Q4 2019 Earnings Call
[music].
Welcome to the Envestnet fourth quarter 20, <unk> earnings Conference call. Today's conference is being recorded at this time not to turn the conference over to Mr., Chris Curtis Division CFO and head of Investor Relations. Please go ahead Sir.
Thank you and good afternoon, I'm joined today by Bill Krieger interim Chief Executive Officer, Pete to really go Chief Financial Officer in Stewart Subpoena, Chief executive of our data and analytics business.
Earnings press release and associated form 8-K can be found that investment dot com hungry Investor Relations section.
During this conference call, we will be discussing certain non-GAAP information, including adjusted revenue adjusted net revenue adjusted EBITDA adjusted net income in adjusted net income per share.
Information is not calculated in accordance with gap, you mean calculated differently than similar non-GAAP information for other companies quantitative reconciliations for non-GAAP financial information to the most directly comparable GAAP information to appear in today's press release.
During the call. We will also be discussing certain forward looking information.
Discussions are not guarantees of future performance and therefore, you should not put undue reliance on though these statements are subject to numerous risks and uncertainties that could cause them to differ materially from what we expect.
Please refer to our most recent VLCC filings as well as our earnings press release, which are available on our website for more information on factors that could affect these matters.
Call is being webcast live it will be available for replay for one month on our website.
Our remarks made during the call her current at the time of the call and will not be updated to reflect subsequent material developments.
Two questions after our prepared remarks, but that I will turn the call over to bill.
Thank you Christopher.
Hello, everyone is great to be speaking with you again this afternoon.
For indefinite 2019 will always be remembered.
Well it was an extraordinary year strong result.
Well most difficult year.
We experienced a great tragedy the company so stood up move forward and remain committed to building the leading financial wellness network powered by our data infrastructure, which enables financial advisors and their firm.
Help millions of American households achieve their goals.
Well this calls about our 2019 result.
Also about the future.
We believe that investment the best position provider.
To drive the future.
Yes.
Here is why.
That's it has grown by driving the rapid evolution of the wealth advice, they watching a platform that leveled the playing field for all financial advisors, expanding that platform to become a broader holistic advice engine, including the market's leading financial planning software.
2020.
The adoption of our financial wellness network accelerating and its long term ma'am impact.
Will become recognized more imports.
Not only was our addressable market expanding but our ability to create new integrated solutions that provide essentially value for our clients and also new revenue opportunities for investment.
They are grown.
Hey, data, which essentially was an aggregation source we acquired Gill.
Now emerging as a key sources of information for a decision engine.
That will help recommend next actions for our clients the guys consumers to better achieved their goal.
Yes, good quantifiable results.
These opportunities we believe that differentiate investment.
And so as I said on our last quarter's call.
We're executing against our vision in the company is not taking it off the gas.
In 2019, we achieved important milestone in serving more than 100000 financial advisors more than 5000 farms.
Also in 2019, we acquired portfolio Center and also money got.
More than 150 portfolio center clients signed onto the higher valued tamarac offerings during the year.
We're also actively supporting the thousand swaps and working already using portfolio centers hosted offering.
We are thrilled.
Money guide as part of the investment family.
Moneyguard was named the number one financial planning software by the 2020 addition, the T. Three inside information survey.
Honestly 12 years in a row earn that recognition.
Moneyguard popularity remains consistent among firms of all sizes, all experienced levels no business models, including 10 of the top 12 to social platforms.
Eight of the top 15 broker dealer platforms. Most recently Morgan Stanley license for an additional three years, let me guys entire planning offering including Michael.
Both portfolio Center and money guide are performing well financed sleep and in terms of progress you just made and delivering on the strategic rationale for acquiring them.
During 2019, we also launched Envestnet insurance exchange I mean, Thats Netcredit exchange.
On making important progress.
Sure Jade it carriers onboard and 40 annuity products on the platform with many more on the way.
So far we have 10 advisory firm partners sign and they're in various stages of implementation.
Our credit exchanges for lenders in the process and deep integration.
Actively processing loans today.
On the distribution side five advisors partners signed them for a currently onboarding with additional confirms evaluating proposals represent access to over 15000 more financial advisors.
There's a tremendous progress on both fronts very short period of time.
Just a few weeks ago, we announced the formation.
Of the advisor services exchange in conjunction with our investment diet the financial partners.
Feedback from our clients has been extremely positive.
As we work with dynasty to provide access to growth capital business management tool tool marketing services and outsource the opposed services to our advisor clients.
In terms of financial results for the fourth quarter adjusted revenue grew by 15% from last year. Adjusted EBITDA grew 30% adjusted earnings per share grew 13% from a year ago.
These results were driven by solid performance in our well solutions business.
Operating activity for that business remained very strong gross sales of 34 billion.
That's a great conversion debate billing.
And another 32 billion in subscription based conversions.
Also benefited from favorable market conditions market conditions, as we headed into the new year.
[noise] investment management continued to be an area, where we are innovating and adding value.
