Q4 2021 Envestnet Inc Earnings Call
Greetings and welcome to the investment fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is.
Is being recorded I would now like to turn the conference over to your host Mr. Brian Shipman.
Of Investor Relations. Please go ahead Sir.
Good afternoon, everyone.
Thank you for joining us on todays fourth quarter and full year 2021 earnings call.
Before we begin I would like to point out that our earnings press release supplemental presentation and associated Form 10-K can be found under the Investor Relations section of our website at <unk> net dot com.
This call is being webcast live and a replay will be available for one month on our website.
During the call we will be discussing certain forward looking information. This information is based on our current expectations and is not a guarantee of future performance.
Encourage you to review the cautionary statement on slides two and three for potential risks uncertainties and other factors that could cause actual results to differ from those expressed by the forward looking statements further.
Further information can be found in our regular SEC filings.
During this call we will be referring to certain non-GAAP financial measures. Please refer to our appendix in our presentation for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures.
The presentation is also posted to the invest net investor relations website.
Joining me on today's call are Bill Krager invest <unk>, Chief Executive Officer, and Pete Darrigo, The company's Chief Financial Officer.
Bill and Pete will provide a company update as well as an overview of the company's fourth quarter and full year 2021 results.
After our prepared remarks, we will open the call to questions during.
During the Q&A. Please limit yourself to one question plus one follow up you may get back into the queue. If you have additional questions.
With that I'll turn the call over to Bill.
Thank you, Brian I want to thank everybody for joining us today I'm excited to report our fourth quarter and 2021 full year results.
Last year at this time, we introduced the strategy to deliver on our vision that investment is uniquely positioned to achieve we have a formidable market position and are tightly connecting our industry, leading capabilities, which is a distinct competitive advantage that investment will leverage for sustained growth and profitability.
Over the years ahead.
We're executing on the plan, we introduced last year and the results we posted speak to the significant progress that we're making.
I'd like to call out a few tangible achievements for 2021 first we doubled our net asset flow in M&A to $54 billion, excluding conversions as we began to focus on opportunities in our current account base. We also advanced digital connectivity to our clients.
Delivering 11 million insight today that enable our advisors to take actionable steps based on their clients' unique needs. We also signed with 291, new firms alright, as banks Fintech companies enterprises and embedded environments connect.
<unk> them to the power of the investment ecosystem we.
We made impressive progress last year and as we look ahead, we are on track to deliver accelerated revenue growth and hit the $2 billion in revenue, we forecasted by 2025.
We're also on track to generate $1 billion inside today for our network by 2026.
Lastly on track to deliver a modernized connected digital environment that uses data to scale, a fuller range of financial wellness capabilities.
Our guidance as we look ahead.
Flex the relevance of our strategy and the rigor and focus on execution that we've applied.
The pieces are in place we have strong momentum and we are delivering people will provide thoughts on 2022 in a moment.
But as you know we've been speaking about our growth strategy for the last several quarters and I want to share with you how we're doing.
First we are capturing more of the addressable market with over 108000 financial advisors that manage five seven trillion dollars in assets on our platform. We've been focused on going deeper or process is powerful we are able to pinpoint opportunities for advisers to introduce.
Value added services to their clients and they are having success engaging with them here's what I mean by this I mentioned earlier that we had doubled our net flows year over year.
And within these net flows the mix coming from assets under management was much higher last year at 70% up from 49% the year prior.
This wasn't an intentional concerted effort for us.
AUM flows typically generate higher fee rates for the higher value services that we provide and have a positive revenue growth benefit.
Within AUM flows are personalized investing capabilities continue to grow at an accelerated clip, reaching $61 billion in total assets under management.
This is happening across the board with these services for instance assets utilizing our overlay services grew by 57% last year. The number of advisers using direct indexing solutions expanded by more than 50% in.
Inflows in our sustainable investing strategies doubled year over year.
Early results are encouraging, but what's more important is that the structure and approach. We have put in place is highly leverage level and we believe will drive accelerated success in the quarters that lie ahead.
Next we've been focused on modernizing the digital engagement marketplace, providing our clients with a full set of market leading technology.
2022 is a year of execution for US you see we are moving from build mode to delivery mode on several key initiatives, we've already gotten started.
Our next generation proposal tool is rolling out to our clients and today more than 1200 firms have access to it this tool creates greater productivity for the advisor while connecting them to the broader set of investment solutions.
