Q1 2022 Envestnet Inc Earnings Call

Greetings and welcome to the Investor that first quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.

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 being recorded.

I'd now like to turn the call over to your host Mr. Brian Shipman head of Investor Relations. Please go ahead Sir.

Good afternoon, everyone.

Thank you for joining us on today's first quarter 2022 earnings call.

Before we begin I'd like to point out that our earnings press release supplemental presentation and associated Form 10-Q can be found under the Investor Relations section of our website and then best 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.

Information is based on our current expectations and is not a guarantee of future performance.

I encourage you to review the cautionary statements 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 information can also be found in our regular SEC filings.

During this call, we will be referring to certain non-GAAP financial measures.

Please refer to the 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.

Pete will provide a company update as well as an overview of the company's first quarter 2022 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 now turn the call over to Bill.

Thanks, So much Brian greetings, everyone and thank you for joining us today I hope everybody is good and everybody is healthy.

The first quarter of 2022 as a case study of win financial advice and access to financial information matters. The most.

Market volatility and geopolitical upheaval weighed on markets and on the minds of financial consumers this quarter like previous quarters. The volatility we saw advisors in the firms that we work with empowered to react and respond to the uncertainty with extraordinary agility given the technology.

And data driven solutions that are powered by investment.

Our clients are supporting.

Tens of millions of families who are navigating the challenges of inflationary pressures and.

And rising interest rates, but also the uncertainty of volatile markets.

What we do for our clients is really more critical than ever before these times underlined the importance of connecting people daily financial lives with their long term goals and this is something that investment is delivering today.

During the quarter I was able to spend much of my time on the road with clients and partners hearing how they view the future of financial services every company I spoke with is accelerating digital transformation. There is no mistaking the transformation that is coming.

And what was so gratifying really is that investment is delivering on it.

Our clients are focused first and foremost on meeting their customers' digital expectations.

You know consumers who access.

It'll experiences throughout their lives expect the same from their financial provider.

The digital expectations, coupled with the desire for more connected access and more connected insights.

Financial planning remains core, but it's shifting from a standalone offering to a fully integrated experience. This experience leads to answers that are executed to achieve a person's financial plan.

It's a breakthrough that each and every one of the clients I spoke with this quarter are looking for.

Data is at top most client priorities as well.

They know it is a large underutilized resource it should drive actionable insights to better serve their clients and use to scale their businesses much more effectively yet.

Most firms are challenged to do it they have data everywhere.

Really everywhere.

Useful but for most firms, it's just untapped our clients want help deriving value from this data and there are thousands of firms that lack the resources to deliver on these really important digital.

And data initiatives invest net is stepping in and we can solve this for them.

Another observation from my discussions this past quarter is that portfolio strategy and asset management is undergoing a rapid evolution to be far more comprehensive integrated and personalized than ever before.

The quarter's volatility highlights this.

The ability to reach further to connect the person's goals in the entirety of their financial life has a profound impact on how they experienced market periods like these and even.

Strong market experiences the personalization is what matters.

With inflation and rising rates, where there's someone who is planning for short term cash flows or with volatility investing for generations ahead. The importance of personalized strategy that can be created and manage at scale is something we keep hearing over and over again from our clients and <unk>.

In the past quarters as you know I've hit this point pretty frequently it is something that we are delivering.

At scale today.

The very deep conviction, we have about what we are doing comes from our clients. We are delivering for them today and we are more essential than ever before at the same time, we are introducing powerfully aligned data driven intelligence solutions that will serve them into the future we.

Have accelerated our investments to do this and being on the road being with clients. The feedback we have.

<unk> has been overwhelmingly positive frankly, it is validating and it is exciting.

This year, it's really that headline investment is delivering a uniquely scaled digital and data driven ecosystem to enable the industry to meet the rapidly evolving needs of the consumer.

Next week.

The investment advisor summit in Charlotte, North Carolina, I'm thrilled that we are hosting this premier industry event in person this year in Charlotte, we will lift the curtain on what we've been working.

On for the industry to see and some of the highlights are these.

The newly launched invest net client portal will be on display. This is a fully integrated data driven white labeled environment, our clients will deliver to their customers and as the game changing framework that connects all the parts of a consumer's financial life period.

Our data and analytics business will spotlight the upcoming launch of our cloud based data intelligence solution for wealth advisory firms. This offering will bring an enterprise's data together it will enrich empowered with new advanced analytics to help clients grow and to help them scale. We will also introduce tech.

