Q1 2021 Envestnet Inc Earnings Call
[music].
Good day, everyone and welcome to the investing that first quarter 2021 earnings conference call.
At this time, all participants are and a listen only mode.
A question and answer session will follow the formal presentation.
And he wants to require operator assistance during the conference police breath starts here and telephone keep that.
As a reminder, the day is call is being recorded.
At this time I would like to turn on the conference over there Miss that May Dorcas and faster relation. Thank you. Please go ahead.
Thank you and good afternoon with me on today's call and they'll Krager, Chief Executive Officer, and Pete do retail Chief Financial Officer.
Our first quarter, 2021, and Inc. Press release supplemental presentation and associated for him a K can be found and and estimate dot com under the Investor Relations infection.
During the call we were discussing certain forward looking information.
Such comments are not guarantee that future performance and therefore, you should not put undue reliance on them.
We also will be discussing certain non-GAAP information.
Please refer to our press release and the SEC filings for more information and forward looking statements risk factors associated with our Smith and required disclosure is related to non-GAAP financial information.
This call is being webcast life and will be available for replay for one month on our website.
All remarks made during the call our current at the time of the call and will not be updated to reflect subsequent material development and you'll.
We'll take questions. After a prepared remarks with that I will turn the call over to bill.
Thank you Stephanie.
And thank you everyone for joining today. It is good to be speaking with you.
Investing it is building the ecosystem for financial wellness connecting actionable data seemed.
Seamless technology, and the deepest set of solutions to enable and intelligent financial life.
We are uniquely positioned to do this and we are investing to execute on the significant opportunity that we see for our company and this will drive faster growth ultimately greater profitability and we believe much higher value for investors.
Today, we plan to highlight the following.
First the progress, we're making towards creating the ecosystem for financial wellness net.
Next I will discuss the scale, we bring to the market and how it enabled our strategy.
We will spend time on the opportunities we see for revenue growth acceleration. This includes capturing more of the existing addressable market.
Second Modernising, the digital engagement marketplace to connect clients questions to advisors and actionable solutions and finally opening the platform for expansion to more solutions providers and developers.
And then highlight the organizational progress that we're making people highlight the company's strong financial performance and the first quarter and then Pete and I are looking forward to your questions. So.
So let's start let's start with the progress that we're making.
Joining the first quarter invest net continued to deliver strong financial performance, we executed high volumes of activity and advanced our strategic position as the financial wellness ecosystem provider for the industry.
The ecosystem provides the tools and intelligence to our clients to power and extraordinary value proposition for consumers. This is and intelligent financial life connected from the daily cash that people spend to the long term goals they seek to achieve.
How can people optimize the impact of their financial decisions. How does one decision impact another how do people become more confident and the decisions that they're making.
We are answering these questions with technology and data and access to and industry, leading network of financial solutions.
We know is the financial wellness ecosystem.
During the quarter there were important examples of how we are advancing this vision.
With the launch of our money guide borrowing blocks clients are empowered to make better credit decisions and a click advisors will access a full range of credit offerings and on our advisor credit exchange you see this the consumer questions. The advisor answers and is able to execute all of this intelligently.
Connected.
The acquisition of harvest savings and wealth technology, Leverages, our existing bank relationships and brings capabilities that open to all of our banks account towards addressable market.
For instance savings accounts, creating a much broader solution set for this important channels.
Harvest gives banks the ability to use savings accounts as launch points for people to plan for their future enabled enabling micro savings, which can connect to investment accounts again intelligently connecting People's financial lives offering answers and the ability to take action.
We also announced the launch of true Cendant and network of trust capabilities that benefits advisors by streamlining the process.
Establishing trust accounts and benefits and clients by bringing down costs and account for minimum.
This capabilities connecting to our legacy studio, which helps family develop estate plans for next generations. Once again answering questions supporting decisions with the ability to execute all intelligently connected.
Each of these examples show our vision in action providing.
Providing practical actionable information to address a person's financial question or need intelligently connecting the dots of their financial life.
We are extending these capabilities to our full suite of solutions significantly broadening the range of intelligent connections and each case pairing more insights and more action will result.
It is important to understand the scale and activity of what we do and how it enables us to achieve the opportunity that we see.
Today, we serve for eight trillion dollars and assets, we power more than 2 million financial plans at quarter. During the quarter, we executed 50 million trade orders on board and 42 billion and conversions, we service 500 million aggregated accounts for each day, we have relationships with over 5200.
Companies, which is up from 30 to 100 companies just three years ago.
Leveraging the scale of what we do while meeting the growing demands of our clients also enables us to extend the services and solutions, we offer and conveys the possibility of what's ahead.
We have built and we are utilizing the foundational essential building blocks of the financial wellness ecosystem. This scale is key to executing on the growth strategy, we presented to investors last quarter.
I want to spend some time on revenue growth accelerators.
We have three areas of focus to accelerate our revenue opportunity.
Our first focus is capturing more of the address for market that already resides on our platform.
Asset based solutions are an important part of this opportunity and.
And the first quarter solutions, such it's overlay impact and direct and and indexing continue to post strong double digit growth rates across assets advisors and accounts.