We have developed a new best in class client portal and the feedback from early users has been nothing short of extraordinary we're beginning phased rollouts of this client portal this coming April .
Also invest net is driving scaled connectivity for our clients Yodlee U S. Open banking Apis went live mid year last year and in a very short time, we've enabled many of our largest clients to connect better with their clients. We're projecting by year end 2022, we will manage <unk>.
80% of Yodlee data request through these Apis. This modernizes the data offering enables us to add value in new ways to these clients.
And finally, the last pillar of our growth strategy. We are opening our platform to the ecosystem. The invest in that marketplace is extremely valuable digital real estate and by connecting more and more solution providers, we centralize and we concentrate industry experience and drive more benefits for our.
Clients.
Here's some examples.
The developer portal makes it easier for our fintech clients to onboard and integrate their solutions over the last two years, we have seen usage in this portal up over 80 fold.
We launched last year API developer environments for both all of invest net and for money guide.
Our clients are using these environments to customize their investment experience and importantly, third parties can directly connect their offerings to the ecosystem, resulting in more options for our clients. What's coming ahead is even more exciting.
This year, we will combine all of our developer portals into a unified experience, creating a single entry point to the entirety of the invest net ecosystem. This breaks new ground for our industry and is a one of a kind for our marketplace.
And then finally, we're growing the number of solutions on our platform. We continue to expand the choices that clients have we've announced partnerships with UBS and <unk> capital.
For a full suite of alternative investments, we've partnered with yield ex for greater fixed income solutions and we've partnered with Simon for Commission based annuity products as well as structured notes each of these builds upon our market leading platform of solutions that invest net offers our clients.
We're executing on our strategy and by pulling the pieces of investment together, we are aligning and enabling the future for our clients. One recently, noting to me you aren't just hitting the bullseye you on the exact center of the Bullseye for us.
This is great news and tremendous progress, but we are not taking our foot off the gas.
I'm very excited about the year ahead for investment let me highlight some of the capabilities that you will hear more and more about over the quarters ahead.
Our data and analytics business is helping our clients more deeply engage the 30 million small business owners in the U S by building a powerful aggregated environment for Smbs to connect the disconnected parts of their business. This is a huge opportunity for our data business that we're very excited about.
Our cloud based data management solution aggregates reconciles enriches and publishes data for our clients. It provides data insights from recommendation.
Power's Nexgen business intelligence and fuels all of our networks technology capabilities Youll hear us talking more and more about this offering over the rest of this year.
At the advisor summit, which we will be hosting in person. This coming may you will see how all of these parts come together into an exciting multi dimensional experience for our marketplace connecting from end consumer to the adviser to the advisors business to the home office and enterprises.
As to the network of solution providers that our ecosystem offers networking all of investment and our partners into our fluid Leverages <unk> engine that powers, the future and the future is the intelligent financial life.
We are using our market position and our full range of capabilities to grow our footprint and serve our clients more deeply as we drive faster growth and ultimately drive more profitability for our business.
Now, let me hand, it over to Pete who will take you through our financial results and our outlook for 2022.
Thank you Bill and good afternoon, everyone. Our fourth quarter results continued to demonstrate the strengths in our business model. We expect the momentum from the last few months of 2020 wanted to carry through into 2022.
Adjusted revenues for the fourth quarter of 2021 grew 21% to $320 million.
Compared to the fourth quarter of 2020, adjusted EBITDA was $56 million slightly ahead of our guidance range and this reflects the expected progression of investments we announced last February .
Adjusted earnings per share for the quarter was 50.
Our complete guidance as laid out in the earnings release and in the earnings supplemental presentation, but I want to highlight a couple of items.
2022, we expect adjusted revenues to be between $1 $360 million and $1 $385 million up approximately 15% to 17% compared to 2021.
Adjusted EBITDA is expected to be between 270 and $280 million.
Consistent with our past practice, our guidance is based on asset levels as of year end 2021.
Most sell side analysts current published estimates include contribution to revenue and EBITDA as a result of market appreciation for.
For clarity on a like for like basis, our guidance is in line with consensus.
Adding some detail about our revenue outlook for 2022 first our wealth business performed well in 2021 as Bill mentioned record net flows during the year are a substantial driver of organic growth and the revenue from these assets will contribute a full year benefit in 2022.
Second our subscription business continues to grow steadily in both segments with accelerating recurring revenue growth in the data and analytics segment from around 2% in 2021 into the high single digits in 2022.
