Q1 2020 Earnings Call
M.C.F.L.P. to rigo.
Earnings press release and associated 0.8, K. can be found at invest net dot com under the Investor Relations section.
Point out that a supplemental presentation is also posted on our website, we will reference that throughout our remotes.
During this conference call, we will be discussing certain non gaffe information, including adjusted revenue adjusted net revenue adjusted EBITDA adjusted net income and adjusted net income per share.
This information is not calculated in accordance with gap and maybe calculated differently than similar non gap information for other companies quantitative reconciliation of our Noncat financial information to the most directly comparable gap information appeared in today's press release.
During the coffee will also be discussing certain forward looking information. These discussions are not guaranteed the future performance and therefore, you should not put onto reliance on them.
Statements are subject to numerous risks and uncertainties that could cause them to different materially from what we expect please refer to our most recent F.T.P. filings as well as our earnings press release, which are available on our website for more information on factors that could affect these matters.
Being webcast live and will be available for V. play for one month on our website all remarks made during the call. Our current at the time with the call and will not be updated to reflect subsequent material developments, we will take questions. After our prepared remarks.
And with that I will turn the call over to <unk>.
Thank you Chris for is good to speak with everybody. This afternoon like most of you I'm doing this call from home.
Hope will be a quiet location with a good and disrupted connection I.
I hope everyone on the call today and their families are staying safe.
That everyone is healthy.
Or business headstrong momentum as we started the new year, we posted very strong results growing adjusted revenue by 24% and adjusted EBITDA by 61% year over year.
But as you well no. The first quarter was a story like two very different chapters before and after you know wealth business and in our data business you saw very good very encouraging activity, but then the world changed.
Late February and the first stays a March we began to respond to circumstances is day unfolded first in Seattle, but then across all our operations.
Activating our business continuity plan, we rapidly effected decisions protect the safety of our employees in every location in which we operate well. We also ensure the ongoing support of all of our clients. These were extraordinary days, we mobilized and we relocated at the very same time that.
Store market volatility absolutely exploded.
We sit at the Nexus financial services partnering with nearly every type of financial institution and serving more than 100000 financial advisers, who work with tens of millions of clients. You also serve over 20 million consumers, who use our data every day.
Well, our interconnection gives us a unique perspective on the industry as you can imagine during periods of volatility in distress, our clients generate a tremendous level of activity.
During those days in March we operated in the I. wall of the storm.
Routed all our platform performs I'd scale in our people delivered in the most difficult circumstances I can't express enough how proud I am a team for executing the situation with with such high degree of difficulty and how appreciative our clients have been for investment being there.
<unk> when they needed us.
Wearing essential partner that has delivered and I suspect will be leaned on even more in the future. What we have built over these past 20 years or technology or team or Klein first culture stood up and showed itself. These past weeks. The vines were handled in recent weeks demonstrate the.
Power of our platform and the ability to grow and handle volume at scale.
These weeks I've been an important proof point for our company.
Page six in the supplemental material show some of the metrics on our recent activity here just a few examples.
March trade orders were more than five times higher than last year advisor service or requests were up 78%, 17% more consumers leverage Yo These account aggregation platform to check on their finances.
<unk> leverage Dart tamarac climb portal nearly 80 per cent more frequently in up late if more than twice as many documents to our docking involved.
We handle the volume <unk>.
<unk> illustrated our scale, we more than held up during the storm.
All the while 100 per cent of our global workforce, including our employees in Bangalore <unk> have been working from home.
<unk> of our technology to be deployed from anywhere at any time and the work. We've done is accompanied to prepare for whatever comes there's been an incredible asset. During these week again, I'm grateful and proud of the investment team.
My financial results for the first quarter were strong with revenue in earnings exceeding expectations people run through some of the specific areas of Apple form and spend a few minutes first I'd like to take a little bit time to review our business business activity in the first quarter.
What we're seeing now and then what are outlook importantly is for the rest of this year.
Let's start with the wealth business.
The point you to page seven <unk>, earning a supplement.
Gross sales or acid inflows surpassed $40 billion in the corridor, that's our highest ever we also on board it more than $20 billion, an asset base conversion.
Challenging markets late in the quarter do not appear to have affected our platform activity in a meaningful way within the quarter gross sales were strong each month and redemption rates importantly remain below two per cent Oh told him that flows from existing business, where $11 billion for the quarter.
Based on an early look at April net flows are likely to exceed what we saw in March but it's not going to match. What we saw in January and February that's driven by some understandable softness in gross sales and <unk> from rate that that's been running north of 2%.
This more recent activity in forms are updated outlook that people will cover in just a bit.
And her data and analytics business revenue in earnings were ahead of expectations as we saw outperformance and subscription revenue from all major areas of the business, including aggregation for financial institutions as more consumers check the balances or their financial accounts more often.
As we go forward consumers will interact more and more with digital tools that providers make available to them. When there is uncertainty users absolutely click on me that they want to know.
The data, we provide becomes essential and is essential in credit.
We've also seen increased usage as m- mortgage refinancing activity has grown as a response to record low interest rates.
You know credit analytics or Equifax implementation continues.
On a slightly delayed schedule given this currents environment.
Revenue should not be affected due to contractual minimum and we still expect the head into 2021 in a very good place with rich this with respect to this important credit offering.
In in our investment analytics business, we continue to innovate and pursue additional use cases to diversify or revenues in this area I'll comment about the work we are doing here in just a moment.