We now have all for 20000 advisors accessing for solutions to a more than 400000 accounts, representing more than $40 billion and assets.
But this is just a small fraction of the captive addressable market and.
We have within our current account and and asset base and our organization is focused on going deeper.
The powerful advantage we have for doing this for these solutions and other important focus areas is our data recommendation and just which.
Which provides its depth of actionable insights with changes how customers can achieve their important objectives, while accelerating investments growth.
Spotlight and use case of transitioning brokerage accounts to manage portfolios.
A large bank client of ours has made a push towards more gola line manage portfolios to meet the long term needs of their clients.
Are users of our manage account platforms and as we engage with them about their goals, we introduce them to our and and data framework approach.
Which helped identify the scope of opportunity inside the current brokerage business, we identify the account's most likely to benefit from the managed portfolios and then help the best provide actionable tools to their advisors to engage these accounts.
The results are important to note.
We have observed a doubling and conversions since recently launching the capability to all of their advisors. This is meaningfully ahead of the activity client and I had seen in the past.
One example, does one client and one use case.
As we step back and extrapolate this opportunity to more firms and more use cases like tax overlay impact direct index brokerage to managed accounts Rep advised to fund strategist portfolios credit opportunities Trust insurance and beyond it becomes apparent.
How we can benefit customers credit opportunity for our clients and execute on a near term attainable and large growth accelerator for investing.
Our second growth focus is on modernizing digital engagement marketplace.
Seamlessly connecting and consumers pressing financial questions to the execution of the solution by the largest network of advisers from the industry.
We are launching a game changing client engagement portal and we are confident will become the leading digital storefront for the industry.
Tools make advisers and their offerings accessible and real time from anywhere to answers to questions that their clients have it as a superpower for advisors and his financial lives become more and more fragmented the client portal becomes the hub for client engagement.
The intelligence of our financial planning infrastructure connects to the portal and threads the consumer's experience to actionable services to achieve their near and long term goals.
To help advisors execute on these opportunities we are more seamlessly connecting all solutions and exchanges to all advisors and we're also rolling out and new trading platform that brings together and the first of all of investments leading capabilities to advises us every channel.
The third focus of our growth strategy is to open on our platform for expansion. So our capabilities and dataset are enabling the greater ecosystem of solution providers and developers.
This past quarter, we announced the launch of money guide engine, which opens financial planning API as to the industry and over the coming quarters will bring to market Lun complete ecosystem of Api's for the entirety of the Investnet universe.
This will do two things.
One and will.
Open up distribution of our solutions to the Fintech and embedded finance marketplaces, and secondly, it will open invest net financial wellness ecosystem to a greater array of third party providers, creating more and more choice for our clients.
This universe of Api's will enable us to power financial wellness for more people and we will drive growth for investing yet.
Here's a brief update on organizational progress.
Let me take a moment to shine a light on the immense effort of the invest net team.
Across our business activity is elevated we are working remotely we're making progress on our vision, we are integrating to bring the power of investment to all of our clients and we are driven by and important purpose. The team is making this happen and I am proud of the work that we're doing.
It takes discipline and commitment to achieve our goals the organization as a line and moving forward.
This quarter, we on both on.
Boarded key new leaders across our business, including a new chief marketing officer.
And new Chief data officer, and a new head of market intelligence and.
And as we continue to sharpen and the line the organization to make faster progress. We now have the leadership and talent to operate as a more scream line organization and to capitalize on the large opportunity that we see and.
We posted strong results and have enhanced our capabilities across the platform last quarter. We've enhanced the organization, we will lead and support the industry every step of the way invest net is building the ecosystem for financial wellness connecting actionable day.
Ada seamless technology, and the deepest set of solutions to enable and intelligent financial life.
I'll be back for some closing comments and a moment. Please let me turn it over to Pete.
Thank you Bill. Thank you everybody for joining the call. This afternoon.
He'll review, our first quarter results provide and update on our outlook for the second quarter and the full year and review our progress on the accelerated investments we discussed on our last call.
Ah first quarter results for strong and exceeded expectations adjusted revenue for the quarter was $275 million, 11% above the first quarter of 2020.
Data and analytics outperformed largely from higher platform utilization, while the wealth segment was and line with our expectations recurring revenue this quarter was 98% of adjusted revenue.
And just that EBITDA for 68, 3 million, 25% higher than the first quarter of 2020, driven primarily by the strong revenue growth.
And just that earnings per share was 64 cents <unk> higher than our guidance for the quarter.
And looking forward to both the second quarter and the full year, we're updating our guidance as follows for the second quarter. We expect adjusted revenues to be between 281 and $284 million up 19% to 21% over 2020 as the business benefits from higher subscription based revenue.
And strong flows and market appreciation and the first quarter.
Adjusted EBITDA to be between 60, and $62 million, 8% for 11% higher as we anticipate beginning to restore some of our pre COVID-19 expenses and Q2.
And EPS to be 53 to 55 cents per share.
For the full year, we expect adjusted revenues to be between.
$1.138 billion, and 1 billion and $148 million up 14% to 15% and.