For expenses pandemic related circumstances again suppressed our 2021 adjusted operating expenses, which we believe is unsustainable longer term around $15 million to $20 million of operating expense favorability compared to pre pandemic levels can be attributed solely to an operating environment that <unk>.
Limited travel in person adviser and client support and other activities.
This is important context as we consider our outlook for 2022.
We are actively managing our expenses as we are moving into the second year of our accelerated investment initiatives among the areas on which we are focused.
Our first what I would call normal expense growth to support the needs of the business today, including supporting additional customer activity as the business grows.
Second a partial restoration of normal spending levels that we experienced prior to the pandemic for certain items in this category, we've assumed a broad resumption of business activity over the course of 2022, but still at levels below where they were in 2019, including for example, the return of an in person advisor summit.
Finally, we continue to anticipate the accelerated investments announced last year.
To have a full year impact of $45 million to $50 million as we have discussed on the past several earnings calls, which will affect adjusted operating expenses by $15 million to $20 million year over year.
These expenses are primarily what is driving the progress Bill mentioned and laying the foundation for extended revenue growth and profitability.
In the first quarter, we expect to have the full amount incorporated into our expense structure and this will be the low point for our EBITDA margin, we expect sequential quarterly EBITDA growth and margin as we turned the corner in 2022 accelerating into 2023.
As we move through 2022, these components will become less separable, becoming the core of our expense base. We are focused on maintaining reasonable expense growth relative to our revenue growth going forward.
Briefly on the balance sheet, we ended December with approximately $430 million in cash and debt of $850 million, making our net leverage ratio at the end of December about one six times EBITDA.
Thank you again for your support of investment.
And Bill has some closing remarks.
Thank you Pete we.
We have clearly made a lot of progress and we are enthusiastic about where it is leading.
We're enthusiastic about what our work means for our clients and for our business.
The work we have done is important and exceptional and we will have a meaningful impact in the quarters ahead.
But today is a day, where I think all of US are struck by the uncertainty of our world today.
Today is another reminder, that life shifts and disruptive ways.
Stasis cannot be the assumed state conditions change on Sundays for unimaginable reasons, the risks flash brighter and glare may compromise, how you see opportunity.
I would think many of you are fueling some sense of this today.
And so are millions and millions of others, who now suddenly have a deeper sense of insecurity.
In a meaningful way this connects to the work, we do and the purpose that drives us.
And security is felt when things happen outside People's control.
And one of those things should not be the money that people have.
Our work is breaking down the walls of a person's financial life, creating greater clarity much greater control in EMEA and yielding far greater value from the money that they have.
This drives a stronger sense of personal security and enables people to better weather the uncertainty that the world will inevitably cause.
It doesn't solve the things outside of People's control, but the work that we do helps our clients put more within a person's grasp that is valuable and it is essential.
We are focused on delivering this to more and more people.
The invest net team.
This is the purpose that drives us.
It is important value for our clients it drives important value and security for their clients and it creates increasing value for our shareholders.
Our thoughts and prayers today are with the people of Ukraine.
I will now turn the call back to Hector.
Who will moderate your question Hector.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.
One moment, please while we poll for questions.
Our first question comes from Devin Ryan with JMP Securities. Please proceed with your question.
Okay great.
Afternoon, Bill and Pete how are you.
Good Devin how are you doing looking forward to seeing you doing.
Yeah, you as well doing great I guess first in the queue here and I'm sure. This will come up.
Not sure. If you guys can shed any light or perspective on some of the recent press articles just around private equity interest in the firm in a painful process that's underway.
Even if you can't get into any details how sits.
Situations like that might affect strategy or.
Kind of the next year or two for the firm.
Thanks Devin.
Just our policy and <unk> been very consistent about not commenting on what's in the media or any rumors or speculations that are that are out there.
<unk>.
I know there has been a spate of articles, but but.
At the end of the day I'm not going to comment on any speculation.
We are hopefully it's clear in what.
Our prepared remarks stated about how focused we are.
We are really.
<unk> been working hard to align the organization behind the strategy that gives our company a sustained competitive advantage and man we are making progress.
And we have our head down on that very focused on making that.
That progress.
The key now is really to connect our strategy to our clients. So that they are receiving the benefit of all of investment networking more and more to more of the industry partners that we have and making sure the industry understands as a whole the important work that we're doing and how it meaningfully.
<unk> the stage for the value of advice going forward.
We're making investments and making sure that those investments are yielding progress and they are booked.