The current environment has reduced our expenses in the short term, which for some of these reductions in March more anticipating even more in the second quarter, particularly in areas of traveling in pertain Entertainment, obviously and also in marketing.
We also have put back on a hiring another discretionary expenses for the year to mitigate meaningful portion of the earnings the decline we're expecting from the first quarter market action.
Based on our first quarter results.
Nor strong financial position as well as their outlook for the remainder of the year. We are confident that we won't simply weathered the storm will emerge from this even stronger and be prepared to take advantage of opportunities to accelerate or long term growth.
We don't know how this pandemic were fully play out in macro global sense, but we do know is impacting the heart of American families. They cope with their own economic physical and mental well being during this time.
The kitchen table has become the center point for what it means to all of us.
It is absolutely essential that we think about all stakeholders at times like these.
Truly in this together and is important for a company to play it's part today.
Never before has our core purpose are making financial wellness a reality for everyone become more essential.
As Americans are under financial strain and stress right now we're in a unique position to help so we've made money got my blocks financial planning modules available for free.
Are encouraging advisers to share these with all of their clients with all of their employees as well as within their communities. If they serve a tremendous purpose that can be utilized by everyone young and old employed are unemployed financially secure for him financial need to answer the essential question.
At this time, what should I do.
That's that also has providing insight on consumer spending with a launch of our cobin 19 incoming spending trends from Investnet yodeling.
This is a powerful example of how we plan to evolve or you'll be analytics offering as these reports are helping businesses in government agencies understand where and how consumers are spending money. In this current environment is invaluable information. These insights are answering questions for policymakers and others.
About how American families have been impacted.
We're also leveraging data from our industry, leading wealth platform publishing adviser insights with highlight key investor behaviors is inside your showing the value of advice.
Investors were able to react quickly.
Also maintaining focus on their long term plants.
Links to both of these reports included in the supplemental material online.
Or investment Institute in the classroom partner would ever five to offer free online education to anyone in the United States.
Curriculum includes digital courses for students in kindergarten through 12th grade and provides quality educational content on life's critical topics, including financial education incredibly proud to sponsor this effort.
And then last week, we were scheduled to hold or annual adviser summit in Austin, and obviously and disappointingly that was cancelled.
But in its place we will be launching a series of virtual some events, including a learning center to help advisers navigate the landscape post Covin World. We encourage you all the sign up when we launched these online.
That leads me to what we believe the future will look like and how Investnet will lead the way.
Well at least our thoughts this morning, and you'll find this list on page 11 of your supplement.
Thoughts are based on the data, we see each and every day that I'm forms what we deliver and how we serve our clients and informs these essential elements as we see critical so we see is critical to the future of our industry.
Number one.
And new level of trust and relevance or the currency valued engagement.
Transparency authenticity and logic supported by predictive analytics it'd be the baseline for how a client values information. They engage with this month, we'll invest we will introduce investment connect which makes it possible for advisors that scale.
Number to.
Redefining what it means to be prepared understanding the trade offs and what if scenarios will be the underpinning advancements usage of financial planning.
Or market, leading money got financial planning tools enhance real estate planning features become the core to all investor engagements in the future.
Number three.
Digital becomes far more you.
Hybrid will be the only engagement model that will work in the future infidelity of engagements must be the same whether they a digital or they are in person or dynamic client portal becomes an essential digital extension of the financial adviser.
Number for the fusion of helping wealth behavioral holistic wellness across assets and liabilities will be the mandate supported by an integrated technology platform.
Our current and future exchange is supported by predictive analytics when naval true personal wellness.
Number five family in communities lead the way forward. This is the new mutuality.
We are all in this together just drives the connectiveness in strength of communities and financial security integral part of this and our industry needs to lead the way.
And finally number six creating a new playbook for sustainable business the need for scale that includes digitizing data and analytics outsourcing and strategic partnerships will be the focus for advisors after coded nineties.
Investment ecosystem combines technology data in solution as well the upcoming suite of advisory services and Miss comprises the foundational tool kit for our future.
We do see definitive outcomes that will drive change, we do realize that with this change the delivery a financial wellness will become a reality for everyone.
We will lead and will support the industry every step of the way and this is our mission.
I'll be back with some closing comments in a moment, but first let me turn it over the <unk>.
Thank you Bill.
Four I get into the review of our first quarter results I'm thrilled to extend congratulations to buy long time partners here are the best that bill on being they'd sit you hold the company and Stuart Depina are being pregnant.
I'm looking forward to the next phase of growth for us.
Also on our board of directors congratulations to jump box at our chairman our chairman.
Chip, Rome, or vice chairman I barely roles.
So like to express thanks to Ross chicken for his stewardship as interim board chairman bridging us through a time of uncertainty.
I'm going to review our results for the first quarter and update or outlook for the rest of the year and a bit of a different fashion than usual.
Providing as much context as possible given the current environment.
The last time reading the numbers from the tables themselves.
First quarter results were quite strong meaningfully exceeding expectations.
See on the slide eight and the supplemental material that adjusted revenue for the quarter was $247 million around 24%.
The first quarter for 2019 $4 million ahead of the mid point of our guidance.
Data and analytics outperformed largely from higher platform utilization, while the website was relatively in line with our expectations.
Including the revenue contribution from the acquisitions of money guide and of course phone portfolio Center completed on the second quarter of 2000, 1970, real 15% burst last year on an organic basis.
Cost of revenue was favorable to our guys driven by lower manager fees associated with our asset base revenue.
Which led to hire adjusted net revenue.