<unk> that is specifically designed to help advisors build their businesses. This is the first of its kind and an indication of how the connected parts of investment are creating transformational progress for our clients.

Finally on display will be a host of exciting enhancements of our fiduciary offerings.

You've heard me speak about our direct indexing business before this has grown by 45% year over year, and we're continuing to innovate and expand our capabilities here.

At the summit, we will introduce personalized qp's. These are based on a person's financial goals and their preferences. We can create a portfolio for them individually built for them really for anyone in that portfolio evolves with the shifts in the market and a path to achieve their financial plan.

As you know direct indexing is a very hot space and asset management, there's lots of secular current behind it and this demonstrates how we are connecting data intact with our deep quantitative fiduciary team and our distribution to drive substantial growth.

Hopefully you can sense my excitement for next week really I can't wait to get there, but what's really great is that our team will showcase the exact implementation strategy. We've highlighted for you over these last quarters because it would be very evident that we are doing these things we are going deeper in our existing client base with value added.

<unk>, we are modernizing the digital marketplace and pave the way for the future and we are opening our ecosystem to more and more providers.

I wanted to just spotlight now a few results for you.

That I think are very important.

Our revenue is up 17% versus Q1 2021.

The assets, we serve is up 14, 5% year over year to $5 five trillion dollars.

The number of accounts, we serve is up 29% year over year in.

In the first quarter Investnet posted AUM and a net flows that were consistent with our quarterly average pace during the last several quarters, despite the marking to market conditions, we experienced.

And our annualized organic M&A growth in the quarter was 10%, which included importantly annualized organic assets under management growth of 14%.

Close into our value added services.

The stats that I just cited are near the end of this funnel.

From our five five trillion dollars that we serve today to now seeing real momentum in the execution of our pipeline and we are accelerating our progress we are using data insights today.

Broken about this in the past today, we generate more than $11 million of these a day to identify accounts that are opportunities for advisers to pursue.

We are growing the number of people focused on these insights and engaging with advisors on the appropriate solutions.

And wait until you see the technology, we will introduce next week this will surface client and business priorities for advisors on their desktops everyday and create far more streamlined workflows that advisers will soon have one click access to all of these offerings.

One last note I wanted to make sure I highlighted this quarter, we often talk about our technology in the context of how our clients are using it.

But as important is how investment uses that we serve more accounts and more assets, we process more trades and more service request than anyone in the wealth advisory business.

We do that across more than 20 different custodial trust environment, and we reconcile and post execution ready information for our clients before they log on every single morning.

We do this.

We do the same in our data business collecting more data for more data sources on more consumer accounts than anyone in the aggregation business.

Scale of investment I believe is very important to understand the.

A competitive assessment of our space should begin here.

We do more for our customers than anyone has ever done before and simultaneously. We are innovating. We are automating, we're streamlining and we are driving up customer satisfaction.

Five and better outcomes for their customers.

Laser focused on our strategy, we are validated and we are energized by the engagement. This past quarter offered us and we believe this will drive long term success, So the company and for all of our stakeholders.

With that let me turn the call over to Pete for his review of our first quarter results.

Thank you Bill and thank you everybody for joining the call. This afternoon picking up where bill left off the business today is operating more and more effectively the organizational work. We've done is yielding important productivity gains. An example is our technology output is up more than 30% this year.

Compared to last year.

This is allowing us to bring the data technology and solutions together across our company against tight timeframes with higher quality.

Our clients have noticed we are seeing these types of operating efficiencies across the company from data to wealth service to operations and so on it's driving the activity we are focused on going deeper.

Modernizing and opening the platforms up to the ecosystem.

At the same time of course, we are managing through market volatility and inflationary pressure. Many consumers are feeling our data shows how it's impacting people are analytics inside show that quarter over quarter discretionary spending by consumers was down 5%.

Which is higher than any other posts seasonal spending decrease over the last couple of years.

We also saw that over the quarter activity at our digital Fintech clients. This plateau them.

And in some cases beginning to pull back.

And the wealth business, we see how advisers R. Rebalancing I'm looking after their existing client base to better position them for market volatility.

Our technology has made it pretty turnkey for our clients to address these market turns across their businesses.

Our business is performing well given the push and pull of these dynamics and it is with this context, we provide our Q1 results and the basis for our guidance.