Just that EBITDA to be between 230 and $236 million.
And EPS to be between $2 and <unk> and $2.10.
To add context with and increase in revenue expectations. We may have expected, a greater increase and EBITDA as well.
We close the acquisition of harvest and April and harvest has a strong pipeline with current and potential bank customers.
Which elevates our confidence that harvest will approach breakeven and early 2023 on a standalone basis.
We also see revenue opportunity to support digital banking initiatives within our bank channels potentially accelerating their revenue growth, but for this year harvests operations will be and offset to that corresponding EBITDA increase and it's a difference of around $5 million to $7 million and 2021.
Turning to our accelerated growth investments, which we introduced last quarter. We expect these investments will ramp up throughout the year as we add people and other resources and product and engineering marketing and sales and go to market activity.
There wasn't a lot of expense anticipated and the first quarter, but we have ramped up our recruiting team and we will see that hiring began and Q2.
We expect to provide additional information related to hiring progress and future earnings calls and.
And we continue to expect the investments to account for roughly $30 million of operating expense during 2021.
As a reminder, that $30 million, roughly $20 million or resources to support technology initiatives and roughly $10 million of expenses related to those go to market marketing and sales activities and resources.
Additionally, we expect these investments to begin to generate incremental revenues and.
And the second half of 2022 and continue to increase thereafter, as we create a better more streamlined ecosystem, which elevates our value proposition to existing clients and expands our total addressable markets.
The financial implications should be powerful as we unlock access to the addressable markets build discussed.
Realizing greater depth of relationships with our existing client base increased adoption of portfolio solutions within our captive addressable market and strengthening the engagement between advisers and they're investor clients Bye.
By 2023, we expect to be driving higher revenue growth and growing profitability.
As the marketplace evolves, we are updating the key performance metrics. We report while advisers accounts and assets will continue to be important we are emphasizing internally the ways. We measure the connectedness of the ecosystem as we focus on a wider variety of participants that will add significant value and the future.
We mentioned earlier, the 5200 firms with which we do business. These companies our clients, but this number does not count the thousands of product and service providers such as asset managers.
Tech firms insurance carriers lenders and custodians that are part of our growing network.
And we will be providing greater detail on ecosystem contributors over the coming quarters.
Turning to the balance sheet, we ended March with $372 million and cash and debt of 862, and a half million dollars. The outstanding debt consists of two tranches of convertible notes do and 2023 and 2025.
Or $500 million revolving credit facility was on drawn as of March 31.
And our leverage ratio at the end of March was one nine times EBITDA.
Thank you again for your support of Investnet and I will turn it back to bill for his closing remarks.
Thank you Pete.
Invest net our team and our roadmap is leaned into the future a future that makes financial wellness a reality for everyone and.
Future, we are uniquely positioned to enable and future with a total addressable market Ah more than $40 billion across the financial wellness stack.
Enabled through our financial wellness ecosystem, which is differentiated from every other provider is a fully connected open architecture hyper personalized wealth management platform with solutions engagement technology.
AI powered recommendations financial planning and data analytics invest net fully encompassing ecosystem enables advisors to provide their clients with a comprehensive view of their financial health connecting People's Daily financial line to the long term goals.
We are consistently posting strong results, we are leveraging our scale, we have industry, leading capabilities across the financial wellness solution set.
And we are driven by a clear and winning strategy. We have the right team and we are focused and investing and the right capabilities and the right opportunities.
Before we open for questions and want to highlight that will be hosting our inaugural Investor Day and June also and June will be our advisor summit, both events will be virtual this year and there will be more details about timing and logistics and the coming weeks.
I'm excited about the progress invest net is making and the opportunity in front of us I'm excited about creating the intelligent financial life and value for all of our stakeholders advisors consumers employees and investing.
Thank you again for your time this afternoon and thank you for your support of investment with that Pete and I have.
Happy to take your questions.
Thank you we will now be conducting a question and answer session. It.
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One moment, please and I'll be all for your questions.
Our first questions come from the line of Devin Brian with JMP Security. Please proceed with your questions for me.
Good afternoon, and thanks for taking the questions.
Hey, Devon how are Ya.
I'm doing great I appreciate the detailed overview I guess I just want to start.
On a question related to your Italy, obviously.
Watching five.
Year on the market and it looks like they just raised capital with a 13 billion dollar valuation.
<unk>.
Keep moving higher and higher and and so clearly weren't a backdrop of elevated evaluation and strong valuations, but I think a lot of interest and businesses like Italy.
And and so I'm sure you'll continue to deteriorate on the evolution of that business, but.
Just kind of curious if you've kind of put more thought into work for interested and kind of thinking about ways.
For that business could be separated just given that point around such strong evaluation and such strong demand for that type of business.
Yeah, absolutely Devon and.
I think one of the things that spotlight is in my comments, we talk about how we are creating these connectivity across our platform and generating a lot of the recommendation engine and and really advancing are the invest net data vision and and it really points to the the optimization I think and.
And the space on the utility of the data.