Elsewhere within our operating expenses personnel expenses were lower than our expectation to enlarge parts of the way, we banished hiring activity in the corridor.
They they're building in our benefits in taxes.
It's an increase through the second half of 2019.
General administrative expenses were also favorable across a variety of categories, mainly due to the cancellation or deferral, the events and lower marketing spending travel another discretionary spending.
During the month of March consistent with the way build describes.
All told are adjusted either $54.6 million exceeded the midpoint of our guidance by more than $8 million approximately $5 million attributable to hire adjusted that revenue at around $3 million related to the expense visibility, including personnel marketing and travel.
Adjusted earnings per share with 57 cents 12 cents higher than our guidance for the court.
Our growth adjusted either file with 61% compared to Q1 2019, and adjusted earnings per share was up 46%.
Looking forward to both the second quarter and the four years you can find a specific guidance and the earnings release, an additional information on page nine of the supplement.
Or updated outlook, we're taking into account the current environment and the impact that may have on our business activity.
Financial performance the most obvious changes the effect of the market in the first quarter.
The market downturn reduced our billable assets by $82 billion as of March 31st.
This impacts are asset base revenue going forward.
Which will be partially offset by a reduction in our asset base cost of rather.
Other assumptions impacting our asset base revenue have also been updated.
Ooh rates have come down as a result of a mix shift from a U.M.T.A. you away.
Do the conversion activity in the first quarter and partly due to advisor driven portfolio changes.
Which we see commonly during times of high volatility.
The effect a few rate in the first quarter was 9.8 basis points and the second quarter. We expect we expect these shifts to result in a few rate of around nine and a half basis points.
We are tempering that flow expectations modestly, reducing our expectations for gross sales and increasing redemptions.
That flows are still expected to be positive and the second quarter and the rest of the year.
Less so than was previously might have anticipated.
And we have shifted out to expect the timing of new bookings conversions and implementations based on known are likely delays and such projects in the current environment.
This last element low impact both our asset base and subscription based revenues this year.
Special services and other revenue is lower than previously expected due to the advisor summit cancellation cost of revenues associated with the summit will also not exist in the second quarter.
Within our operating expenses, we've assumed that pandemic related measures will continue to affect hiring traveling entertainment marketing and the near term. We're also managing discretionary spending through the remainder of the year.
To mitigate the impact from the first quarter market decline.
The four year 2020 would continue to expect top and bottom line broke compared to 2019 and despite the impact from the first quarter market decline.
Conscious effort to manage expenses, we expect to maintain a 1.2 times relationship between our growth rates in adjusted revenue.
<unk>.
A guy this assumes a market neutral outlets based on market levels as of March 31st.
Every quarter, we update our forecast and guidance based on a core and market level. The current environment given the volatility we have seen so far this year or.
Our future guidance updates could look meaningfully different although as the your progressive there's less of an impact in the current calendar year.
Turning to the balance sheet, but I'm not referencing page 10 of the supplement we ended March with $69 million and cash and data $635 million. Our debt consists of a revolving credit facility with $290 million outstanding as of the end of March and convertible notes maturing and 2020.
Three with a principal value of $345 million.
Leverage ratio at the end of March was 2.6 times either die.
With an additional $210 million available on our revolver.
Revolver and positive cash flow generation, we have liquidity and flexibility as we balance managing the business in the current environment with continuing.
To invest in growth opportunities, both organically and through strategic activity.
Thank you again for your supportive invest that at this point I will turn it back to bill for his closing remarks.
Thank you very much Pete.
Maybe uncertainty of these days.
<unk> position to be the driver of a digital integrated future that empowers the industry as we emerged from this extraordinary period of time.
I spoke earlier about the storm the collision of a health crisis financial crisis.
Locations for government healthcare education.
Interpretation, the service industry for financial services, and the very ways of life.
And how it has impacted the sneaky every American households.
The big storms.
Transform the way.
Will live and they also transform the way people operate.
This is one of those storms.
We've done an incredible amount of work to put ourselves in a position to be able to deliver the necessary solutions for the surgeon future that said there's work we still need to do we are accelerating we're initiating an effort to create a greater alignment inside the company to speed. These efforts along.
Yep. It up this work will generate savings, but it will also require investment.
Urgently dried these outcomes, we expect to be a stronger more aligned more efficient market, leading company with the ability to continue to grow industry leading rates.
More of our address address bar market that's available to us.
We're investing in new solution to drive future growth in the business. These are things like our insurance exchange or credits and advisory services exchanges as well as other new exchanges that we were planning.
These are investments in progress in the use of our too artificial intelligence using our data did drive next action.
For the advisers and their client.
We're also leveraging voice and chat service to support.
To help support advisers in this new digital age.
Bringing these pieces together is what we're focused on and needs the things that we're investing.
As we go forward, we're also continuing to evaluate strategic opportunity despite.
The market environment, and we will be opportunistic when it makes sense for us.
See acquisition opportunities that with deep in our position and fast growing segments as well as continuing to evaluate other opportunities for all parts of our business.
We're planning for a different type of future.
The industry will require new tools, and new ways of engagement and Investnet will deliver them.
One thing will not change.
That is our ability to make a difference in our mission to help more families find financial security into Chief financial Williams.
Has never been more important and our purpose never more clearly needed.
Thank you again for your time. This afternoon. Thank you for your support of investment with that Pete and I are happy to take your questions.
Well now that conducting a question and answer session.
Threat to replace the question to please press start one undercover phone keypad.
If you like to remember question from the queue, you mean press start to.