Adjusted revenue for the first quarter grew 17% year over year to $321 million. The wealth segment was modestly softer than we originally expected due mainly to the equity and fixed income markets, both sound greater than 5% for the quarter impacting revenue from accounts Bill monthly and build on <unk>.

Average daily balances throughout the quarter.

Revenue within the quarter was softer and the way we calculate are effective fee rate for the quarter was also lower since the revenue that was billed was build on these lower asset values than the asset values were at the beginning of the corner. So the effect of fee rate appears to be a little lower than we would have expected.

The data and analytics business also experienced the pressures of challenging macro trends in the economy and marketplace. As I mentioned, we saw the impact on our large <unk> in bank clients, who saw a decrease of user volumes.

As well as in our research business, which primarily serves asset management firms.

I just did EBITA was $55.7 million, reflecting the expected progression of expenses, we outlined on our call when February adjust.

Justin earnings per share was 47, two cents higher than our guidance for the quarter.

Before I go through the detail about our outlook for the remainder of 2022 I would like to add a little more context first our wealth business as I said performed well in the quarter, especially in light of the market environment. We saw continued strong gross and net flows largely consistent with last year's strong pace.

That said, we had anticipated an acceleration of flows.

As we look forward to the rest of the year a revised outlook does factor in the current market environment, including a more muted outlook for clothes through the rest of 2022.

Visors are focusing on making sure their clients current portfolios are best alive.

Second our subscription businesses continued to grow steadily in both segments.

Data and analytics made significant progress from a new product standpoint, a revised outlook for revenue growth. This year is a bit more modest given what we've seen in Q1.

As Bill mentioned the technology modernization efforts should begin to benefit our cost structure in the quarters and years ahead.

We're also actively managing are expensive and given the macro environment.

As we are moving into the second year, a R accelerated investment initiatives.

Reiterating the way we are approaching expenses first as normal expense growth to support the needs of the business today, including supporting additional customer activity as the business grows.

Second is a partial restoration of spending levels that we experienced prior to the pandemic for certain items such as travelling entertainment.

And 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.

All that said, we will be scrutinizing all of our spending activity.

Given the top line impact we are seeing in the business, resulting from the market. We are ensuring that we continue to manage our expenses.

Now 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 324 at 326 million showing growth of 12% to 13% compared to 2021 is it.

The business benefits from higher subscription based revenue somewhat offset by the market declines in the first quarter.

Adjusted EBITDA to be between 55, and a half and 56 and a half billion dollars as we anticipate the accelerated investments to continue to impact profitability on a comparative basis.

And adjusted EPS to be between 45, and 46 cents per share.

You will note an increase in professional services revenue in queue too as well as cost of revenue. Both of these items related to the advisor summit and are in the range of $5 million to $6 million each.

For the full year, we expect adjusted revenues to be between 1.330 billion and $1.340 billion.

12% to 13%.

Adjusted EBITDA to be between 255, and $260 million and adjusted EPS there'll be between $2.78 in $2.23.

The change in revenue guidance reflects the roughly $30 million impact from the market through March 31, with the remainder being a more conservative outlook.

Flows in the wealth business and lower utilization.

Data and analytics were consistent with what we experienced in the first quarter.

Our guidance is always does not assume any changes in the capital markets.

From the prior quarter and and is based on market levels as of March 31st.

On our EBITDA margin, we are still estimating that the first quarter was the low point and we expect adjusted EBITDA margins to improve in the second half of 2022 is our revenue growth combined with modernization efforts in general cost actions should drive margins higher <unk>.

Q3, and Q4 will not have the impact of the advisor summit. So the margins are expected to clearly increase beyond Q too.

Longterm the financial implications of our strategy should be powerful as we unlock access to the addressable markets Bill discussed realizing greater depth of relationships with our existing client base increased adoption of portfolio solutions within our captive addressable markets and strengthening the engagement between advisers and their <unk>.

Shuster clients.

By 2023, we expect to be driving higher revenue growth and growing profits on profit margins meaningfully.

Turning to the balance sheet, we ended March with $360 million in cash a debt of 862 and a half million dollars.

The outstanding debt consists of two tranches of convertible notes due in 2023 and 2025.

We are actively monitoring opportunities to refinance or retire the 20 threes as we are approaching within a year of maturity.

And we will update you accordingly of our progress.

Our $500 million revolving credit facility was on drawn as of March 31 at our net leverage ratio at the end of March was approximately two times EBITDA.