But I'm dead focused on that and at the end of the day all of that is going to lead to something that we we lead off the call last February with was we want to drive faster sustained faster revenue growth that has a lot of leverage and can drive more profitability for the business that is what I'm focused on period.
Yep got it well thanks for that.
Jimmy There and then.
I guess, a follow up and I guess.
The last point just made bill I mean, so seeing some nice flow momentum in the fourth quarter and I know the expectation is that over time, that's going to accelerate based on the investments.
Just to unpack that a little bit you gave a little bit of detail in the prepared remarks around.
Some of the drivers of the strong flows, but maybe just to kind of dig a little bit deeper was there any seasonal benefits in there or anything else that.
It may not necessarily recur and then just remind us on impact of market volatility. You'll clearly this year has started on a much more volatile note than we saw throughout all of last year. So just any early indications from that as well.
Orion.
Sure you've followed the market today today, if today's an indication right.
So.
No theres no seasonality and that what that what that reflects is a concerted focused effort of ours.
And as we talked about this last February we understood very well that there was a significant opportunity for our business in the five seven trillion that we serve and the millions of accounts that we serve and what we needed to do was get that focus apply our data analytics.
Tool to our account base, so that we can pin point.
Exact opportunities for advisers to add value to their clients and so we organized around that the resources that are super focus to make sure that we're connecting those insights to advisors, who are connecting that to their clients and you're seeing the results early results of that effort around a few use.
And I spotlight some of the growth rates in our our overlay business, our direct index business.
As well as in our impact and sustainable.
Asset will expand those use cases, utilizing our recommendations and the apparatus that we've put in place to drive more and more penetration of the current addressable market. That's like one Devin what I am get excited about now is that as we're introducing some of the modernized technology.
Into the market and we've got.
Our proposal tool that's reached the desktops over 200 firms, who those 1200 firms have thousands of advisers, so where we're touching a big.
Group with the industry now with an essential piece of technology that <unk> got the client portal you have the trading tools you have other capabilities that are that are making their way to market. What we will begin to see what will have anecdotal evidence of at the end of the year and then into 'twenty. Three we will see begin to see the early results of.
Is our subsidiary our subs growth rate.
And really driving our technology into the market and driving growth in the subs and I call. It the old one two punch.
One is the M&A number two is going to be the subscription revenue that we'll be able to generate and so I think we're setting ourselves up for a pretty sustained environment in which we're able to drive accelerated growth.
Terrific.
Devin I'll hit the sensitivity on the market because I know thats going to be a question, especially given today.
When we.
Think about this.
Illustrative really the.
Impact on our assets relative to the broader equity markets is about.
60%.
So it might be a little higher might be a little lower but if you just use that as a proxy for the exposure to the equity markets.
And assume that on March 31.
Markets were 5% lower than they were on December 31.
So again, our guidance assumes December 31 asset levels with no market impact over the course of the year. If you assume they drop the market's dropped 5%.
The the.
Impact on our assets would be about 3%.
And our impact the impact on our 2022 revenue would be right around $17 million.
And the EBITA impact again, using the ratio of asset based cost of revenue to asset based revenue Q4 was about 57% that would translate to about seven or $8 million of EBITDA impact. So the cost of revenue is variable along with the revenue.
That would be the difference between the two.
Okay terrific well I appreciate the color Pete and bill Thanks for the update as well good to see the momentum.
Thanks, Kevin and we will see in a couple of weeks.
Our next question comes from Surinder <unk> with Jefferies. Please proceed with your question.
Yes.
Surrender.
Hey, guys.
Congratulations on what looks like pretty good for Q numbers.
My question is about the guidance itself can you break the guidance down into its organic growth components in terms of what youre thinking for the wealth solutions business on the on the fee based side.
You are thinking for wealth solutions on maybe the subscription licensing.
And then the data and analytics.
And then any color on the <unk> number for subscription licensing it seems to be down pretty meaningfully quarter over quarter.
Okay.
Well, let's let's.
Let's answer the first one first.
So if you break the two segments down the.
The wealth business is growing a little faster than our overall, so but not a lot.
I would say that's going to be maybe if we said 15 to 17 for the whole business, maybe 16 to 18 for the for the wealth business and then kind of high single digits.
On the overall revenue growth in the data and analytics segment.
So call it six to eight in that range.
And then the second question was about subs.
Certainly.
Didn't follow your second question I'm, sorry around though unless I'm misreading the guidance and I apologize I was going through the numbers really quickly.
The guidance for <unk> subscription licensing.