A confirmation code.
Keep your mind is in the question Q. when you press Star one.
If we're using a speaker phone maybe necessary to pick up a headset before pressing star one one moment. Please when we pull for questions.
The first question today is coming from Alex Crammed from U.P.S. Your line is that life.
Yes, Hey, good evening, everyone I guess, firstly, just would love to get a little bit more color in terms of what you saw during the first quarter I think <unk> gave some good color already in terms of the two chapters and also what we saw on April but I think is set at the same time that maybe results were a little.
Better than what you saw in terms of flows and redemptions et cetera. So just curious if there's anything more in terms of what advisers have been doing or or why that may have been little bit better and then of course, how that informs the <unk> Oh. Your your outlook going forward. I mean is is is it I was assuming an environment off maybe prior.
Those of increase volatility and and market declines war or or why could this maybe a little bit that'd be a little better not sure if that makes sense, but yeah any more call that would be would be helpful.
Oh from Alex Hope hope, you're doing well in the hope hope here everybody's healthy.
We got off to a very good start after the you know January and February were were incredibly strong months for US I think the stage was set us we got towards the end of the year. We saw the visor activity increased so so January February very very positive month and in addition to that Alice are redemption.
From rate in.
January and February were low.
As we got to March towards the back half a March we saw the flow rates kind of decrease a little bit.
Will vary significantly netflow positive and we saw the retention rate pick up to 1.9%, which had been kind of over the quarter around 1.7 in January and February and then 1.9 into into March.
Still you know I think overall activity for that for the quarter really very strong as we look at provided at an early look at April.
Get a sense of what's happening here in April I would say that our net flows in April are going to be stronger than March I I think that we continue to see good account activity, but we also see increased activity and redemption they've kept up above two per.
Percent for the month April so or net flows will be solid, but they won't be what we had forecast at the beginning of the year understandably, just giving the market climate so gun.
Taking taking a picture taking a snapshot of what our experience has been in April and as we forecast is p. talked about our forecaster outlook would try to extend that across.
Actually I think we are in you know obviously the market to come back impressively, but there is more news out there on the horizon and we want to be make make sure that where you know again looking at a conservatively as we look at the rest of the year.
So maybe just very quickly. So so are you basically saying you assume kind of in April this environment for the remainder of the year or again anything more specific in terms of the kind of attention not flow assumptions that you have for the remainder of the year.
Yeah. We've again, we've we've looked at it in April issue type environment for the rest of the year and moved more of the the business towards the back half. So <unk>, what we're thinking you set the next.
Throughout this quarter in early into this summer I'm more volatility.
Push more of it into the back half the year of course that impacts are open that feeling of T. Rex and billing rate.
Okay, Great and then just maybe like a little bit bigger picture I mean, obviously you laid out this.
I'm kind of like really matter. That's the right word off of how you think the environment is going to end up going for it but.
Maybe be a little bit more specific in terms of the challenges that advisers faced in particular during the quarter independent challenges you have to engage with advisors in in in in helping navigating.
What the kind of tools that you you you you think maybe necessary or that you've already working onto can I address maybe this whole.
<unk>.
Engaging with with client with your clients, but also advises inclines in in in more of a remote fashion for the time being I mean, I guess what are they.
Historically, you've always leave been always going with a with a package goings I'm. Just wondering is new environment. What specifically you are doing too it's kind of address things as as a as quick as plus one position yourself where that environment.
Without it out Alex So there was a week and March of course, everybody scattered great. So if you think about advisers, they're sitting in their offices. There you know and they're not as the independent advisor is not quite as equipped from a technology standpoint to to operate remotely is that <unk>.
A large organization.
Just given infrastructure, so everybody scattered I'd say it was about two weeks of lots of volatility that the the key instrument I think during that period of time was our platform is they were able to rebalance the council rental to send daughters make service request, a treat portfolios and do that at scale and the volume.
You saw were historic they were they were they were extraordinary we reacted to that we were able to supporting so first and foremost.
Going forward of having a web based class based platform that is available at all times from anywhere is key now the engagement in the future has to become more and more of this digital hybrid the digital imperative become you know I read somewhere and I'm sure a lot of people that are the same.
Thing that you know five years and digital transformation has happened five weeks that is <unk>. That's occurred in our business to advisors in in order to to continue to engage in support their business going forward. They have to blossom in grow their their client poodle you know infrastructure we're.
Leaders there, we we feel really well positioned there we believe that we provide the tools to.
Help advisers engage two cobras. This week if you look at some of our releases money Guide released a secure environment for advisers to work with their clients do their financial plans and a cold browsing video secure video environment. So that is the future and we're pushing hard towards it at the end of my car.
<unk> I did talk about investment from those investments are to pull all those pieces together and do that as rapidly as we can and deliver things like chat and voice for advisers Klein poodles. So the clients aren't speaking to that adviser all the time, but are getting the answers that they need given an automated A.I. platform that we're building.
Alright, great. Thank you very much.
Yep, Thank you Alex stay safe right.
Yeah.
Oh next question today is coming from Devon right from J.P. Securities Your line isn't that life.
[noise] Oh, great ticket afternoon, guys how are you.
Good How're you doing.
Two well so I guess first question maybe to fall back up on Alex's first question.
Around yea net flows and what I'm trying to think about here is is this kind of two things going on there's the market dropping in the volatility which we've been through before but then there's also the health crisis and work from home and you know they affected that's just had on People's daily wives, including advisers and your employees as well so I'm I'm just trying to think about.