Thank you again for your support of investment and with that I will turn it back to bill for his closing remarks.

Thank you Pete.

Transformation for our industry demands talented people driving new technology, new data and new ideas <unk>.

Envestnet is delivering on all three fronts.

We've made meaningful progress breaking through to enable what we introduced last year as the intelligent financial life.

Feedback we are hearing is incredibly validating.

The results we've been focused on are moving the needle and they will accelerate.

Which made it possible is the work we have done to bring the parts of Envestnet together.

And what it creates is access to the power of an interconnected ecosystem that is fueled by the largest data sent in the industry carrying the broadest most intelligent technology platform in the industry that has network to the most comprehensive marketplace of solutions and partners.

In the industry.

This is transformative and drives important value for all of our stakeholders pretty incredible team here an investment.

Valued client and the tens of millions of families. They serve and very much for our shareholders as we make progress toward driving higher revenue growth and higher profitability into the future.

Thank you for joining us today and for your support of investment I will now turn the call back to the operator for questions.

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[noise]. Your first question comes from Devon, Bryan with JMP Securities. Please go ahead.

Hey, there Devon, how are no IP hi, good good good afternoon first of all thanks for.

All the detail. So I guess, that's on first of all I'll kick off with the obvious one. So so you just laid out bill kind of a multiyear plan, which which I appreciate it and I promise I'll have a question on that as well, but yeah. There have obviously been some recent press updates just suggesting a sales process is progressing and then some other pressing.

Questions about around Stewart peanut potentially leaving the firm. So I guess if you can can you provide any additional context around even maybe at a high level, whether we hear from the firm one way or another if a process was still ongoing or it ended.

It's kind of one point and then just another kind of high level, but related you know I I appreciate where in a volatile market backdrop, but but how do you guys think about valuation for the firm and kind of where we are today vs kind of long term value proposition in the company airports any insight you can share there as well.

Sure. Thanks, Thanks, <unk> and you know last year, we really.

Laid laid out the roadmap and what we were aiming to achieve in the time period in which we were going to achieve it.

And that was.

Coupled with our accelerated investment and so we're a year and a quarter into it and I would say that the.

The work that has been done organizationally to.

To bring.

Much more closely collaboratively together to.

Bring the parts of investment together from a technology standpoint <unk>.

To begin to derive.

New more streamlined experiences for our advisers leveraging the data across our platform to provide insights and.

Power, new solutions and connecting that to our market facing teams.

I'm going to tell you that we check the box across the board there and we're beginning to move the needle. So when I look under the Hood at the data that I'm seeing is we're driving more penetration of our advisor base, we're going deeper with them.

And we're doing that and incredibly effective way with higher yielding.

A solution both gross and net revenue that will drive both top line and bottom line.

Modernising the technology.

Hopefully you you noted how excited.

Excited I am about getting them to Charlotte next week.

Really lift the curtains for the industry.

And what we've done because it is a.

Going to be <unk>.

Perceived as transformative and then lastly open the network up to two more and more partners. So I.

I would say that we've done an extraordinary amount of work and.

And we're making material progress and we're beginning to move the needle.

I won't comment on any rumour or speculation that's out there in the press.

And you know if there was ever anything that we felt we needed to convey announce we would of course do that.

But.

Our our focus has been very much on execution on the comment about Stuart Pina.

Stuart and I have been partners for Ah for Ah.

A very long time.

He ran that tamarack business.

<unk> business at.

After judge <unk>.

Tragic passing.

We.

Said, Hey, this is the work we need to do we put our heads down and everything that I just outlined.

Really been led.

Bye.

Judd I'm sorry by by myself.

In partnership with Stuart.

I think we've accomplished an incredible amount again, if there's anything that the company needed to announce there we would announce it.

So yeah.

Your question on valuation look there is incredible value being created here, we have a market share.

Lead.

Ah multiple categories and that's been validated again and again in the discussions I've had over the past quarter.

Industry surveys again, just reiterate that investment is leading.

And.

We're moving the needle.

Two created to really support a sustained higher growth environment.

We've targeted 15% a year.

And then that's net of market.

And then.

We've also focused on returning adjusted EBITDA of 25% a year so.

The market will tell us what the devaluation of the multiple is on that Devon, but at our scale and our size with our market position with those sorts of supporting.

Financials, I think you've got.