It seems to be down quarter over quarter versus <unk> and by like $4 billion or so $3 million to $4 million any color on that.
We'll take this one offline we'll follow up turning to Alpha will follow up with that doesn't that doesn't jive.
Okay.
We'll follow up with you my apologies.
And then in terms of just <unk>.
Strategically obviously the emphasis has been on the fee based business I've noticed over the last two years the.
To reclassify <unk> is kind of between subscription be going from the fee based business too.
Subscription.
Scripts and licensing businesses.
Lower than its been prior years.
Any color on that is that is that our strategic shift that you guys have made in terms of dissuading clients for making a switch, especially given how large the market moves have been if we were to compare market levels from two years ago.
No.
<unk>.
We have.
We have utilized what we are what we went through a process.
Who is taking a pretty large sum of assets.
Over time.
The marketplace had transitioned from a an.
In asset based product like rep, as pm and or some of our pro forma performance reporting capabilities into more of a subs based offering and we.
We're converting those clients are transitioning those clients to more of a <unk>.
More of a sub base.
For those solutions, I think where the opportunity fits well move clients more no sub base for those types of offerings preserving assets asset based pricing for the for the more value added value added services building on from the UN may up to things like our overlays.
And.
Direct index product as well as our our sustainable platform.
But there's there's mixed there I think its episodic in that.
Sometimes its client discussion, maybe a contract's up for renegotiation, but really what were pushing our clients to a place where.
When.
When there is a technology tool that's driving the majority of the function. We wanted to be in a sub category and then when we are using our fiduciary infrastructure to help them make decisions, we're charging a fee basis.
Got it Okay, and then I apologize.
Double check the numbers here just for <unk>. It says on your guide and your press release subscription based revenues are going to be in the range of $1 14 to $1 $15 million on a non-GAAP basis.
And then when I look at the reported number this quarter. It is $118 million, so it's going to be down $3 million to $4 million quarter over quarter for subscription based revenues.
Yes surrender, we'll take that offline with you okay. Okay.
Our next.
<unk> comes from Michael Young with Truest Securities. Please proceed with your question.
Hey, Michael.
Hey, How's it going.
Good how are you.
And doing just fine. Thanks for taking the question wanted to start with kind of the shift in the growth and then I guess, the only or the data analytics business can you talk about kind of what the drivers are that are moving that up from kind of that 2% growth back.
Back to the more decent kind of growth trajectory at high single digits and then as.
A follow up just if we can think about sort of the EBITDA margin profile of those incremental revenues is that accretive or significantly accretive to the overall margin.
Yes, Michael So as you know.
The Yodlee business has been something that we've been working hard to two.
Really vitalize and to restore.
Growth in that business, it's been several quarters.
That we've been working hard to do it kudos to our our <unk> team as we believe that we've got.
Building momentum in that business and I'm very encouraged by it a couple of dynamics to take note of.
Continued.
To be very competitive in the data AG space, whether that's on the on the Fintech side or it's on the on the financial institution side of the business. We have been very purposefully, bringing down our professional services revenue and pretty much have worked through that.
That that decline in revenue doing that to create more agility more usage out of our.
Developer kit, so that we're not charging PFS and it's much easier to deploy the yodlee product too big and small clients. So that's been a purposeful revenue decline. There was there was a bit of a hiatus in.
Foreign or international revenue, mostly created by the open banking rules in Australia and in the UK.
They have restored and our growing pretty well today and then finally.
In the analytics business.
That debt on the hedge fund side on the asset manager side, we're seeing kind of.
Restored growth interest in that marketplace, we're supplying some tremendous firms who are using that data.
Bringing that data to the market so.
As our reseller partners, there and as well as contracts that we're winning.
In that in that space, So Michael long and short of it is we've been hard at work to kind of get all of those kind.
Kind of leverage points for the business are working in the right direction.
We've turned a corner and I'm pretty enthusiastic about what lies ahead for that business from a cost standpoint, we're investing here.
And we believe that there is tremendous opportunity in certain areas underserved areas.
Of the business that are pure data platform like Yodlee.
Can serve much more.
Consider very effectively I noted the SMB offering.
Small business offering.
It's very exciting product that will make its way to market in the second half of 2022 some investment.
To get that into market and make sure that we're properly distributed that that is going to be a really useful tool for.
Commercial lenders large banks as well as our advisors who serve.
Lot of small business owners by helping them pull their business lives together and also on the analytic side.
Seeing expansion from the asset manager space too.