Component of that is yodlee for and investment so the daily transactions daily footprints debt that you'll be is tracking on a consumer basis matched up with the long term data we have her on our money guide planning and and the investment accounts and the investment platform is a very powerful combination of data that we're beginning to to utilize.
And really profound ways. So that's the first point and it's and optimization and it's been been and progress for a long time of year, but it's really beginning to to evidence itself on the desktops of our employees and the desktops of advisors.
But only at the end of the day is one day to feed that we take into our total cloud based environment. Every night, just as we've taken a custodial theater or a pricing fee and.
I think our DNA business and.
Is a tremendous asset for US again, we've optimized it and the core wealth business and and and and continues and will continue to drive our ecosystem, but we see the same thing you do we see the market the value of the asset more than it has and the past we look at the valuations that are out there from a private standpoint and I.
Just say that we will act.
On that on the on the valuation proposition, if and when we see the right opportunity for the business and for our shareholders completely recognizing the backdrop that exists from from evaluation standpoint today.
Okay, Great Carmel, thanks, so much and and maybe just a follow up on the harvest acquisition you <expletive> on was interesting and and you appreciate it relatively smaller transaction, but just kind of curious how you guys are feeling right now about your broader suite of products capabilities into the.
Bank channel and just rounding out for you or just more opportunistic and is it.
And maybe came to you.
As an opportunity and and I was I think about going on the digital account open and cool within that sounds pretty interesting to me and and just kind of curious how much of an opportunity exists for leverage that either within the existing relationships or is that kind of an easy way to kind of present value to newer relationship seems like kind of pretty obvious.
Opportunity for people that don't have that capability.
Yep.
I'm excited about this transaction.
Not very significant from a purchase price standpoint, Pete highlighted some of the.
EBITDA expense will take this year as we we transition that into a fuller sweet a solution. So so important to note.
But.
The capabilities that it offers to us really.
Helps us expand our value set to the bank channel. So not only today are we able to address and to serve investment accounts at the bank. We've now leapt over enable to address all the savings account that a bank has and inside that savings account, we were planning mechanism that helps.
A smaller saver.
Kind of begin to plan for long term goals within their savings account and connect that seamlessly to investment accounts. So you can see there with a fiber that harvest provides to us really greatly expands the footprint that we can we can penetrate the bank market with and so we're we're very.
Excited about that and I look at the the suite of solutions today that we can offer and that bank channelled Avenue kind of hit on that and your question I think it's important to note.
Harvest from Ah.
From a savings planning standpoint connected to investment accounts or whether those are at the discretion of the consumer.
Through the Robo tool that harvest offered or the full suite of capabilities on investments investment platform tied back through our comprehensive reporting tool that can look into the trust environment. The the wealth environment bring those pieces together for the bank our new Trust.
Platform, enabling banks, who do not have and trust capability to offer trust services to clients that it suitable there we have our Abe AI conversational AI tool that helps automate and provide service to the bank channel and of course, yielding.
The data package that we are able to offer to banks as we bring those pieces together. There is tremendous leverage is leveraged from a pricing standpoint product standpoint, and then data that we are able to.
Kind of utilize as we expand our footprint.
And the bank channels, so something that we're very encouraged by.
Oh, and then okay, great and one and neglect the other day. The other question is an important winter on the account opening capability and that.
With harvest, we've got we've got a account opening platform that kind of stretches across all the different environments brokerage.
And.
And the insurance platform Trust, all those areas, but what harvest brings to us is to extend that to the consumer. So the consumer begins to open the account themselves a lot of data input that gets pushed to the consumer comes back for the advisor seamlessly and digitally opening accounts lowering our administration costs and speed to open and.
I think it will have a meaningful impact.
That's great well really appreciate though I'll leave it there and.
Well.
Thank you David.
Thank you and we're next questions come from the line of Alex Crammed with UBS. Please proceed with your question.
Yes, hi, good evening everyone.
I want to touch upon that example that you gave with.
Was that bank and.
And I guess selling if that's the right way to put it but when you described it it sounded a little bit of manual and labor intensive and maybe just came across that way because given us a lot of detailed there, but I guess I'm trying to ask.
Is that where a lot of the investments outgoing BK in terms of manpower because it is a very tedious manual process or are examples like or examples like this.
Other opportunities I guess with the examples like this to to really automatically scale and let others. So I guess, what I'm trying to say is like.
How would you take just one example on maybe and.
And just scale of two 100 thousands of different banks.
Very quickly and what's what do you need to do there.
Yeah, absolutely and I Hope you I hope you're doing well good good to talk to you and thank you for the question. So it's actually the opposite.
And what we've been able to do as we work with that particular bank for this particular opportunities we looked at their book of business, let's call it $25 billion and brokerage assets able to identify and they're very quickly $810 billion of opportunity for them and were used.
Our data recommendation engine to do that not manual at all so we're automate meeting and AI tool that is reaching through that book of business very quickly surfacing a total addressable market for.
The bank the bank and is able to we were able to identify the accounts on behalf of the bank. They're advisors are able to tap on the shoulder of those accounts and and say Hey, we've got this value proposition and then the uptake the uptake from September 2022 today has been consistently consistent.