Very valuable enterprise that will continue to invest to disrupt to create better and better more connected solutions. So that our clients can provide.

More holistic financial advice from financial information to their clients. So that we're driving something that it's transformational and that's what that's what's happening here.

Yeah.

Got it well, thanks, though I appreciate it.

Kind of a complicated question to answer but.

I guess I'll move on and just try to ask and have a bigger picture question. So I'm trying to look at the slides here with the.

New advisor portal and the developer portal on it I appreciate we're probably not gonna front run.

Next week, but I'm, having a hard time with my ice tea and kind of all the all the nuance of it. So I'm curious on I guess on the advisor portal side is the the recommendation to engine going to be essentially built into that so there's kind of additional ways to monetize that that corridor.

Maybe it already I'm curious kind of like is that a new aspect of it and then the other pieces just on the developer portal side. Maybe again. This is for next week, but like at a high level.

What's different there relative to.

Beyond the interface relative to kind of what has existed before.

Yeah, Yeah, I didn't think you loved that question because the answer is yes.

On the adviser portal.

If there is an opportunity that we see in the advisors practice.

That recommendation will be surface to their front page it'll be bucket. So accounts that you want to review from an investment standpoint, and insurance standpoint credit standpoint Trust standpoint.

And all of those will the advisor will be able to click through not only will they be able to then click through to execute on the opportunity, but they're also going to see the value that that do rise for their business.

We are connecting the parts of advice to what it means to be advisor to grow.

And that has never been done before we.

We will show that we will introduce that at our advisor summit. So the advisor sees what's in it for the client they can add value deeper value, but they also can almost instantaneously see what it means for their practice not only from a revenue standpoint, not only from a productivity standpoint, but from a valuation standpoint and again <unk>.

That is a very.

Profound step forward for the advisers desktop.

Regarding the the developer environment I think that.

What's so unique about that is that you've got our data <unk>.

A complete set of Api's from our data business, you've got a complete set of Api's from our financial planning business and you've got the complete set of Api's from our wealth platform and our wealth business. So for the first time ever our industry has a developer environment and.

Which our clients can take and put the parts together within their own existing infrastructure to thread that into their workflows and the products that they are offering their clients and a very turnkey streamlined way and so.

Then a lot of work on our part, but we are the first of a kind of it's kind in opening our platform to those api's that as an outbound initiative, meaning for clients too.

To take that and build into their environment, but it also has a profound inbound effect because it helps our partners find ways to thread themselves more deeply into the environment Envestnet ecosystem and that will drive that's an additional revenue line.

That begins to show up in the second part of the year.

Great well I'll leave it there, but great to hear bill. Thanks, so much.

[noise] next question, Michael Young with Truth Securities. Please go ahead.

Hey, Thanks for taking the question.

Sure Michael how are Ya.

I'm doing just fine looking forward to the next week so.

Just wanted to wanted to start off maybe just you know obviously I appreciate the the color on the guidance as of March 31, and I see the representative example in the back of the slide deck here, but as we move into to view, that's obviously been under pressure a bit in capital markets broadly.

There are other opportunities.

To kind of tremor reduce some some costs or expenses anything that'll be.

A sunset as we kind of roll through some of the new products.

That could have some cost savings attached to it or anything like that that would be an offset we should think of going forward.

Yeah, Michael Thank you for for your question.

If there's ever been me.

Many case study here the last two days and trying to figure out.

The market it's y.

We don't really want to.

Not how we're modeling right, we're modeling with knowns and the volatility in the last two days has been.

Definitely noteworthy.

But you know from a cost standpoint, I would say that we are.

We've got a lot of integration going on across our organization. So.

The teams that have been.

And the development organization in the service organization et cetera are beginning to fuse into a single single team. So so what we're getting there is more lift and more productivity.

Pete Pete cited the lift in engineering, 30, 30% plus output year over year, but I could I could cite those statistics for you in our operations team from a trading service request standpoint, our service environment in even narrow go to market how.

How were how were kind of driving more and more.

Productivity.

We are.

Continuing to assess.

Expenses.

I think we are balancing that with the progress that we're making Michael because.

As we go forward.

We're really beginning to to to move the needle.

We don't we don't want to disrupt that where I think.

We would look at is if.

There is if there is a slate of new hires from here that we'd be contemplating.

We're gonna have we're going to be prudent in how we do those things will also take advantage of.

Other opportunities for cost savings.