Policy areas as well as AD tech and making some investments to enhance continue to invest in the dataset, adding data to the existing yodlee data to make that data set even more competitive in the marketplace. So well.
It will be still be a very large EBITDA contributor they're investments that we're making there.
Okay. Thanks for that.
Yes.
Sorry, Michael Yes, it's a good question on margins. It has higher margin as bill is talking about I mean, there. It is not without cost we do have costs that support the platform as more activity goes through but it is it is.
Closer to software Tech type margins as opposed to some of the asset base, which carries higher levels of variable cost of revenue.
Thanks, Dave appreciate the cleanup there on that one and then.
I guess my other question would just be you've been more open in talking about potential monetization or partial monetization of that business just sort of curious philosophically.
Something like that were to come about.
What would you do with that extra cash in capital or are there specific projects or things that you would put that towards on the wealth side or would that be more of a return to shareholders. Just any thoughts you have there would be helpful.
Yes, Thank you Michael.
We've been really heads down and very very focused on getting that business to restore its begin it would risk towards growth and we're going to let that run a little bit because I believe that creates.
Tremendous value in the meantime, we've been threading more and more our data.
Set in throughout our wealth environment, and it's powering some amazing things.
We made $11 million.
Inside some recommendations that we shared with our our advisor set a day as we ended last year and we're on our way to $1 billion.
That is a unique competitive offering that is going to get smarter and more powerful and drive more productivity across the board for us.
Some of that some of that IP or some of the brain share.
And our ability to do that comes from the Yodlee business, We've just kind of cross bred at now across the organization.
We're using the data to power some nexgen business intelligence and then the data is also powering some incredible fin apps, whether it's our money guy blocks or a cash flow apps or financial planning or a whole host of other capabilities.
We spent the time not only to get restored the growth rate in the Yodlee business, we've been using that dataset to power more and more of the wealth.
Environment.
All that said, we've maintained and we continue to manage that business and a separate a bold way.
Strategically it made sense for our business.
To contemplate that.
So that's kind of where we're at and I think it's it's really such a hypothesis at the moment as to what we would do with the capital.
I don't I really wouldn't comment much much further than what I've said.
Yes.
Okay I appreciate all the color. Thanks.
Our next question comes from Ryan Bailey with Goldman Sachs. Please proceed with your question.
Hi, good afternoon, everyone.
We were about a year and since you announced the investments needed for the intelligent financial life I think beyond the benefit to investments revenues I think you have a vision that it could impact the entire wealth management industry. So I guess given how important. This is do you feel as anything Thats held you back over the past year from executing on the strategy Foster a bigger one.
Better than you've done.
No Ryan I mean.
We kind of had a running start at it is we got going last year and I'm really pleased with the progress, we're making and I would encourage.
Investors analysts to join us in Charlotte in May because.
What we'll be able to what we'll be introducing to the marketplace then is.
Really.
The vision and how it's coming to life in really.
I think in the.
My prepared remarks I called it.
<unk> dimensional environment and it truly is.
It is it is creating more and more intelligence and insight to help.
People make more sense of their money.
I've been working on.
Another edition of the White paper.
And I referred to.
The.
Money as the technology.
And inefficient technologies are disrupted that's what our industry is going to do is going to disrupt the way money has been kind of managed an experienced by people and connected in powerful ways. We're at the tip of the spear there and we are we have leaned into making it happen I'm really pleased with the progress we're making more to do.
<unk>.
But again I encourage people to join us in Charlotte and May if you. If you can as we get back together in person for our annual advisor summit, because because I think.
Youll get a very good understanding of how these pieces are driving that vision that we stated last year, it's coming to life.
Got it that's really helpful and just maybe a better question Im sure, but im sure Youll have an opinion sir.
All the data and analytics business, if you had more flexibility.
To invest more aggressively in that business.
Just given kind of what.
The industry competitiveness of being able to do that.
<unk> had to focus as much on margins what do you think you would have tackled.
Or what would you be tackling there if you could invest more aggressively.
On the on the data analytics business, particularly Ryan.
Yes, yes, yes, yes.
We've really.
Tom.
A tremendous way in the quality of data that we are able to share with our clients and how they are using their clients to drive value for their investors.
And then we're powering.
Some of the prominent.
<unk>.
Firms that are <unk>.
Driving analytics to the same marketplace.
And the power of those analytics are improving all the time.
Where we're headed.
And what we see an opportunity and as a couple of other areas around analytics one is in the.
In the policy area.