<unk> from the month that we launched it 50% increase flows for.
For every month since we launched it to other advisors in in September. So so it's a highly automated highly AI driven.
Scaled offering.
That's just one use case, but let me extend that let me talk a little more broadly and we step back.
We serve for eight trillion dollars and assets today, we are building use cases around brokerage to managed accounts. That's one of them another use case.
Taxable accounts as you know one of the headlines absolutely. These days is capital gains taxes right inside that inside the for eight trillion were able to identify a very significantly sized captive addressable market on our platform that would benefit from tax overlay, okay, and not only that which for.
Firms, which advises which accounts and we're automating a digital marketing capability that our specialist team is connecting to the advisor tapping the client on the shoulder and saying Hey, This is a benefit for you.
That will yield ex in tax Alpha for you.
We're able to deliver that at scale and penetrate.
Captivity captive addressable market that I would call very significant in the in the supplemental deck, we highlight kind of how that that would.
That works, a little bit and slide and I'm, just flipping to get to the page of the slide but and page eight.
Current existing client relationships, but then and each of those fears are use cases, where will be able to automate.
This recommendation engine to identify opportunity connect with the advisor helped the advisor clothes account and then Alex for the last point I would make is that by.
By the end of this year.
R. AI tool our data set the recommendation engine that we've been making investments and advancing and accelerating investments and by the end of the year it'll make 10 million recommendation the day across the platform and we believe within four years that will lead to a billion recommendations that will be made on our plan for.
From each and every day to highlight opportunities for advisors to engage with our clients and the more that we deploy the client portal to highlight the consumers what benefit could be derived by engaging with their advisor more deeply.
Okay. That's that's great. Thank you sorry, I was on mute for a second.
And then maybe just secondarily, maybe just give us a quick update on I guess, the data and analytics or Yodlee whenever you want to call. The second of these days to look at the last few few quarters here, it's fairly flat.
Right, So maybe just and update on it gets the three areas.
And then legacy bank business.
The kind of asset management data business day.
Fintech business and anything I may be missing here too I think and then you mentioned that thanks for doing better so I, just especially that was for us. Thanks.
Yeah, Thanks, Alex and again, thank you for the questions.
We had yodlee had a very good first quarter.
The DNA business up for them really well subscription revenue was higher than expected, it's driven and mostly by our financial institutions the big the big banks.
User ship is up.
That's COVID-19 activity hits on the phone and finding out what you're balance is are interacting with your money digitally far more.
Actively during COVID-19, but we think that will be sustained post COVID-19. So usage is up for.
Financial institutions had a very good quarter, but so did our fintech business, so usage from and consumers up across financial institutions and syntax.
The business area that has been the biggest challenge for the DNA business was our analytics offering.
Which is we just had resilient pricing headwind.
Given given competition and the space and Ah.
On pricing per contract had come down so we've been flat to negative on the on the on the analytics business again, the analysts business had a pretty good quarter. We saw revenue was solid slightly ahead renewal rates were high we think that there's some new market opportunities that were disc.
Covering and the DNA analytics business, especially around management consulting.
The continued headwinds it's not it's not going to restore it's it's.
Analytics business not going to restore is high growth rate anytime soon but we are beginning to make progress and and we think that we're we're turning the corner and that business.
Very good thanks again.
Yeah. Thanks, Alex.
Thank you. Our next question has come from the line and surrender aside with Jeffrey complaints for stay with your questions.
Thank you.
So.
Hi, guys.
It's my first question is just a little bit about the investments that you guys are making or at least kind of the the implications of those investments. So maybe can you provide and update in terms of.
Receptivity, you've gotten from clients and then may be explored the idea that.
And as you can talk about the future and functionality that's coming into does it makes sense for clients to kind of hold off and.
Coming onto the platform Howard new clients dealing with the idea of making the decision of.
Onboarding today first day is maybe waiting to on board with the new enhancements.
Yeah certainly.
I would say that universally the feedback that I have received from our clients has been been very positive and.
And.
I think they are excited about the roadmap, they're excited about where we're headed and how the tool set that we have within the investment organization is being pulled together.
To be most impactful for our clients, whether the the largest broker dealers that we serve largest banks that we serve all the way to the to the local RIAA. That's that's a couple of blocks from you right now.
And so very positive at the same time, so we on.
<unk>.
Also deploying.
Teams for our clients.
That are addressing near term issues or near term ways to unlock more opportunity.
With our with our current with our current technology and that's been been and effort from our relationship management standpoint technology data standpoint.
To help our clients kind of.
Kind of grow and and meet their goals you utilize more and more of the investment solution set and do that and a very near term like this quarter.
And while we rollout more modernized user interface that will reach their desktops over the and the quarters ahead.
The next large piece of technology that that we will be launching and of course has declined portal.
And the Investor day that we're going to host in June I'm very much looking forward for.
For you all to to have a look at that technology and understand how powerful.
Piece of technology that we'll be bringing to our clients and and our clients are are incredibly enthusiastic about that the feedback has been been tremendous so so it's something that we feel very positively about.
And.