Assets, using our PSG impact platform as well as our tax overlay solutions grew 74% compared to 2018 have custom direct index portfolios more than doubled.
Index based low cost asset management environment, either value added growth areas that investment is power.
We're making progress in deploying investment data cloud solutions and believe we have an emerging opportunity to help our clients adopt for more agile data environment, both connection to their proprietary system as well as to the growing but its impact marketplace.
In 2015.
We acquired deals with the strong sense of its strategic value.
2020, it's clear that data, it's essential value is being recognized.
By adapting you all these infrastructure investment to establishing an important use case that connects with individuals daily financial behavior with their long term financial goal. This is transformed.
There are other exciting opportunities for our data platform and include expanding ecosystem the areas that will empower individual.
Flexibility control and success integrated financial locks.
As we signaled last year for short term revenue growth challenges as we've seen competitive pressure.
Investment manager analytics business, the impact of UK opening banking changes as well the shift from professional services integrated offerings.
Financial institution client.
That said.
Core aggregation business with financial institutions continue to do very well.
Last quarter, we announced bilateral agreement with JP Morgan Chase governing direct data.
With a full pipeline similar agreements where in the process of executing with other institutions. This is important.
It is important for the consumer is important for our industry.
Putting that consumers financial data transfer.
[noise] that consumers financial data be transferred distort the aggregated in a way that protects the consumers privacy and at first follow.
Lets standards to how to operate in a world where data is essential to driving financial outcomes.
Please be on the leading edge of this important industry change.
We're also seeing growth.
Fintech component of our data business as we rollout our hands developer platform.
We continue to modernize our solution set which will allow third party developers access to our solutions, which they will build out new enhanced financial products.
Longer term, it's clear to us, but this tremendous value the capabilities.
Infrastructure and scale.
What we have built in our data and analytics business, we connect more than 21000 data sources and aggregate hundreds of millions of accounts, which we believe is more than any other provider in our space.
Aggregated data provides to fuel to unify financial Whelmed network driving optimal decisions that advisors and their clients can act on to achieve their financial goal more tactically and helps consumers managed vidalia financial lives.
Investment is executing.
We see tremendous opportunity continue investing in our business both in wealth.
And also when David.
Clear that individually.
And collectively is meaningful value to be unlock as we position ourselves and we do the work to capture more and more of the market opportunity before us, which we believe is in the tens of billions of dollars revenue perspective.
As an industry leader with about $1 billion and revenue today, we have a long runway for growth and value creation value for our customers.
Value for our employees and value for our shareholders.
I'll turn it over to Peter at this point I'll be back a few moments with a few closing farms.
Thank you Bill. Thank you everyone for joining us this afternoon.
I'm going to review our results for the fourth quarter and full year 2019, as well as our guidance for the first quarter and full year of 2020.
And that's not overall results for the fourth quarter of 29 team beat our guidance expectations set out in November.
Briefly summarizing these results compared to the fourth quarter of 28.
Adjusted revenue and adjusted net revenue increased 15% of 18%, respectively to 242, and a half million at $177.1 million.
Recurring revenue, which comprises asset base and subscription revenue was 96% of adjusted revenue.
Excluding the contributions from portfolio Center and money guide adjusted revenue grew 9% from the prior year period.
Adjusted EBITDA was 61, and a half million dollars, a 30% increase over last year adjusted earnings per share was 69 cents in the fourth quarter eight cents or 13% hires in the fourth quarter of last year.
For the full year 2019, compared 2018, adjusted revenue increased 12% from $909.4 billion.
Excluding the contributions from portfolio Center Moneyguard adjusted revenue grew 7% from the prior year period.
Adjusted EBITDA was $193.3 million or 23% increase over last year.
Adjusted EPS was $2.15 for the year, 23 cents or 12% higher than last year.
Adjusted earnings per share grew at a slower rate than adjusted EBITDA.
Reflecting a higher fully diluted share count.
Interest expense and depreciation expense.
December we settled our mature in 2019 convertible notes through a combination of cash on hand at a draw from our revolving credit facility. We entered the year with a net leverage ratio of 2.8 times EBITDA.
Slightly lower than the prior quarter.
Moving onto our outlook for the first quarter at full year of 2020.
You will find our guidance these sale to full in the earnings release.
But I'll give a few highlights here for 2020 is first quarter. We expect total adjusted revenue to be between 242 were $244 million up 21%, 22% compared to the prior year.
Asset based revenue between 134, and $135 million up 23% to 24% compared to last year, implying an effective fee rates on our end of December assets under management, where administration roughly 9.8 basis points.
Subscription based revenue on an adjusted basis between 102, and 102 and a half million dollars up 22% to 23% compared to 29 team.
Professional services and other revenue between six and six and a half million dollars.
Similar to prior years, we expect operating expenses to increase sequentially from the fourth quarter for the first quarter due to the seasonal nature of certain items, particularly personnel expenses.
Payroll taxes, and other benefits all of which are significantly higher than the first quarter compared to the fourth quarter adjusted EBITDA should be between 46 and $47 million up 35% to 38% compared to 29 team.