Every municipality every state every government agency.
Wants to think about people and what people are doing with their money and how.
People are earning and how they're earning their money you get a really great macro view of how the economy is.
Growing and how the economy is evolving and it's incredibly valuable analytics. So we're working on developing a product there have partners that will take that product into the market.
Ed Tech with cookies.
The other kind of.
Hurdles.
That have been in regulation that is put them put in place around web usage and the sharing of data.
There is a.
AD Tech.
Is it struggling to kind of put the pieces together as well as they used to we can add a perspective for.
For some of these consumer companies on how they are messaging is how effective their messaging is hitting the market that theyre trying to trying to reach and so that's an opportunity for us the last one.
Is around Reg Tech and just helping from an analytics standpoint, our clients understand.
Some of the details on a continual basis around the regulations that they need to adhere to.
Got it thank you for the color Bill.
Yes.
Our next question comes from Chris Donat with Piper Sandler. Please proceed with your question.
Hi, Christopher.
Hey, guys good afternoon.
Wanted to go.
The 2022 guidance with with peak and.
Just making sure I'm understanding what's going on with the growth in asset based revenue that's implied if I look at the first quarter revenue number and then the out.
The full year number and basically back into what the second quarter third quarter fourth quarter it could be.
As I think about the growth in asset based revenue that's implied for the remainder of 2020, Q is that more balances or fees or a combination.
I'm, just trying to get my arms around it.
Yes, it's more of the same that we saw in 2021, so a higher asset levels based on flows.
And those flows weighted more heavily toward AUM business, which carries higher fees. So I think over the course of the year, we would expect to see higher flows in.
Not dramatically different but a slight increase in the fee rate quarter to quarter.
Yes.
Okay.
That makes sense and then just also then backing into the.
The implied expenses.
From a revenue and EBITDA.
It looks like that should be somewhat steady state for future quarters.
And I'm doing the math right there and then it looks like.
The implied.
So it will be similar also tried to kind of talk about that a little bit in the prepared remarks, but the.
The first quarter should be the low point in terms of EBITA margin when you think about it that way.
So we <unk>.
Should start to see the revenue growth.
Next market outpace expense growth.
And so we'll see that ramp okay.
More like we saw before Covid go back to maybe 2019 and look at the progression we had over the course of those years, we always had Q1, a little bit lower in Q4, a little bit higher and I think we're kind of back on expecting to be more on that trend.
Okay got it and you had mentioned you're like sort of a partial recovery.
<unk> expense elements too so.
Theres still might as we think about 2023.
Still some embedded.
Expenses.
That will likely go higher just assuming the world gets more <unk>.
Normal if you will.
Yep.
Yes, okay. Thanks, very much out in 2023, but I think we're going to see margins accelerate through 'twenty two into 'twenty three yes, yes, yes, that's our intention Chris yes, yes.
Yes.
Yes, 2022 at a higher rate than you began 2020 jobs.
Correct.
Got you okay. Thanks very much.
Our next question comes from Alex Kramm with UBS. Please proceed with your question.
Hey, everyone.
My question May have the same subtext of some of the questions before but I'm going to I'm going to add.
And so I ask it anyways.
I think bill like a year ago. When you rolled out this investment plan I think basically told you on this call that you're acting like a private company and not a.
Public company B given that your question your EBITDA margins.
For a few years, so I guess again asking.
Something that was asked somewhat before but if.
If we imagine you were a private company.
Do you see opportunities, where you say, okay. If I had an open checkbook for two three years I could really go after things I haven't.
It can't go up after right now because I am a public company so.
Would you be more excited than free to do things in your opinion.
Just as a public company you just don't feel you can right now.
Thanks, Alex Hope you're doing well.
<unk>.
Not going to speculate on rumors that are out there but.
No I am.
We are very leaned in and we've made I think.
Very good use of our capital.
In an interim period of time to create tremendous value and.
I think it was an important step for the company because what it really does is it solidifies.
Incredibly sustainable competitive distinction for our company.
And.
Alex you've known us for a long time.
But here are the areas that competitively invest net.
Delivers to our clients that no. Other firm can we have this tremendously deep data heritage and data set that we're creating.
More and more intelligent insights for our network to take advantage of.
These actionable.
Opportunities that were presenting to them and theyre, taking advantage of it we're seeing and beginning to access it we have the number one leading market share in financial planning, we had the number one leading market share as a turnkey asset management platform, we have built out and extended the types of products that we put.
And our solutions platform.
So those are like.