Throughout the business discretionary type things that we can we can absolutely Ah manage.

We also as you know.

Have a reasonably good forward look of the quarter ahead, so depending on the degree of volatility we do have that visibility Michael and of course, we would take action if we saw something dramatic occur.

Okay, Great and you know I I guess more broadly in the longterm scheme of kind of the EBITDA margin outlook. It seems like it will probably bottom here over the next quarter or two with the advisor summit and then lower markets.

You know you you express confidence in 25 per cent plus kind of EBITDA margins longterm and it sounded like you were feeling more confident about that you may have given us a little bit of color, but are there specific things that you're pointing to I don't know if it's from the conversations with clients or otherwise that are kind of making you think it might be even higher than 25% while.

Return.

Yep.

I'll start with that one and then bill to Ken However, in I think maybe the.

In the near term.

You you've got the idea that we're can bang on the.

On the advisor summit, that's that's going to be a little bit of a negative this quarter.

Without that our margin would be almost almost a full percentage point, maybe 75 basis points from Q1 Q2.

And we do expect to continue to see our our revenue grow.

Margin expanding for the rest of this year, so that kind of fits what we've we've guided longer term.

When we think about the long term, it's really driven by growth but.

<unk> talked about some of the modernization.

That's going on in our infrastructure and our ability to continue to scale and improve the breadth of the organization.

And that will continue to accelerate our ability to expand margins.

And my God I, just said when when we're talking about modernization, we're talking about systems that we operate the firm on our portfolio accounting.

Trading systems.

Out of our service infrastructure.

And what's.

What we've had a long range plan for.

Been working towards is to really create more.

Digitized environment, so that ultimately.

Just not going to need the same cost to support that.

The technology because of modernization because of automation that were able to create.

Confidence is growing there.

What we needed to do is get a code and up into the cloud check done now.

Well to move much faster through the process of Modernising those systems and what it what it does again is help us operate more effectively gives us tremendous scale, who were at five five trillion today, where we are anticipating growing to greater.

10, plus trillion and then.

How we can operate it and how we can serve it from a cost standpoint, and that will that will drive material.

Cost savings as we move out through this five year period to 2025.

And as I mentioned.

I mentioned on the call earlier.

I'm going to dig in on that over the quarter, the head to get to provide more detail to to to you.

Okay that sounds great. Thanks Bell.

[noise] next question Alex clan with you B S. Please go ahead.

Good evening everyone.

Hopefully not so detailed here, but question on the personalized solutions, obviously, great traction, 45% up year over year I think that's what we want to see a question, though when I look at it quarter over quarter I think last quarter. You said it was $61 billion 57, so down a decent chunk and obviously.

That's where sauce, but.

The trends they were actually worse and then in your other line.

So just wondering if if there's any mixed effects from the underlying assets or if this was an environment, where maybe your advisers will focus on other things. So the personalized sales or maybe not as strong because of what's going on so just trying to understand the dynamics and dose newer products, a little bit better I guess.

That's three months is the way the <unk>.

Question is going.

Yep, Thank you out.

Good quarter for US again, the flows into AUM in the services was.

You know.

Positive I would say it was at the same paces. It wasn't the fourth third and fourth quarter of last year. So.

Given the market climbing that was very good what we did anticipate was that we would accelerate from 21% to 22 and that we didn't see but we saw very comparable.

Flows engagement of new advisors opening new accounts and also asset during.

The quarter.

What I think.

The data reflects.

Slightly is that some au M&A accounts.

I'm sorry.

Accounts that are that are in some of the administrative side of that especially in our impact platform.

We're.

Transition so that that would be the.

It's not notable but that would be the the decrease there.

Again from an activity standpoint, I would tell you that the <unk> looked a lot like <unk>.

Okay and that is that is my question was specific to the personalized solutions. So is that the same comments, we can obviously follow up there.

Yes, yes, yes, yes, exactly it would be our direct index business. It would be our tax overlay it would be our sustainable platform Yep exactly Okay, and then and then and and and we can follow up there later, but secondarily, just and maybe I should know this but just wondering on the yodlee or data and analytics side.

When I look quarter over quarter again, the subscription revenue, so actually down 2 million.

Quarter over quarter, and then when I look at your presentation. It seems like the number off.

Accounts.

It was actually down there as well so was there was there a and I guess paid users as well.

Was there a client losses yould lead that I should know about that maybe I forgot or what's going on there because it's surprised I I thought.