We expect our normalized long term effective tax rate to be 25.5% consistent with 29 team.
Assuming approximately 55.6 million diluted shares outstanding this translates into adjusted earnings per share of 45 cents compared to 39 cents a year ago.
For the full year 2020, we expect adjusted revenue at a range of $1.018 billion to $1.028 billion.
Increase of 12% to 13% compared to 2019.
Contributors to this 12% to 13% growth rate.
For the year.
Include the first three or four months spoke acquired revenue from portfolio Center and money guide.
When those acquisitions anniversary, our organic growth rate is expected to be between 10 and 11%.
For the year.
Asset based revenue should grow in the mid teens aided by overall strength in our wealth solutions business as well as the carryover impact of a strong equity market in 2019.
Subscription based revenue should grow in the low double digits stronger growth in subscription revenue within our wealth business, including money guys will be partially offset by low single digit growth in revenues in our data and analytics business driven by the factors Bill discussed earlier.
Professional services and other revenue is expected to decline in 2020, as we onboard new business with less of an implementation revenue component associated with them.
As professional services goes down our recurring revenue should go up to about 97% of adjusted revenue.
We expect adjusted EBITDA per year in a range of $220 million to $224 million.
Reflecting growth of 14% to 16%.
And this is consistent with the 1.2 times relationship we've discussed in the past between our targeted adjusted EBITDA growth rate and our revenue growth rate.
Finally, we expect adjusted earnings per share to range of $2.22 to $2.27 as we saw in.
2019, Q4 fully diluted shares increasing year over year interest expense and depreciation expense are the primary reasons EPS growth is lower than EBITDA growth.
Thank you for your support of investment at this point I'll turn it back to bill for his closing remarks.
Thank you Pete.
Yes.
Year 2020 represents our twentyth year, but it also represents the beginning of the next transformational age of advice.
We have grown our business from product to platform.
Today in network.
And data is fueling everything from service integrated application and now into the network to drive better decisions that advisors can ask Don on behalf of their clients to help them fulfill their financial goals.
Investment is uniquely position power. This next phase of the Doug.
We are moving forward very purposefully with our vision and mission in mind with focused on expanding the definition of unified advice and continuing to launch services and tool to help advisors grow their businesses can serve more clients efficiently.
As we began to call I said, we believe Envestnet is best position the best position provider to do just that.
Investing along the way to help our clients continue to grow and to create shareholder value.
Thank you again for your time. This afternoon. Thank you for your supportive investment with that Pete Stuart Subpoena and I are happy to take your questions.
Yes of course, if you like to ask a question. Please signaled by pressing star one on your telephone keypad. If you are using his speakerphone. Please make sure. Your mute function is turned off to layer signal to return equipment again press star one to pose the question, we'll pause for just a moment to allow everyone opportunities for questions.
Well take our first question from will Cody JP Morgan. Please go ahead.
Hi, good evening.
It will.
So first I just walked through some of the moving pieces in the 2020 guide.
I'm trying to understand a little bit walked away from EBITDA that you, yes, so what assumptions are using for interest expense.
Ben DNA and share count would be helpful.
So instead of getting into a detailed on this call why don't we save some of those detailed modeling questions for follow up.
Okay, theres going to be a lot of calculation, but I don't want to get into that level of growth.
Okay, and then I have to turning to the elephant in the room on the.
The media reports on them.
Some potential buyers protein invest that for the sale of yodle we.
Could you frame for us how you think about selling parts of your business like what framework should we be thinking about it you will be using.
To consider divestitures, if there is the right price.
Thanks, well this is bill.
And as a public company, we don't comment on rumors or any of the speculation.
That said.
I would say that theres been a tremendous activity in our marketplace.
19 in early 2020.
With.
As some pretty per pound.
Announcements, whether that was 12 and TV or where that is visa and clad or for that is even today Morgan Stanley with you trade for Franklin Templeton Legg Mason is there is oh.
Activity in our space that I think is is it essentially very validating of this strategy, we've been pursuing and really recognizes the value of the pieces that investment has strategically invested in if you go back can you think about.
The history of our company in that in the areas that we've anticipated.
We did make an acquisition to into the Ri ate space from the acquired Tamarac and now have a very substantial physician anywhere a space, especially with $1 billion plus all raise retimer. We did last year make the acquisition of money I believe.
Leading provider of financial planning, we believe that planning is going to power the really be the engine that will help us power. This feature unified insights marketplace. In 2015, we acquired Yodlee ahead of the market's understanding of the value of data and is.
Just kind of outlined in my comment data is the power or fueled a much of our platform in becomes accrete intrinsic value beyond just just the data business.
Increased the value within our entire ecosystem.
All of these were very strategic steps through the night understanding where the market headed and we believe that we continue to have a very good outlook on where the market will go.
And we'll continue to assess each component of our business will continue to assess the the ability to invest in arc.
Every component of our business and the opportunities that we want to invest deeper in for the next strategic moves in our screens.
Okay. Thank you for that.
Yes.