Got it and then if we were to just kind of tickets step back and take a look at me be demand that there was pre COVID-19.
And kind of the demand interesting out there and the near term at this point and how would you describe that Ah, we kind of fully back to where things are at this point.
Just any color of contacts you can provide there in terms of like upcoming conversion activity or how we should think about the near term.
Yeah, well I would say that the activity on the platform and the first quarter was as significant as any quarter I mean.
The new account flow the net account flow.
And flow so lots of activity that advises or engaging clients and that's.
And when you when you think about the dynamic of how the business was working which is very.
Advisor face to face belly to belly.
For the remoteness of this COVID-19 period. The fact that the account flow has been so strong as an absolute credit to be advisory industry and and the way advisers have adapted.
That has been very positive we continue to on board.
New firms new logos, we continue to transition firms from legacy platforms competitive platforms.
On to the invest net.
Platform I do believe that as we roll out the new client engagement.
Portal and the new logo activity is going to increase surrender.
I know that because I look at the pipeline and I know that.
The firms that were talking to.
Specifically around the client engagement portal and those are new logos and firms that are that are used competitive platforms and the past and and will ultimately become invest net clients.
Helpful. And then one quick question.
Now that we're kind of a quarter in.
And update you can provide on kind of the equal perhaps relationship and maybe where you are in terms of that relationship generating revenues.
Yeah. So.
I would say that debt COVID-19 caused a little bit of a delay right and.
I mentioned that I don't know, how many calls ago, probably three calls ago, we talked about.
Little bit of a hiatus last.
Spring with Equifax Button Q1, 21, Equifax released our joint credit solution. It is.
Called cash flow insights and Equifax is building and pipeline.
They are selling the solution. They they feel that the launch has been very effective we will not top over our minimum with equifax and 21, but we believe that in 2002 and beyond and it will begin to contribute beyond the day.
The minimum that we have and the contract with them. So we're in the market products on the market. Good initial response to the solution.
Got to build got.
Build from here.
Kind of punched through the the and.
And the revenue minimum that we have on the contract.
Okay. Thank you that's it for me.
Alright, Thank you very much.
Thank you our next questions come from the line of Peter Ta David says. Please proceed with your questions.
Hey, good afternoon, everyone alright.
Just wanted to get a little more color you touched on it but just some of the reasons behind the really strong net flows ex ex conversions this quarter and looked like it was the strongest and and a couple of years.
But we didn't necessarily see and accompanying uptick and and advisor growth or or a necessarily a couch.
Anything going on there.
That you can attribute that to or just just some some.
And maybe one group or one for the customers.
More assets over.
Yeah, So part of the the account and advisor metrics, we had a reclassification.
Move some from <unk>.
Two subscriptions.
So that's why I think primarily the reason the.
Account numbers aren't matching up with the clothes and they were low margin type stuff that weren't really generating a lot of new business anyway. So they'll talk about the reasons behind the flow. So the re class kind of.
Pushed down the actual I think net gain that we had and <unk>. That's that's the headline.
And a business had a very good quarter and I think.
People and we talked to our clients again invest net transition through the COVID-19 period, and helped advisors transitioned through that period and a scaled kind of very dependable.
Supported way and so.
I would say that the.
The satisfaction index on invest net and what we're able to provide to clients is.
We proved up during the period.
<unk> has been on the platform a longer period of time, they're used to the work flow there used to how to engage clients with it the longer that on the platform and the more productive. They are this is something that and go back and I think about.
My good partner Jud and he talked all the time about the longer that advisers had that platform. The more productive. They are they are they are they are certainly more productive and the average advisor and in the marketplace and that's what we're seeing we're seeing that and and the benefit.
Of the investment platform again is that in and COVID-19 period of remote period cloud based accessible from anywhere teams are able to leverage it and.
And my sense is that advises are really getting deeper traction on the fee based solutions on using our platform.
Got it that's helpful and then.
Just just eyeballing that.
The subscriptions and.
Licensing line.
Yeah, we know what the trends are at Yodlee, but.
Appears that based on the wealth portion of that.
Has been growing maybe mid to high single digits.
You see that accelerating at all.
And continued deployment of upset with the AD on somebody guide and and other new solutions.
Pete I'd do I think I think.
And I think about the money guide solution and I think about some of the new capabilities that would that we're rolling out and we think about some of the harvest capabilities that will be offering inside of the bank accounts we've got.
Lots of kind of capabilities now that are more license based on and then based but those license based tools what are they do they drive ultimately.
<unk>.
Drive advisors to utility of the.
Solutions, whether it's investments insurance credit et cetera.
So no I continue to be very bullish on the on the.
Subs growth and the and the well space I think what.
As we articulate.
This strategy around the digitized engagement.
That form.
You're going to see more and more uptick as we also the other the other dynamic, which which I will 0.2, which I think is important is that I believe we will see more headcount growth and and M&A category as we use the data recommendation engine across the for eight trillion dollars.
Some of those advisers and some of those accounts are sitting and subscription based environments reporting only reference PM from the tamarack assets now, we're going to pull them over into solutions tax overlay impact direct indexing.
