within one year thereafter will be paid to participants in the Change in Control Bonus Plan in the form of vested shares of Class A common stock between the first and second anniversaries of such date of effectiveness. As of June 30, 2022, we will issue approximately 14,914,206 shares of Class A common stock to former holders of vested Award Units and 1,667,852 shares of Class A common stock to former holders of Award Units that would have vested within one year after effectiveness of the of the IPO registration statement, in satisfaction of the obligations described above and subject to further required withholdings under the Federal Insurance Contributions Act. In addition, in exchange for termination of an agreement pursuant to which we were obligated to pay a percentage of our annual net profits to a non-executive employee, we will issue 2,047,064 shares of Class A common stock to such employee between the first and second anniversaries of the effectiveness of the IPO registration statement. As of the date of this report, the number of shares to be issued between the first and second anniversaries of effectiveness of the IPO registration statement in satisfaction of the obligations described above will increase the aggregate number of outstanding shares of our Class A common stock and Class B common stock outstanding by approximately 16.5%, resulting in significant dilution to holders of our capital stock. Any issuance of Class A common stock described above, or the fact of any such impending issuance, may adversely impact the market price of our Class A common stock.

The individual tax withholding obligations to be incurred in connection with the issuance of the shares described above will be satisfied, at our discretion, through methods that may include (i) a “sell to cover” arrangement whereby we would withhold from issuance a certain number of shares, which would then be sold into the market with proceeds from such sale remitted to us in an amount that would satisfy the withholding amount, and (ii) our withholding a certain number of the shares with a value that would satisfy the withholding amount due and using our available capital resources to pay the related tax burden. If we elect to satisfy a significant component of these tax withholding obligations through a sell to cover arrangement, it could cause the sale, at one or more periods of time between October 20, 2022 and October 20, 2023,

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of a significant number of shares relative to the current average daily trading volume of our Class A common stock. These sales, or the perception that the sales could occur, could cause the price of our stock to decline.

The issuance of shares of our Class A common stock in satisfaction of our obligations to former participants in the Change in Control Bonus Plan has and will result in significant stock-based compensation expense. At the time of the IPO, we recognized stock-based compensation expense of approximately $268.5 million (reflecting a discount for lack of marketability due to the post-vesting restriction because, although fully vested, the shares will not be issued until at least one year after the IPO) in connection with 9 future issuance of shares of Class A common stock to (i) former holders of Award Units under our former Change in Control Bonus Plan and (ii) a non-executive employee in exchange for the termination of a profit sharing agreement. We recognized approximately $16.7 million in 2021 and expect to recognize $10.1 million in 2022 in stock-based compensation expense in connection with the future issuance of shares of Class A common stock to former holders of Award Units under our former Change in Control Bonus Plan that would have vested within one year after the IPO (reflecting a discount for lack of marketability due to the post-vesting restriction because the shares will vest within the next year but will not be issued until at least one year after the IPO). In addition, we recognized approximately $4.6 million in 2021 and expect to recognize approximately $51.0 million through 2025 in stock-based compensation related to restricted stock units granted in connection with the IPO. Further, we expect to recognize approximately $500 thousand in stock-based compensation expense related to stock options issued under the 2021 Incentive Plan. These non-cash charges do not impact our revenues or Adjusted EBITDA; however, they will have a direct and substantial adverse impact on our net income. The impact of these equity-related matters on our net income may adversely affect the trading price of our Class A common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

None.

Use of Proceeds from IPO

On October 20, 2021, our Registration Statement on Form S-1 (File No. 333-259635) was declared effective by the SEC for our IPO. There has been no material change in the use of proceeds from our IPO as described in our final prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act.

Issuer Purchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits.

The exhibits listed below are filed or incorporated by reference in this Quarterly Report on Form 10-Q.


Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-40949), filed with the Securities and Exchange Commission on December 3, 2021).
3.2	Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-40949), filed with the Securities and Exchange Commission on December 3, 2021).
10.1#*†	Employment Agreement, signed on September 29, 2021, by and between Enfusion Ltd. LLC and Bronwen Bastone.
10.2#*†	Offer of Employment / Appendix 1 – Scope of Employment, dated September 8, 2021, by and between Enfusion Ltd. LLC and Bronwen Bastone.
10.3#*	Amendment to Appendix 1 – Scope of Employment, dated July 1, 2022, by and between Enfusion Ltd. LLC and Bronwen Bastone.
10.4#*	Amendment to Appendix 1 – Scope of Employment, dated July 1, 2022, by and between Enfusion Ltd. LLC and Thomas Kim.
10.5#*	Amendment to Appendix 1 – Scope of Employment, dated July 1, 2022, by and between Enfusion Ltd. LLC and Stephen Dorton.
10.6#*	Amendment to Appendix 1 – Scope of Employment, dated July 1, 2022, by and between Enfusion Ltd. LLC and Steven Bachert.
10.7#*	Amendment to Appendix 1 – Scope of Employment, dated July 1, 2022, by and between Enfusion Ltd. LLC and Lorelei Skillman.
10.8#*	Amendment to Appendix 1 – Scope of Employment, dated July 1, 2022, by and between Enfusion Ltd. LLC and Daniel Groman.
31.1*	Certification of the Principal Executive Officer, pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Principal Financial Officer, pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of the Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of the Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	Inline XBRL Instance Document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

#	Indicates management contract or compensatory plan, contract or agreement.

*	Filed herewith.

Furnished herewith. The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the SEC and are not to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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†	Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ENFUSION, INC.

August 10, 2022	By:	/s/ Thomas Kim
		Thomas Kim
		Chief Executive Officer
		(Principal Executive Officer)

August 10, 2022	By:	/s/ Stephen P. Dorton
		Stephen P. Dorton
		Chief Financial Officer
		(Principal Financial and Accounting Officer)