A quick follow up do you need to own the data or is it possible to still benefit from the data without actually owning the underlying pieces.
There are absolute value owning the data.
Itself as you know we've grown.
We've grown a pretty substantial analytics business.
We think that over the last several years we've.
Optimize the created very powerful integrated data environment for wealth. The minimal comes to other areas of the use of the yoli infrastructure and up form we decided to park.
In areas of credit last quarter, we announced and we spoke about the partnership with actual facts and we'll continue to contemplate those sorts of partnership.
And in each case, well, we're utilizing components of that data infrastructure inside our wealth business that.
That we've optimized.
And so at the end of the day I think I think there now represents kind of a great use case for the power of data within well. These other emerging wealth case use cases obtain credit for that perfect and in other areas. The weekly is a great utility for a data property in future.
Great. Thank you for taking my questions.
Thanks Bill.
I'll take your next question from Peter Heckmann Aidid's. Please go ahead.
Hey, good afternoon, everyone. Thanks.
Thanks.
Can you talk about some of the.
Different drivers, both positive and negative margins for 2020, and how you think about a mix shift going on.
Yes, so one of the bigger drivers of the mix shift is the the strength of the market in Q4, which.
Increases the growth rate in terms of our of our revenue breakdown.
Into the asset base.
Bucket compared to the other buckets.
So, we'll see a little bit more mix.
Toward asset base.
Which of course comes along with the cost of revenues. So so margin.
On that revenue is not as a director of a have a flow through to the bottom line.
That's a.
That's a little bit more weighted again toward asset base in 2020 bent towards subscription base and we kind of highlighted in the prepared remarks.
Some of those.
Challenges.
And why the blended subs base is probably closer to low double digits spend and the growth rate, we're seeing in the asset base.
Okay and then the the.
GAAP tax rate this year using in 2019.
Okay that was 25 and a half.
On a template tax rate is 25, a half yes.
Turning to 19 and 20.
Okay fair enough she's you for journeys okay.
All right I'll get back into queue. Thank you.
I think Steve.
Thanks next question from Chris Shutler William Blair. Please go ahead.
Hi, guys good afternoon.
Good.
So maybe first an update on the the executive leadership team and build the you still having the the interim AG I guess I want to solve why now there would be a decision.
Thanks, Chris.
Before I've been working very closely with our board of directors and they're being very deliberate with respect to succession very good conversation with them.
Very deliberate process I will make an announcement as soon as we.
Further information but.
Important thing to note.
The company's in very good hands, we continue to lead the company and drive the company I think we're creating a more more opportunity for investment and we're collaborating.
More closely I would say with the board.
Who are supporting us in in supporting our clients and with putting our execution of our wellness vision. So.
Remains a process on the board and being very disciplined in that process.
Okay got it.
Let's see on the.
The Yodle Lee.
Low single digit growth could you just reiterate what you've felt that the incremental hedges headwinds were versus what you were experiencing in the back half was 2020 or back half of 2019 rather.
Yes, so I highlighted them, Chris I'll have I'll, let Stewart just add color to this but really there threefold one is that the data analytics business.
This has become more competitive environment.
And.
And so that's sort of keeping our renewal rate pretty high adequate at reduced our renewal contracts.
That's one.
The other.
Component of that as we brought the delivering more and more of the integrated yield least loosing into investments wealth clients by there's a reduction.
Pressroom professional services to support.
Those implementations and so that has a bit of an impact.
And as the UK.
Good presence over in the UK market.
The.
Transition to an open banking environment.
At the end of year last year and with that a lot of the fintech clients that we'd have in the UK weren't necessarily prepared and that has had a little bit of a headwind.
In our ability to.
Ben headwind in that particular, a component of our UK market, but stewart any any color that you'd provide.
Yeah, I think the only thing that ended up bill is that.
Probably just select elaborate a little bit more in terms of.
No our growth patterns, we are actively recognizing that.
Theres a lot of activity beyond just well clearly that's where we've invested heavily workforce less grew to four years. Since we don't have the Italy asset and were done frankly, we've made a lot of strides in progress and getting bringing to market for the financial advisors universal which towards.
Tools and outputs that helps manage their clients more more more fluctuate.
But areas, where we've been not as active have been in credit and payments.
And then analytics in those areas. We are recognizing that there is substantial amount of opportunity. So from that standpoint ended up at onto what Bill said about professional services, we've been really over the course of our or.
Our deployment with a lot of AQX, one it's worth middle water large from institutions, our models, but very heavy on the.
Professional subscription base or professional support based model to go into those firms and kind of customize those often so those firms with the the marketplace has it shifted more to working with other clients that are outside of the traditional financial services have been with fin tech firms, who want the ability to do it themselves we've deployed in order.
Flooring.
Tools for then we're trying to catch more market share. So from that standpoint, we're seeing a bit of a shift if you only ecosystem because of what can tech is offering and we are we're being more opportunistic to grab more market share. If you will have a level those firms. So that's that's part of what is kind of offsetting if you will or I guess, probably put some pressure.
Our revenue growth rates were trying to recognize more markets or coverage. If you will in some of the deals were putting today.