And the solutions team here and investment so and my expectation is the advisers and count and assets will grow and be a primary initial contributor to the incremental revenue growth that will be driving.
Okay. That's good to hear thanks, though.
Thank you Pete.
Well.
Thank you. Our next question is coming from the line of Michael Young with Truth Securities. Please proceed with your question.
Hey, and thank you for taking the question.
Absolutely Michael.
And wanted to just kind of start on on sort of the investment, particularly on the human capital side is that really going to be focused on hiring engineering and data analytics talent to kind of build and rollout kind of ecosystem expansion and the integration and then eventually move over and tomorrow.
Getting and sales overtime or are you going to kind of higher across the board all at the same time. So we'll see kind of the expense ramp more cohesively at one time, followed by kind of and.
Oh I'd passed lower.
Afterwards.
Yeah.
It it's head count first.
And the hiring is taking place in the product area of the data that data team that and keep on spotlighting or on a data recommendation team and our engineering team, but at the same time.
<unk> to that is we've got a marketing and sales strategy to go to a goat and engagement strategy.
And if I could just take one second to kind of walk through the kind of the platform mentality that we're taking to to to the the investments right. So we're hiring you'll see and uptick and those expenses and the second quarter and beyond.
Really pleased with the pipeline and the candidates that we're getting a look at and.
And bringing on to the firm so again, you'll you'll begin to see some of that build and the second quarter.
As a spotlighted engineering data product and marketing and sales, but at the same time, what day would keep an eye out for is that.
From a marketing standpoint, we're going to begin to to introduce to the marketplace not only the overall drive towards the financial wellness ecosystem that debt that enables and advisor to created and intelligent financial life for the consumer, but and the real product areas of tax overlay of direct and.
Decks of impact investing of credit and insurance to create greater awareness and at the same time, as we're creating greater and wariness.
And we built at a a solution specialist team that is receiving those data recommendations through a recommendation engine tapping that advisor on the shoulder, saying here's the here's the solutions that would best benefit. These particular clients. We created the digital marketing tools for that advisor to reach out to that client and the <unk>.
Opening tool to sweep it back into the platform, where opening more accounts and the other area of investment I would say is around the ecosystem and the ecosystem being the API and network that will enable and open up the embedded finance and Fintech channel for US really good progress there money guide engine, we announced and the first quarter and important to take.
Note of because now our <unk>, our financial planning Api's are open to the industry right and you can use you can use a five minute block if you're a banker fintech and utilize that piece of technology or our estate legacy.
Planning tool to build into your user experience, if you're a bank or or a higher and RIAA.
And that in addition to that the Api's for the invest net universe will be are being leveraged internally today, so that storefront exists for our internal developers more and more of our code is being put into that API set we were able to accelerate that we've been able to accelerate.
Right that because of the.
The move to the cloud, but now I will make a really hard push and invest dollars to build and App store. If you will for the totality of the inverse net universe yields Lee money guide invest net a store that has an API that addresses the full spectrum of capabilities for the Fintech embedded finance and Mark.
And place and for developers to use to build back into our distribution.
Okay. That's helpful and I guess, just as a follow up and.
You kind of complete this integration.
Will there be areas of expense savings sort of on the back in with either legacy technology, that's no longer needed her old platforms et cetera that can be turned off or removed any any color there would be helpful.
Absolutely and so we get through that spell.
Spending.
The 21 and to the 22 cycle, we believe as we get towards the end of 22, and we're going to see cost savings or both from and efficiency.
Of data reconciliation account opening processes.
The other.
Legacy technologies that were part of business units, but a replicated by the core technologies that invest net has created.
So as we get through the day spend we believe that will be able to accelerate our EBIT growth, but we've got we've got to make the investments to get to that place, where we're leaving class and the industry, where powerful from a data recommendation and insights standpoint, we are open from and API standpoint, though all those.
III categories will be industry, leading and transforming and at that point in time and we also recognize that there will be significant course cost savings that will be able to.
I'm, sorry significant cost leverage that we will created and our in our business.
Okay. Thanks, I appreciate the color.
Thank you.
Thank you. Our next question has come from the line of Ryan Valley of Goldman Sachs. Please proceed with your questions.
Hi, Brian and.
And I hope you do good thanks.
So I was hoping you could come back to the comments on some of the asset base feeds and the shift of some.
And the assets that are and subscriptions here and.
And do you feel about the theory is turning them now because of that debate solutions and the exchanges.
And that was my first question and Sneaky and the second one.
And how how will you be accounting for.
Subscription based accounts, but that are also using some of your acerbate solutions and exchanges.
So I'll ask for the second one first I lost a word there when you said.
Something about the fee right are we Tony.
Each question, it's inflicting if it was and blood flow journey.
Yes. Thank you.
He was like a voice much so I thought it said toning too and I pictured our fee right working out.
And so that it can be.
So yeah, we're on an account moves too and.
M a.
It moves out of the subscription bucket into the Ohmae bucket. So so there's no double counting of accounts for for that sort of and yep and.
And 70 rate is going to depend on the on the assets yeah. It just depends on the asset mix, but there will be incremental fee benefit late on to lower basis point accounts, if that makes sense too. So if a if a rep and advisor managed portfolio and which we get paid.