He was expected to stabilize it looks like a tick down again, so I'm just wondering if there was like a one event that I'm forgetting about here.

There's no Ah client Los that's involved there there is.

Again, just really we saw it across the board in terms of.

User volumes.

At large fintechs and at large banks that just saw a decrease in utilization decrease in spending.

And that was.

As best we can tell from talking to clients driven largely by the broader economic outlook for economic environment.

Okay fair enough. Thanks again guys.

So.

Once again, if you would like to ask a question. Please press star one on your telephone keypad.

Next question comes from Orion Bailey with Goldman Sachs. Please go ahead.

Good afternoon, everyone.

Hey, Brian Hi, I wanted to come back to the point on valuation Bill I believe you recently made a comment on a conference that you thought you had the talent in place to get the company to a 20 billion dollar market cap I was wondering if you could help frame that comment and how you arrived at that number specifically.

Sure Yeah, no we again start with the talent.

We have done a lot of organizational work here to bring the teams more closely together, we've brought new leadership and complement the incredible team that it's to help build the company and we are.

One of the one of the points that I would make which I think is important when Ryan is that.

We believe that.

A.

Vast majority of the people that we brought on in 2021, they're hitting the ground and they're really beginning to contribute and you can feel the list you can feel the throughput inside the company. So.

Pleased by that but if you roll forward, where 2 billion top line wrists.

Restore it with 25%.

Twenty-five percent adjusted EBITDA, we're not going to stop there [laughter].

We've created an engine.

We're creating an engine that will grow on a sustained basis over a.

A long period of time.

Confident in that here's why I'm, so confident in that the architecture that we have now installed.

Has has cloud based our data set is growing massively we're using our datasets to power more and more applications and more and more partners.

As those partners come into the ecosystem, we expand our offering we do more things and we're expanding our footprint is very virtuous cycle that we are beginning to take.

To see unfold and as you walk out through the 2025 period again, two plus billion dollars top line, 25% adjusted EBITDA.

Right, but that doesn't mean, we're stopping then that means that that's the momentum we're carrying into 26 and beyond and as you look at the uniqueness of the the company the value that we are providing the distribution network April .

That we will have that we have today and we will have continued to go deeper.

That's a that's a that's a one of a kind business and I think.

Being able to operate that at scale I think is something that is going to be highly value.

Okay. Thank you very much for the color it definitely helps frame things.

Maybe I'll I'll sneak in another one I guess and hopefully hopefully this I guess this is gonna be kind of obvious when I'm trying to get out yet, but I was wondering if you could expand on the outlook for organic growth for the rest of the year.

Potentially being a bit more muted in terms of floors and just as we think about the timing of that slowdown and then relative to the potential offsets that could come from the asset based solutions how that might help.

On the one side.

Yeah, well focused on the side.

Side.

We are.

Moderating our outlook on our on our gross sales activity.

To look a little bit more like what we experienced in Q1, so again that was.

Closer to the average that we saw in 2021.

Instead of the acceleration that we had anticipated so we expect to see.

More modest.

Initially expected growth and Q.

Q too.

And then.

Some narrowing of that of that difference, but still more moderate sales and flows activity for Q3 and Q4.

Got it okay. Thank you.

Next question, Chris Dot Hot with Piper Sadler. Please go ahead.

Hey, good afternoon billing Pete.

Wanted to ask one around.

When I look at the advisor growth.

Decelerate it over the last couple of years, and there's everything Youre doing with the organization of Envestnet and the technology.

But I'm wondering from the adviser perspective are you kind of pushing on a string with with selling to advisors, particularly with the pandemic and bill since you just were on the road I'm wondering if you feel like the receptivity of advisors might be different in this environment and it has been for the last couple of years or if anything.

Likely to change in your sales process because of everything you've done over the last few years, but I'm I'm just wondering if.

Advisers had been more focused on kind of getting through the pandemic rather than than.

Using new technology, expanding their offering and doing different things.

I think Chris to that to that point.

A few of the areas of need right not not like too but need for firms whether you are in.

Broker dealer and that is <unk>.

Digital.

A much more robust digital engagement model, so that they can engage their clients the way.

The typical business engages from Ah dotcom.

Web standpoint.

In our client portals now and market feedback were receiving is.

Just just.

Off the charts positive and.