That's probably the other elements that I would add to your would build just.
Bill just mentioned in terms of or go to its or at least in 2200.
In one of the things that that I am Stuart and I are both very encouraged by the progress made in that developers platform and how we'll be able to here, where we will compete in net fintechs fees.
So thats all that that's out there in the future Chris So so as we've looked as the year. We realize is could you kind of sales frankly than an adoption cycle and then you know that will help restore growth rates.
As the successful deploying.
Okay. Thanks, and then maybe lastly, just on on that same topic, which is usually.
Sort of going back to one of the prior questions, but what what do you feel or that the many benefits is going to usually for the for the wealth business specifically as you see those change again recently I ask now is with visa owning SLAD.
I would say there would be more of an accelerated move towards JP eyes and away from screens great. Thanks, maybe there's.
Going to be less need down the road for all the data scrubbing and although the work that it takes to get the data clean so any comments or be great.
Yes, Chris and I think I think that that's the kind of it a twofold because I do think the reconciliation to the data clean up all that process that we do have extraordinary value and that.
We leveraged the envestnet chassis and platform to bring it for investment account reconcile your reconciliation rate on aggregated data from the 60 something percent dog up into the midnight and that is competitive the differentiated and.
Very advantage as we look at.
The work, we've done to kind of optimize for wealth environment.
And so again that work has been done and we're leveraging the envestnet infrastructure to do that to do that reconciliation all adapt and all that data then fit in.
You know will sit in our cloud based services that can then be utilized through micro services Napier has to be pumped out two different applications as few as an example of the announcement that we made.
In at Twox impact conference last fall in which we're taking yodlee data set to the investment platform.
Highly reconcile into finessed has been apps are part of now the money Guy ecosystem and delivered to our client portal. That's a great example of how that ecosystem or process is working and optimize absolutely in the wealth business.
And we looked at as we continue to look at other opportunities for our data business is notable that we announced that partnership with Echopark last quarter, a part from a credit standpoint, and Stuart and I and the team continue to evaluate other partnerships and available for the yield the business, but still I don't know if you want.
At any color or any other comments to that.
I don't think I have which ever built you think you've covered all those business.
Okay.
Alright, thank you.
Thanks, Chris.
All right, we're not take or next question Chris Donna.
I presented please go ahead.
Good afternoon, Thanks for taking my questions once asked another one around that.
The business Bill.
When you've mentioned with the agreement with JP Morgan the bilateral agreement that you expect to do other bilateral agreements.
I guess two part question. One is can you give us sort of that historical context, because I think of JP Morgan years ago is being somewhat critical of third party data Aggregators and it seems like you.
I've got you persuaded them, but can you give sort of.
Essential what's changed overtime and then just let US know if there's any financial implications from these kind of bilateral agreement. So that doesn't change anything I think I've heard that you expect got it and analytes to go sort of mid single digits, but and it would just wonder if there's any implication on the financial side from.
No and Chris It's a great question.
I think it's an important question because.
The way that data will be collected and and then utilize side financial institution. We believe is going to change materially I think that's the JP Morgan.
Announcing that very progressive around data use and so I think it again, it's a validation of the youll be platform in our ability to create the unilateral kind of connectivity to JP Morgan and serve that data weighted to protected and news from the privacy stands.
But at upholds the standards that that JP Morgan the high speed into JP Morgan has I believe again it is.
And they've been very explicit.
JP Morgan about account aggregation and to the point I believe Jamie done and then last earnings update.
Going to turn off Aggregators at some point in 2020. So this is this is the beginning of a a new highway system that is going to connect our financial institutions are with data providers and really enable a new eco system for the way data the.
Utilized.
By firms and so.
There are other firms that are in that same process, but again I think it's notable important at JP Morgans and leader here.
Stuart any any update or comments about that.
I'd add a couple of things here.
Although we do have several in India and over a dozen other agreements like agreements or that are literally in slate and were referred to the finish line here, we'll be announcing some of those over the course them next several months, but a lot of this from a trend standpoint is really driven by some factors in the marketplace.
The biggest one of which we yodle we are the only did aggregator almost spares koons regulated regulated period independents or we have substantial regulatory bodies federal who we monitor our actions and what we do in terms of privacy and security on we are aligned with financial institutions, but up from a little below thanks.
In that regard we have over 200 audits on an annual basis, So platform systems from a security and privacy perspective, but both at the federal level state level, and then with individual individual institutions that we partner with us so border when the light ecosystem. If you will in that sense disposal.
The movement data in all the elements ago lender, so I'd make that as it is a real core point of again, when we know from our conversation with financial institutions. When they looked at us they look at us as a partner in that sense.
So that's that's one element I think another another aspect that I'd call. It is our reach.
Our simple reach because we've been in the marketplace for 20 years by the way I should come back and say.
What we've been what when doing from being regulated isn't the newer cohen's within when the mill in the southern because business book of business. The cross that threshold years ago. When we've been in this button for quite some time.