Very significant ramp hearts.
Try to compete with investment what the capital did for US is accelerate our ability to bring them together, Alex and that has been kind of something we're down the path and what we made the decision is that we believe that by going faster. We can we can lock in.
This competitive distinction in the market and create sustained growth. It's early days still but I'm I'm Super pleased with the progress.
That we've made but where it's pointing us to.
And we've got a lot of work to do here and we've been really hard at work hopefully that that's pretty evident to everybody, but but.
The answer to me is there is never an open checkbook one number two.
Been really judicious about this incremental spend.
And there's one more dynamic if I could just highlighted that I think is important in this spend.
We are a center for R&D for our industry and the people that we've been recruiting have been very technology deep and very data deep.
Those are competitive resources today in this market and those resources are thrilled to be in invest net guests why because we are investing to grow behind our purpose full mission that can change a marketplace and create sustained growth for our business, we're doing exciting things here and so though.
Those same talent is there arent going to be the ones that are going to be able to put their hands up and say, they're going to work at the local or a midsized broker dealer no. They are coming to invest in it because we are re creating a future.
For our marketplace, and we become a kind of a concentrated or a centralized hub again the capital judiciously that we've invested has created that that force.
For us and.
So again.
I am head down on executing and thinking we're making very good progress there's more to come in.
No.
Just just just again believe that we're making a lot of progress here.
Fair enough thanks for the color.
Maybe just quick one for Pete and maybe this was asked as well but.
You mentioned, the <unk> kind of like coming back. This year can you actually give us a number in terms of how much relative to 2021 is going to be incremental spending on travel et cetera, and then maybe how much you would still be below let's say like nine 2019 normalized level or where you are.
Thank the company could go eventually go back to.
So I'm going to give you a directional numbers I don't want to be too specific about it but.
In 2019.
We probably spent between travel and lumped in the advisor summit in there.
High teens to maybe not quite $20 million.
This year were.
2020 , one we spent.
Virtually none of that in.
Travel and entertainment and.
The summit, which was canceled both years.
This year.
In total will be a little over half of that.
Maybe maybe 50% 60% in that range.
Okay. That's all I wanted to know fantastic. Thank you.
Thanks, Alex have a good evening.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, one moment, while we poll for more questions.
Our next question is a follow up from Michael Young with <unk> Securities. Please proceed with your question.
Hey, Michael.
Hey, Thanks for the follow up just wanted to ask.
I understand you're not going to comment on rumors and stuff in the marketplace, but if we just think generally about kind of what the playbook would be for a private equity buyer it would be something like coming in cutting costs and maybe even raising prices so just and.
Obviously, adding leverage to the balance sheet.
And the latter is not going to happen, but but of those former two are there any opportunities that you see within the business that you all can execute on in terms of particularly price increases.
Near term and then maybe medium term if anything we'd like the real estate footprint or other cost saving opportunities.
Yeah, Michael again.
Not referring to any way in any way to any of the stuff that's out there.
But I think we.
<unk>.
We have been.
Hard at work understanding a couple of things here number one is where our investment dollars are going and what we're going to get from it and we're pleased with that.
The progress that we're making we've also had.
Nearly two year period of Covid.
We're coming up on two years.
And which you have the ability to assess.
Sure.
Workplaces.
Kind of where you want to put your capital in what sort of environment you want to create for your employees. So so absolutely.
Considering our real estate footprint, we also.
Have been been Super focused on our go to market and how we're engaging and.
And engaging in the marketplace and changing the way that we market.
Out there and I think those are areas of investments that were leaned into and other traditional ways that we may be leaning back on would be things like workplaces.
In things like those so.
I don't know if one is more important in a private environment or a public environment, but.
As we've leaned into create this environment for faster growth for the company there has been a good a.
An exceptional amount of work done to how do we create the leverage and profitability that we think long term that this business can generate and that as we've said.
Last year, and Pete just kind of hit on it a little bit as we get to the end of 'twenty two 'twenty three three or intend to new start to drive bottom line growth.
In return for for investors.
Okay fair enough. Thanks for taking the follow up.
Yes, absolutely.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Mr. Bill Crager for closing remarks.
Thank you Hector.
I want to thank my investment colleagues for the extraordinary work that you do.
Thank you to all of you for joining Tonight and for your support of investment I look forward to speaking to everybody again next quarter. Thank you and have a good evening.
This concludes today's conference you may disconnect your lines at this time. Thank you all for your participation.
Okay.
[music].