[noise], whether you know some of the volatility and maybe even the slow down.
In in in that feels more recently and expectations for the remainder of the year are based on what kind of prior experience with market volatility in what you're seeing or whether if some of that is just you know maybe a delay or pause as people I do initially I work through kind of the health issues of their teams and.
But but you know it is in the markets are stabilizing here in the economy, starting to reopen can kind of get back to focusing on your things to help them grow their business I'm trying to kind of course through there's two or you know interrelated, but in some ways separate dynamics here just given that this is an unusual moment that we haven't been here before.
Right Great question appreciate it I'm wondering I starting in P. Lo fill in a little bit on what our expectations are and how we we model bad but you know if I look at our [noise]. If if I look at that the yeah. The flow data and I look at the ours investments and then they look at the industry's I.C.S. you know we've been netflow.
But if every week of the <unk> during the period. We've been consistently you know are are we going to rate has picked up I think if you go back a few weeks in now they use it does this massive anxiety and uncertainty.
The market seems to have planes and leveled in stabilized, but nothing else pets and it seems to me that there. There is you know what we're syncing is a great deal of anxiety. So if you look at the portfolios that we're managing there was it was a pretty significant rebalance of those portfolios today.
Conservative more defensive positions were able to handle that that was part of the trading activity that we experience unable to.
<unk> to support advisers as their clients got more offensive, but but again, if I look at or April numbers.
You know they're in range of what we had had had initially thought the year would look like we're behind but not significantly behind we're not you know it's not a 50 per cent 40 per cent, 30% behind where where in the range of what we believed what we'll see how that continues you know we'll see if the appetite is.
To take advantage of where the the market is valued today in in a belief that the school and we'll pass in at the market will rebound and people are going to put money to work, but I do believe that the <unk> going to be slightly more defensive going forward I do believe that [noise].
You know from our our standpoint, well advisers, we will add accounts are those accounts will be at sort of a depressed value for a period of time, but ultimately I like to think of that as the coil springs, so depressed value, but it's the market comes back in in in reaches its you know <unk>, where it was trading prior to on this.
That that's going to be a a stringing growth for us Pete what would you at.
Yeah, just a couple of things in the numbers. Thanks, Bill. Thanks, Devon for the question. The page 15 of our of our supplement talks about the.
Comparison to 2000, a 2009 global financial crisis, which was a time when we did show positive accounts advisers and asset flows through every period.
So we we do have some history that you're asking about and that was at a time when we were much smaller and much more market sensitive business. What we saw it really is two one was one of the highest increases and accounts per adviser that that we've ever seen and also very high quarter for account gross so.
I know I know, it's really kind of toward the end of March when a lot of this happened, but we we do feel that were positioned well to continue to support advisers and advisor activity. During this period.
And then in in the in the supplement that we posted online there is that there's a historical kind of page that looks back at the crisis that the financial crisis <unk>.
You know nine and it compares to our page 15, a compares to kinda or where we're at today, so that that might be helpful as well.
Okay terrific and appreciate all the detail and the supplement as well just to follow up on you know the emanate landscape I know you guys are always.
Having conversations I'm sure you know there's businesses that you've been watching or no and I've had your eye on and I'm I'm. Just curious yeah. When you get these kind of market shocks your that can create kind of a break and the bit ask if you will and I'm. Just curious you know if if in your opinion you I'm an a. is going on hold you for the industry in infer invest.
<unk> for the time being or or do you think that this may actually and this volatility or lower price points may actually trigger some consolidation.
Yeah since you're trying to think about you know how you know now we've reset the bar here a bit how that could impact the ability to do deals or create opportunities on the other day front.
Yep.
Thanks, seven we you know continue to to to to look at the landscape something that we do all the time looking opportunities understand the opportunities understand how they fit.
They were deals that are being done.
Throughout this period and I think those are the ones that that you know make sense from a price standpoint, but also makes sense from a strict strategy state, but I think to the really quality properties, you're not going to see you know the quote unquote a discount because firms that are strategically positioned didn't have a strong market presence here and then.
Would platform in good client base I think those are you know resilient strong businesses and and they'll continue to hold value, but but again, we're we're going to continue to lean in from a strategic standpoint pine those businesses that that mesh well with the r.'s compliment ours and in our represent.
An ability for us to continue to grow.
Look at when I look at the market place I I see our platform and it's expansive capabilities from the data to the planning to the platform now with the <unk> additional exchanges and how that can be applied out to a a broader a client base and and it you know something that will continue to to be very.
Focused on.
Yeah.
Okay. Appreciate the car thanks, <unk> stay well guys.
You think you do.
Thank goodness question is coming from will cutting from J.P. Morgan. Your line is now line.
The afternoon I for taking my question stuff.
Yeah. So first <unk> quickly on the market neutral comment so that it seems flat markets from March 31st.
I guess, they're not consistent with with how the the the Guardian something given in the past.
In a in 99 per cent of situations. That's how we've done it up there have been a extreme dislocations between the end of the quarter and the time, we give guidance than we we may update that but that we may have done it twice in the last 10 years. So so yeah that is very consistent with that we do it.
Perfect. Thanks for that.
And and the prepared remarks, there was some mention of like next chefs within the U.M. in the anyway buckets could you help us understand like where the mixes is continuing to go do is it S.M.A.U.M. and the asset management buckets and likewise in a way and also a jump the like the latest few rates on a bunch of basis for both of those.
Package.
So the <unk>, we what we tend to see his advisers take the the the portfolios that are managed by third parties in times of volatility or negative returns and they bring those in the house to start to manage them themselves.