They're very low basis points and our subscription rates.
Into the tax overlay well, that's a 12 12 to 15 basis points capability right. So that will be.
12 to 15 basis points on those assets, because and we're going to do that on and on and we were providing the tax overlay on an ongoing basis.
So so we believe that the incremental fee right.
As as.
As were successful and identifying the opportunities a cat and a captive market today and begin to penetrate that we believe that will have an uptick and our overall fee right.
The range of fees.
That are in the solution set or the use case set that we're identifying kind of out of the gate range from 10 basis points to 40 basis points on the solutions that that are going to fall within the window of our data analysis, and and and kind of identifying accounts for.
For additional services.
Got it thank you.
Yep. Thank you.
Thank you and our next questions come from the line of Christopher Piper.
Piper Sandal. Please proceed with your questions.
How are you crazy good at.
Hey, guys. Thanks.
Thanks for taking my question.
Wanted to ask and there'll just a follow up on the last one for talking about the 10 to 40 basis points.
Of uplift from the good analysis and I look at slide eight.
And maybe and mix and some apples and oranges here, but.
And maybe I should be talking about the fee rate Coning here, we're looking at that for eight trillion captive addressable market and then the 500 million incremental revenue opportunity.
Mm calculated and that's only one basis point on there.
And I'm, just trying to square like and if you have yeah.
Yeah and I've been.
Happy to so so we have taken.
So this is the time period of our investment and when we've spoken to investors about how we believe we can drive incremental revenue.
And and revenue growth. So over this window of time, we believe there's a penetration rate that we're making an assumption of that's pretty conservative and and.
We blend that out we believe that that it's $500 million incremental annual.
Recurring revenue.
Revenue incremental revenue opportunity that we see and we think is and very achievable from from.
From a penetration rate.
So so really just looking at a penetration rate that is reasonably conservative and then we blended at all the products and said Hey, we think we can get here and with our data recommendation and and recommendations going from $10 million. A day. This year later this year to over $1 billion. During this period of time.
I think we feel very good about the objective that we've kind of presented.
Okay, and then for your go to market strategy and I'm, just curious as I looked at your your for sorry for eight trillion yet.
The majority of that's and licensing is there a different strategy.
As you go after assets, whether they're under administration under management or licensing or is it.
Similar sort of tap on the shoulder.
Seven day.
And Ah.
It is a great new on that you are picking up on most.
A lot of our advised already have access to all our fiduciary sweet are solutions and sweet.
And.
As I mentioned and the script I think my exact sentence said something like we are working to make all solutions and all those exchanges available to all advisors. So there is some contracting there's some addendum work.
We will be working with our clients to to kind of.
Sign as we identify for them the captive addressable market sitting and their books for business and make that will incent them and say this is a very good idea I want the services helped me go get those assets, because they're sitting and their book of business today Chris.
Okay.
And that's a great. Thanks, though.
Alright, Chris.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next questions come from the line and Alex cramped with UBS. Please proceed with your question.
Oh, Hey, thanks, again, not to drag out the call, but had a quick follow up.
You made a comment at the big and they're prepared remark about.
Two second half 22.
Revenue contribution from some of your investments.
And I'm not sure if I heard this right, but was that pertaining to specific investment and or or is this is this for everything that you're doing because if some of the investment goes into marketing and.
I would hope that there is a payback a little bit quicker. So just just maybe clarify what you were talking about the second half 22 and why the timeline.
So again, it's it's a ramp it's not like a switch we turn on and turn off we've given and example of something that's in the market that will get distributed more broadly, but that won't happen immediately across the universe of existing clients that we have so we're basically giving ourselves.
Time to ramp some of these new initiatives to more broadly distribute them and we expect to really be seeing some more.
Meaningful revenue towards the second half and into 2023.
And Alex said just to add this is bill.
We anticipate that the activity on the platform will continue to be.
The activity that we've been experiencing and the last quarters will continue and will continue to to kind of drive are are double digit growth.
Growth rate.
Where I believe we were confident that we can the incremental opportunity that we're going to be able to penetrate and and accelerated significant enough.
Right to have it.
And impact on the growth rate will begin to really evidence itself from the second half of next year that said.
We're going to provide kpis and other other data points to show to help investors understand the progress, we're making and continue to create.
To create from transparency around again the usage of these products solutions the number of data recommendations and click through rate on those and then.
Ultimately.
The revenue that that activity is driving.
Okay now think that's thanks for clarifying.
Yep Thanks, Alex.
Thank you there and help further questions at this time I would like to turn the call back over to Bill credit for any closing remarks.
Yeah, I just want to thank everybody for joining really appreciate the questions very much.
Two one and just make a note to thank the investment team for the extraordinary work that they've been doing.
Just just extraordinary and I am looking forward to connecting with everybody at the Investor Day meeting in June. So we're really looking forward to that thank you again for your support and have a very good evening. Thank you.
Thank you for your participation. This does conclude today's teleconference. You may disconnect the line, but this time and.
Have a great evening.
Okay.