But for the last 20 or so as we kind of been working in the docking tooling building out our ecosystem.
When you heard Bill talked earlier, we've got 21000, total and plus thousand different interfaces.
Both fruit from large and small and medium sized institution. Many you have capabilities to have automated npis full tourist access data, they're moving don't they don't have an infrastructure. So they look at us as being the people to partner with him in that context as well. So that's part of the reason was commenced in two screens institutions are migrating them in growth.
Getting towards us as well.
And then lastly, net sales.
Aggregation of certainly Q2 critical element source for us financial institution partners and they recognize the value of that.
But because of the legacy of the organization the things we've been able to add to aggregation value added components. We built in terms of having a platform that these financial institutions can use to manage their loan them consumer relationships is a critical element in that has come over very long period of time. So we've added the ability to do in which the data that we get.
Then create analytics and tools and what those mentioned institution. So the customers better. So I would say that those are the components that are really were kind of.
Yep.
Jason others are gravitating, and embracing with us and to answer the last part of question does it does it impacted the economics.
There are there are.
Different homes per se, but there's a broader use case, so probably sit best person, we're getting more deeply integrated into these banks and more broadly deployed in these banks because we're going from the retail side to the institutional sensors, there's lots of different pockets that we're working with a lot of below its banks. So the beauty of economics.
On change your change in as much as we reach within the institution or change in which we're giving us more upside, but that's how I would answer the question.
Got it takes a lot story and then at the risk of asking a question that I don't think he can answer I'll try it anyway.
Sure.
You guys are singled out by the by two Senators and a member of Congress for asking for a federal Trade Commission investigation.
Is there anything you can say on that one or.
Well I tell you.
Yes, Chris.
Yeah, No obviously received a letter and being very responsive to lawmakers and the commission with any questions that they had most of those questions centered around.
Yeah, the terms and conditions the understanding the consumer as that data being utilized.
And it appears to be provider, it's really up to.
To ensure that our customers have the proper terms and conditions in the of a pretty pretty.
Comprehensive process in understanding.
How are terms and conditions have been published two to those consumers. So so again, having a conversation with lawmakers about that the other issue has to do with identification of an individual data.
And really what we view instigated de identified so it goes from personal data to non personal data as we there could be identification.
And it in that in the data in in that in that kind of regulation or oversight of data from the national standpoint, there isn't a single thing.
And what Envestnet has done is we had a will complying who we can we what we believe and I think many believe most progressive standard.
The United States next to California, consumer protection axes, EPA, which were adjusting to the here at the end of year on protecting an individual data and identification.
So.
Where we are having engage conversation with Washington, I think there's a lump education that goes into it I think at the end of the day.
No. It's good to be having these conversations I think it wouldn't be driving toward a standards I think that our standards will help the industry in standards will certainly help on the consumer and that's something that where we'll continue pushing that advocate.
Got it thanks, very much going store.
Yeah.
Once again, it's like to ask the question. Please press star one well take our next question from David Grossman.
Stifel. Please go ahead.
Okay.
Thank you I good afternoon.
So I think you've answered.
Two circuits that most of questions I had but.
We're just getting back to globally, perhaps you could just you know anchor all growth you've talked about a lot of tailwind striving that business, but also some headwinds and I'm just trying to give I had around you know when the growth rate of that business should normalize and and kind of the timing of when some of these factors is the roll off first.
Our to accelerate.
The growth of what the though.
Sure sure David Good just because it's.
So.
As we begin to indicate a I guess is midyear last year, whose judd who indicated that we were going to face some headwinds in in and again it seemed that data and analytics business Alas through it to update on some of the.
They have things, where we're beginning to develop their or we had some regulation coming through our European business in the UK.
And then it was Uh huh.
Business decision to reduce.
Our use of professional services on our implementing too large financial institution you take those really created kinda strain on our or overall Oh go through what we have done David Since then is we've.
The vessel, we published our developers Oh portal afforded fintechs that we're putting in place these agreements with large financial institutions to JP Morgan Chase is a good good. Good example of that.
We're making a progress which again Stuart will speak to on the analytics fund.
Our integrating more deeply and improving our reconciliation rate of aggregated data in the wealth market. So I think all of those things begin to ER concentrate a yield the in a way that that will have resumed you know a strong growth in that business, but that is required.
Kind of environment couple of environmental things that were occurring in a couple of business decisions that that that we've made to to make sure that we've got a long term grower there Stuart.
Actually before story kind of add says comments Bill one, though when you when you roll all of that up with some of those headland diminishing up that some of these growth initiatives start super senior than what we see a more normalized growth rate in and what isn't normalized square trade in your view once all the stuff.
Settles out.
So I think I think in our guidance, where we're indicating a low single growth in 2024 a subscription.
In the yield the business than that so, but we think this is a year of that's kind of working through and towards the back half of the year. We're anticipating that we're going to begin to get some traction. We're also going to see our relationship with equifax begin to two to kind of gain traction towards the latter part of the year.
Sure David I think this is a a 2020 story I think that the work that we're doing positions our data business.