That is more conservative approach, but it's also.
That allows the advisor to speak with more confidence to bear into clients to allow them to say here's what we're doing with your money because sometimes they haven't heard from the investment manager and the client is looking for feedback right away. So a lot of times. They take those more inhouse. So that's a move more from an A.U.M. to an advisor is port.
Manager A.U.A. strategy for US we we we were not breaking up a fee rates. So again on a combined basis generally speaking the the average p. rate for a U.M. as in the mid twenties. The average p. raid for a way as round three to four basis points.
And it's got a blend that sometimes that goes in.
Right right, thanks for walking through that <unk>.
Hi for next question today is coming from Peter Heckman from D., David Supervisors and online.
[noise] hi, everyone that says Alexis on for Pete I Hope all it's you and your employees are saying safe in well.
Thanks, I like sexual hopes you hope you are too yeah. Thank you. So I just wanted to start off by talking about the margins in the first quarter I heard you mention a couple of things, including personal expenses lower than expected and I'm, hoping that you could help us kind of really figure out what drove that especially eat it on March and expansion.
So it was primarily driven by revenue I'll performance in the subscription line, which tends to you know it doesn't have a significant cost of revenue with it. So that's really the the biggest driver of it <unk> the benefit from taxes commented get we're talking about employee or payroll related tax.
They're not income taxes, but but what we had seen through the second half of last year was an increase in carpet benefits with model for that to continue into 2020 and it it didn't return and you want as much as as we have expected. So we're not sure. If that's a timing thing or if that was something that will see a better.
Going through the rest of the year, but but but those were the two major components.
Okay. Thank you and then.
I'm not I think I heard you say 45 million of conversions in the quarter I could you walk us through that it's not coming from 10 to 2019 that that just got completed in the quarter is it something else.
Yeah. It was about 20 billion actually that well I guess, an A.U.M.A. 45 billion total but that is all into one completed into one.
Yep.
And it a Lexus this is bill typically what what does occur is that you know people wait for the beginning of the reporting period to do conversion so they they like to.
Get those done with you know transition up the old system at the end of a year and then transition onto a new one that's going to begin pick up the reporting from that point.
[noise] [noise]. Okay. Thank you. That's that's helpful. And then just just one last one if I could on you only have there been any update into that regulatory review.
Sure see I think you're referring to the letter we received from Senator Wyden. His office and then and then the a F.P.C. follow up and yeah. So we've been engaged fully cooperating with the federal Trade Commission. They they provided us with some questions. We've.
We've answered then been very you know open engage with with the F.D.C. I think our experience there's been a lot of education getting them up to speed is exactly what we do and how we do it and then based on that they gave US a revised set of questions, which we've responded to and waiting for the.
Reply.
Okay. Thank you so much.
Yep, Thank you take care okay.
Mm.
Thank her next question things coming from Chris don't run from Piper Sandler Your mind is that alive.
Ah good afternoon, everyone's going to hear voices.
Hmm like on a task.
One question about the.
Data and analytics business since that looked like it was good just keep in mind is how the subscriptions work for that if you. If you picked up business say in March.
I assume they'll see that over the next four quarters or something but just remind is sort of how the subscription revenue is recognized.
So there there are a couple of what most of the contracts there have minimums with them when clients go over the minimum is based on number of users.
Then the then the the revenue picks up with each additional user so what we saw in Q1 was in many cases.
A bit of a spike in in user activity and so that that translated to somehow performance in the suburbs line, there, where we how performed with.
F. five national institutions.
Okay, and so that that sort of spite that's user driven won't necessarily repeat going forward.
<unk>. So again the the counter wise, we we tend to see Q1 with users be a little bit higher I think that's kind of people go through the year, they're checking their accounts, there or and then and then through the first quarter here when the markets.
All over the place people are checking their balances we saw a couple of days, where there were record low a mortgage rates. So in credit we saw some some usage increases from credit clients that that and we're trying to apply for take advantage of the low interest rates. So overall in in first quarter, we we did see.
Higher user volumes.
Whether or not that continues it <unk> you know again I, it's hard to predict we're anticipating and what we've shown in the guidance is that a moderate to more historical levels through second quarter and second half the year.
Oh Christmas and makes sense. This is yeah. Yeah Christmas is bell I may I may just add a little to it because I think you know what's what was evident to us is that the usage definitely.
The market got Super volatile and people you know got anxious about they're imbalances and all those things. So you know they're clicking on those bank apps and were filling it with the our data.
So in in my mind. It was another proof point that it's in the central offering the data that we're providing is absolutely essential often we are thinking that as the market stabilizes and <unk> you know seasonally we kind of see kind of first quarter that strong and so we have anticipated that.
In our outlook, but there are you know these green shoots in that data business that we're excited about you know, we we've talked last year about a lot of that.
Challenges the business was facing but we're beginning to work through them I don't think they'll be truly evident in 2020, but they are on the horizon for us for instance, we built a new developers poor to.
That is was built to compete in the Fintech market, we've seen a kind of a doubling of new accounts within our fintech client base over over the quarter, which is super <unk>, we see the volatility spike and people turn to these apps that makes sense.
Essential offering roughly developing on the on the analytics business I think the core current product is going to continue to be challenge, but we're invading a new types of solutions and insights there that I think we'll be able to marketed that more broadly so well 2020 will continue to be kind of.
A challenge as we worked through some of those issues I think the green shoots are really exciting for us and and really you know.