To to resume a you know are healthy growth rate that contributes to the overall kind of objective objectives that investment has to maintain you know.
The this is strong grower ahead of our peers.
As the business that we are in again Stuart you can you can elaborate in kind of do more specific Tonight I am.
Yeah I did you say get on your question I see that part of the headwinds maybe help everyone. Just isn't the right would use but what we but we know that we've set the bar so to speak.
The headwinds that would probably church was more in terms of do the business that we have which we call analytics, which is what we've seen more the headwinds we're seeing more opportunity in tailwinds in the sense of are getting more more adoption, what our solution, we feel that a bit of a bottleneck supposed to get that adoption than the fact that have not had the plan.
Form which enables fintech companies specifically.
Easily integrate our application into what a Ross we typically look like so this we will afford us the service rates, we use a developer experience, which is a set of intelligent npis.
Got it that any from continues to deploy the platform with its payments credits wealth or otherwise. So that has really been in my view a bit of a bottleneck supposed to get to that and as I mentioned on our last last quarter's call. We already have because I would honestly tell you input tender what we've learned from platters or that they were able to theres about.
LNG, if you will but I use it anyway.
No. We yodle has not been working with a lot of large banks, primarily over the course less 20 years in the building those relationships and delivering the service we're kind of working on you know one gene if you will select a bit or term to drilling technologies, but you know how does it become a marketplace with the Fiveg side, you solution, which really was a bit more.
<unk> modern platform and we've adopted it you will be Washington sort of what they've done so we've adopted a modest ladder platform.
So frankly, not only mimic what we believe in certain areas certainly well to the goals and credit. We believe we have a solution that's in place it's going to be more.
Impact so for the clients that are in those particular channels. So I would tell you that having been behind the eight fall to the last 12 to 15 months. This plant is really kind of plants themselves into payment space, primarily as having a market share in up to a much more modern technology. We believe that we knew we had to make ups moon.
Well, if it made a platinum and so I think that went out at the point of breaking script bottleneck. So that's a long way of telling you that we think that were up to position now but over the course, the Mets I'd say 18 to 24 months as we get more distribution and more tap and Jeff from a market you're not only in our traditional wealth space, but also in credits payments.
Conversation when they arrive in other another channels. If you will we think we're going to get further adoption. So.
And I would also suit we believe.
But we did a normalized closely looks more like you double digit growth rate, it's probably a low double digit growth would have to them we get there.
I'm not going to forecast as to when that will be because a lot of that it's going to be how the market matures, but that's how we seasons on became replacement boardwalk job in terms of answering Bill specific question, we're doing a lot of things obviously in wall. So I wont wont boys with that because I think everyone on the phone as well and we're doing well, but I'm really interested in what we're doing outside.
The wealth channel them well segment by taking some components such as the blocks capabilities through our acquisition with money guide as well as somebody analytics building to supplement the blocks capabilities for loved the retail banks and other non wealth management firms are using those tools and recruiting some billy billing effective.
Dashboards, so that the non traditional financial advisor.
And support.
In consumers to give them insights into their spending habits their spending patterns to help them understand you know as they get as they get raises where should they be putting the incremental dollars. If it happens there as credit gets more challenging for them, where they are better opportunities for them to get better decisions from a credit perspective, whether that's on a retail credit perspective, a more.
We do otherwise.
Insurance capabilities, and frankly, what yet to come but there are opportunities for us to kind of bridge, if you will or bridge into capabilities for for insurance offerings, whether that's my health perspective, or life perspective, and you are aware of what we're doing around the insurance exchange that we see an ability with dance if you will.
So what we called next best action for consumer insights into their their daily personal life to understand but regardless of where the element on the economic you could ecosystem, whether they're starting out to careers or we don't have a lot of money or they have a lot of money.
And they're looking for National advisor, we believe that working with non traditional wealth forums, who were lucky more technology. We can provide two technology insights from that gives an analytics to help them make better decisions and those are those are the areas where it seems that we can supplement in a meaningful way what we're doing in wealth to drive.
More ultimately to drive more consumers into the wells Chad.
To help advisors have more access to more a potential investors are cautioned trials.
So I'll leave it there on freight.
So the various website, thanks very much for that and Thats explanation I just have one follow up so in the context of have you kind of getting back to an equilibrium is.
Is it that the play is it more of a platform from a technology standpoint has to get there or is it getting out and right now really more what you said I think he said channels to market awareness I just want to make sure I understand the distinguishing between kind of where the gating factor is near term as well.
Bill I'll take a picture question the the gating factor for US was the platform. The older was built by working with some large financial banks since institutions primarily.
We worked with one of the time, we had a heavy professional services.
We had the heavy professional services ordinary implementation.
And that that that's kind of it was a slow role for like a shorter term. So the platform was was what we need to enhance it involves sit ups death that was the bottleneck that we were looking to trust.
Okay, so going forward, but going forward I think was the question stored. So so you feel like you've got the platform, where you want it now if I'm understanding it correctly and that.
The gating factor too, yes, celebrating its really more market awareness and and distribution I if I heard your right yes.