Paint a picture my into 21 that we that we're beginning to to to be a lot more optimistic about.
Okay.
Thanks for I'd met on and then I just want their kids ask about the marketing budget I realize there's a bunch of things in there probably like some conference attendants and stuff like that but it. It seems like this might be an environment, where you can be picking up.
Business and new relationships with advisors trying to think about the advisor landscape I'm imagining there's a number of them that are not as well served with that technology in offering that that they could be and anyway. They might be looking for solutions. In this apartment. So I'm wondering are are you still reaching out to those potential customers or is your.
It just won't let her what's changed in the marketing budget and really.
Yeah, we just prioritize the investments for not you know we're not doing conferences were not supporting you know remote events as much as we were Chris So [noise].
You know today would be Great example of some of the marking that we're doing you know we published are are outlook for where the industry is going ahead, and we went up we want to lead and then you know in all of those elements. We have services that we're providing out to the market and they become essential right. So we are going to absolutely.
Accelerate.
And and pronounce our voice in the marketplace to see as much more active on social the C.S. much more active from a P.R. standpoint, and you'll see es active in other kind of virtual type marketing environments, including a virtual summit that will host I believe that say in the beginning of June.
Alright makes sense me. Thanks, Thanks, though yep [noise].
Bank or their question is coming from <unk> from.
Right as L.A.
[noise] Katherine everybody hope you're all well.
Maybe first Bill Bill could you can just talk about some of the exchanges specifically the I guess the insurance exchange and then any.
Sites you can offer at this point in time on some of the the.
The other or newer types of exchanges that are under consideration.
Sure could be good to talk to Christopher I hope you're well. So yeah. No. We are very optimistic about the exchange network that we've.
Invested in and have built over the last.
A year or so you know we didn't anticipate a pandemic, but if you think about the future the investor or risk is going to take a much higher kind of <unk> much more mindsets.
And then how do you have to mitigate that two principal protection and also through guaranteed income the insurance exchange becomes an essential so we feel incredibly fortunate that we have built this and we spent the time to integrate it and they were advancing the integration of the exchange into all.
Elements of our Big for instance, straight out of the money guide planning half now any advisor can access or insurance exchange and execute on those products. So made tremendous progress we've got eight carriers today.
And in that they're loaded up on the platform and beginning to distribute product to a growing list.
Clients that are utilizing our insurance exchange you know at last count I think at the end of the quarter.
We were up to.
4000 insurance license advisers you know.
Nearly 6500 total advisors, who who are using the platform, but the pipeline behind that Chris has been very very encouraging and my sense. You know just giving the market climbing could that will continue to build the credit exchange off to a very fast start we've got a for lenders today on the platform in a pipeline.
Others that will join a were processed Oh, we're processing loans and have a pipeline of over $100 million in loans today that we're we're looking to serve we anticipate by the end of the year about 15 firms will be utilizing the the credit exchange so lots of progress there.
What are we announce a partnership with dynasty financial partners around the advisor services exchange when I think about the future I believe that it independent advisory firms you know in a remote go remote environment without all the infrastructure to connect in <unk>.
The way larger companies can I think there'll be more and more outsourcing outsourcing to things like finance support marketing support complying support other services that were driving around our adviser services exchange. So we're we're super encouraged by that by the early days of that and you know hoping from.
Backed up we've gotten and hoping that by a third quarter will be in the market and we'll be engaged with advisors to help fill those services as we look at future exchanges.
<unk> continuing to look at it you know what is integrated device look like what are the components of advice. They include things like thanking me include things like you know life insurance and and and other types of services in into these you know beginning to step into that the healthcare Hataway budget my.
H.S.A. or how to like address my health care needs and that all becomes an integrated environment. It sits underneath a financial planning and that's really what we're looking towards.
Got it okay. Thank you for that though.
<unk> second question I notice looking at that as a p. you know that the the severance expense.
Up quite a bit 14 million. It was also elevators last corner, maybe just talk about that looks like mainly in the wealth business. So what what what are those efforts around and maybe just talk about driving more efficiency throughout the organization more broadly how much.
<unk> expensive fish and see if we see today to how much is still to come.
Yeah. Thank you Chris so it towards the end of last year, we introduced an optional early retirement program because it the <unk> programs and a long tenured individuals with them at the company for you know with the Jen mice.
From the team for a number of years decided to to opt into that and you know these are have been great partners of ours and you know that that's what that expense represents we do believe that you know as we've gone through that we've been able to lean in towards this more integrated Oregon.
<unk> and create more efficiency and effectiveness in the ways, we work across our our data business or well business or planning business et cetera to create that integrated device model. We are and always have continue to evaluate the organization.
Ways that we can be tighter aligned where we have redundancies, where we have you know in this environment, especially as we we think about real estate and other things <unk>, how can we bring the company closer and closer together to create more alignment to get more throughput to get to market pastor with with things that we see and.
This opportunity for us so so working on it and continue to make progress and and we'll make more progress this year from across standpoint.
Kind of Crazy and then lastly, just.
On maybe to follow up on on on a devins question.
About I'm in a a is it fair bill to say that tuck ends are possible, it's not likely but larger transactions and there are those still on the table in this environment or.
Not so much.
No I think they're possible, Chris I mean, if it's the right opportunity and we can find a way to to execute the transaction you know, we're not going to not participate given the climate, we feel Compton very competent capital base, we feel very confident in our ability to.