Okay great.
Right. Thank you very much.
Two questions banking.
I'll take your next question from Patrick O'shaughnessy at Raymond James. Please go ahead.
Hey, good afternoon.
The guide for asset based cost of revenue suggest that's going to tick up a decent amount and the first quarter of 20 relative to last quarter of 2019 can you talk about what's going on there is the revenue share to third party managed increasing what's kind of driving an increase.
Yeah.
As a percentage of the total I don't think it's changing all that dramatically.
I think the increase interest is what I have another way.
Right.
Okay, maybe I'll follow up with you after.
The call and then as you know obviously spent a lot of time talking about the <unk>. The data analytics segment for obvious reasons, but you know wealth is still obviously pretty important of the company.
So I question on that side, you can you talk about the credit and insurance exchanges that you've launched and now you have a couple of quarters and your belt. How are you thinking about the long term revenue opportunity in these areas in the timeline to realize that opportunity.
Thanks, Patrick do doing well.
No. We're excited about it and there are couple of elements that I think are important to recognize one is that these are pretty comprehensive platform, they're not just products shelfware.
Advisory able to pick up on solution off the shelf proposal, there actually tied back into the insurers and the banks to help act help us execute on these transactions.
Really optimizing the ability for advisory Gulf and plan to execution of the plan have the product choice and then go transacted and have all the data come back up so that we can do a comprehensive plan. So the elements of revenue.
Keep an eye on would be.
Yeah, the solution providers themselves are providing licensees.
To be part of our universe. So.
Solution, we are doing a rev share as we hit certain scale on many of those solution, especially on the.
Security backed lending our program and then from the size or is it will have a service fee.
From a platform standpoint, how to access to the solution So Patrick there.
Well thought out there very comprehensive components think of them each as a platform for that individual products Weve insurance credit.
And that with the adoption I highlighted advisory firms are beginning to utilize these solutions and they have a growing network solution providers.
I neglected to add that.
On the credit exchange, we're probably going to pursue a second syndicate of banks, who currently at four banks in the first syndicate, how would the other banks would be part of it based on needs in feedback from our clients is back to where they we see these opportunities in the profile of.
Banks that we're working with so we see these is as instrumental.
For the future of the unified advice and the other thing the realized is that.
It is not an insignificant workload and it's not an insignificant kind of investment of time and resources.
To have built these things in so in my mind, they offer a very distinct competitive advantages for investment today. The fact that these platforms are integrated into the investment platform and fit under or the market, leading financial planning and Jean I mean, how all those pieces are connected.
I think it is very competitively advantage.
Great. Thank you.
Thanks, Patrick.
All right well not taken our last question from will cut JP Morgan.
Thanks for the follow up.
Sure I know it is early.
But could dig in and just a little bit more on the advisory services exchange first.
Could you maybe talk us through more about the rationale in the minority investment in dynasty.
The second are there more opportunities for investments pursue partnerships relationships like this with our I gave firms them off that sometimes.
Yeah. Thanks for all it's great. It's great question, it's something that we're super excited about I think we've chosen the great partner, so a team that weve respected.
For a long period of time no show a penny it's once in who run.
Dynasty, I think I understand this space and their ability to recruit top advisors at a very established infrastructures and bring them to independent environment has really been extraordinary and important work that they've done and so weve recognized that and we believe that.
Not only is between vision of an advisor say from a captive environment, but they are a marketplace itself is seeking to network to acquire tumor into growth both organically and Inorganically. We believe that traditionally the investment platform has been in.
Awake, a tremendous organic growth engine for Arnie, we need help them, we use cost to maintain a help them to be more compliant and given that technology in the tools and service support to help them engage their clients and a new level and you see the assets values.
And then number of claims growth longer that they're on the investment platform to help them provided by what the advisor service exchange, helping to grow their business and we're doing that again in helping our I phones are very interested in a utilizing capital to merge with other funds or to make investments.
It's it's a really help.
Their businesses our growth, we're providing a suite of business analytic pool.
Also providing as part of the service exchange will ultimately provide outsource access to a CFO services and also to marketing services, it's not as I look at it.
It isn't really exclusive to the Oreo market. The best that that's an obvious place for our advisory services and the team more and more our broker dealer partners as well I'm very interested in the state and they're interested in setting up combined for their top advisors.
Who have.
The ability to networking well outside of their from making acquisitions and holding those funds into their.
It into their team and so you know the advisory service exchange really is an enabler of that and I believe you know kind of again it helps our clients both broker dealers banks as well as our a a grow we do it from a technology and advice standpoint, and now we're doing.
From a business.
Got it had to go.
Thank you will.
This concludes today's question and answer session I'll now turn the conference over to build trigger for any additional for closing comments. Please go ahead.
Thank you very much everybody. We really appreciate you joining this afternoon and we we really appreciate your support of Envestnet and we're looking forward speaking you in the next quarter. So thank you and I hope everybody has a good evening.
This concludes today's question.
Brian This does conclude today's call. Thank you for your participation you may now disconnect.
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