Execute those types of transactions they present themselves, we want to be opportunistic and we want to do we're in a position too and maybe others are not in that same position at the moment. So that said you know the market climate is what it is and I think everybody's pretty tentative at the moment and so it's not it's not as it was a say in February.
They were all the that many opportunities out in the market and we're not having lots of conversations as clearly narrowed quite a bit.
Yeah Okay.
Excellent.
Thank goodness question today is coming from Craig's Jones from C. for your line is not alive.
I agree I think that'll save costs involved I wanted to ask about a year ugly sort of you know if we think about what what would sort of an annualized growth rate maybe in a normal environment. You were thinking that this is doing and then maybe.
Now in this new environment sort of what would be the deltas man.
So you know where.
We talked a lot about how you totally starting in the middle of last year really is starting to a rash in the beginning of last year running into some headwinds in terms of growth, particularly within that analytic segments.
We are looking to diversify your that client base to to start to to drive revenue.
We'd also seen somewhere knew what was that were coming in where where retaining clients, but not as much of the revenue. So we're in a period right. Now that's that's relatively flat first quarter was was up a little bit four or 5% from last year, which was pretty good but the rest of the year where.
We're still not not expecting an acceleration from that point, we're still expecting <unk> not only given headwinds that we're still working through but also just given the the broader economy. So we expect some of the business that was starting to get into the pipeline will will likely slow down so.
You know probably still flat longer term as we transition. We we do think a double digit growth is there's certainly what our expectation is as we worked through this but that's not a 2020 thing for us.
Okay, Great. That's that's very helpful thing.
Thank you. My next question today is coming from L. scramble follow from your B.S. for that is not alive.
So far I forgive me the time again, I actually had to fall off although one of them. You I think you may just answer but on the data and analytics side was looking for an up then I guess I was hoping that maybe this environment right, where the call customer base like the the hedge funds a long long onlys, maybe demands a little bit more.
Insights as everybody's trying to deal with you now what what does this crisis mean for for I guess insights on on on stocks I guess, I, you, saying that you're not seeing new demand coming at all is it still kind of the status quo on under the man sides is there more competition maybe or.
Again, let's just hoping that then maybe a little bit of new demand I think you actually giving some products away for free right now to just to to spur. Some some interest. So just wondering if if anything has changed their.
No Annette on the analytic side I think you know again I think.
It's it's it's a little uncertain just given how budgets will be impacted a D.F. managers that said I think we've advanced quite a bit from an automatic standpoint, the kobe insights that we publish and are available on the blog she should check them out and we update those every other twice a week.
I think or or indication of where we're headed in in in my mind. We can develop a really a a pretty macro consumer dashboard of the American economy, <unk> and provide a real time look at how consumers are responding to different events, we focus today.
But you know there'll be something down the road hopefully something else down the road. Although this with the screen will be here for awhile, but we want to help deliver insight.
They get people to answers around I items that are that are that are creating an uncertainty or creating an opportunity and I think that's you know again, a small example, <unk> a path where actually headed down and you get a good look at that on our on our you know I think there's a link inside the supplemental material to go to go look at having people look at that.
Great and then just not very <unk>, yeah, and you probably watch and <unk>. Yeah. You just mentioned via the free we we gave our money guide my blocks away to advisors, and really encouraging them to distribute them to their clients their employees their communities because they're bite sized kidnap said answer.
Questions like how do I refinance my credit card debt Hideaway pay my rent you know really quick snapshots People's financial life that can be completed in five minutes and and they've been really well receipt.
Cool Great and then just secondly, you just maybe just coming back on the expectations. I think you said the conversion pipe the conversion expectations are lower so just again, maybe just flesh out how much of this is has a pipeline says appear to is it is environment. Because these are really big.
Undertaking so you have to really engage in person or or a is it is there is there a I guess a pass for maybe that's a pick up later in the year as as maybe everybody gets used to just kind of environment I just I just.
It seems that conversion is probably the part of the business. That's the hardest to do in this new environment, but but maybe just flush it out a little bit more and and and once you expecting.
Yep, Alex I think part of the what we're incorporating here is that maybe a last month you know people you know again fled to their homes and got booted up and and you know our customers are trying to get their arms around what's happening and you know projects for most part or an afterthought. They.
I would say that there's a lot of activity. There's a lot of engagement is new ways of working we're getting in our customers or clients are getting better and better about pushing projects. So word I know I have executive calls with certain clients each each week and they're very anxious to keep up momentum throughout this.
Period of time, So you know I think what we did was we we got conservative. We we we you know clearly disruptive a period of time, we know that we've lost time about a month or so in that transition to remote we find the working environment in their collaboration environment improve.
<unk>, but still that's going to have a cost you know, it's not going to be like a us putting a team in so and so's office and doing the work for then you know it's can be more virtual so so we build that in likely Alex as you said later part of the year and everything just get pushed out a little bit.
Yeah.
Alright helpful again, thank you.
Yeah, Alex take care Okay.
Thank you we reach one of our questionnaire for since nine to turn the four back over the management pretty further closing comments.
But thank you very much everybody. We appreciate your support we are and again you know I I think that the the main take away that I have from today's session is that you know, they're navigating a very difficult environment, we have our our businesses are up.
Parading very strong have been been very stable and we've been able to execute and tremendous volumes in that we're going to exit this period of time with more opportunity given the work that we're doing in the in the focus and aspirations that we have so I appreciate the support thank you very much and I looked for.
And to talking to you next time thank you.
<unk> teleconference. You mean disconnect provided at this time and have a wonderful day, we thank you for your participation today.
[noise].