Inside that is pretty cool infrastructure, so underneath that portal sits a high degree of Configurability I don't want to get too detailed but it can be built and distributed and offering him or his widgets or is api's. So it's got maximum flexibility as well and unlimited kind of capacity to bring.

<unk> data and apps into combined to render what we call the intelligent financial life. So that's a need it's not a it's not I've kind of <unk>.

It's a need because consumers are going to find that.

And that's where they are going to consolidate their financial lives firm see it they get it 100%. The other one is around data.

Data is a bit of a challenge for firms.

You got to think about the R&D concentration in our industry and the talent right. So envestnet, Scott a pretty substantial engineering team.

Pretty substantial data engineering and science team.

But your local RIAA does not have that nor does.

Up to the to the very largest firms on wall Street, they don't habits.

And so our expertise is something that we can flex we can scale and we can help firms with the data issue why because they're they don't have the organization of data they are getting regulatory pressure, they're asking their their advisers to continue to grow.

They're looking for a greater insights all things that we can deliver it to them so Chris.

As I look forward those would be two two needs to have right and.

And something that we are we are leaned in on both of those I'm pretty excited about the other thing that.

I would note is that most advisers.

You've also got a demographic issue from.

Aged standpoint succession.

Thinking about the future of their practice there is no standardized valuation metric in our industry. It ranges from 70.

Five times to 19 times Rev.

For a lot of these firms in okay. So how do I measure that out of my firm Stackup data drives a lot of those insights in our technology will drive that and those are things that are in the self interest of the financial adviser beyond what they do.

Their their clients so.

We're just bringing the.

Climbed portal.

Health data solution and the business platform to market, that's going to expand the number of advisor users I would also tell you that over the year, while the head count on <unk> accounts has been reasonably steady there are other users of the platform.

Meaning investment specialist.

That have expanded pretty.

Substantially year over year, they're not registered investment advisors registered advisors, but they're using our platform to provide services not advice to clients and if you recall there was a pretty significant conversion last year and I would assume that that type of environment and then.

Lastly, our software business financial planning, particularly is growing substantially and touching many more advisors than the 100 700 and.

We serve from an <unk> standpoint, and that continues to grow at a very healthy clip.

Got it that's helpful to understand.

Okay, and then just a quirk.

Question is it sort of surprises me is looking through.

Numbers today at least as I'm calculated which could be wrong, but it looks like <unk>.

<unk> annualized redemption number.

Is is actually at a multiyear low for the first quarter of one are you seeing the same thing.

Do you have any explanation for that because I would've thought with little more volatility and even.

Demographics that it might be working more the other way but.

Our redemption trends.

Know your.

Sorry, Chris Yeah, I know you're looking at it the right way the the number of came in.

Much lower than.

Really what we I think have seen it.

Is the impact of the technology, allowing advisers to leap.

Reposition portfolios without necessarily closing accounts changing accounts or redeeming accounts and.

Making that accessible in just a few clicks with solutions that are all available on the platform.

As allowed a little bit more stickiness, maybe on the platform.

It's it's one quarter, so evolved volatility that we're experiencing.

Continues at any prolonged way that may change, but.

Really kind of a quiet quarter from that perspective.

And I would let.

Let me just give a shout out to our two advisers throughout COVID-19 throughout this whole period. They have been very engaged with their clients and they are aligned to plans. So planning based advice you stick with the plan and.

And advisers have done a great job coaching nurturing tweaking and people are aligned to plan, we sit on so many acid. So I can assign the the majority of it to that fact, but.

Advisers are absolutely stepping up and doing their job and you know it's.

To shut out to our industry, because because they've they've navigated these years incredibly and I think it's a small data points quarterly data point.

We'll know after the upcoming quarters, but it is also an important one.

Speaks to something that we're seeing in the quality of advice between offered.

Okay.

Very much for that.

Next question surrender Sandwich Jeffries. Please go ahead.

Hello, Senator how are you yes.

Pretty good yourself skies.

Doing well thank you despite the market today right.

Fair enough, it's it's a tough challenging environment.

So maybe just following up on the question about organic growth.

Any way that you guys can kind of quantify what you're seeing more in the sense of where I think your projections were versus.

Where they are in terms of the flow as it sounds like that obviously gross sales might be impacted a little bit in terms of their some maybe some market fear out there but just.

Any additional color that you can provide that you're sensing from clients.

I just wanted to kind of understand the big picture dynamics of men.

If I remember correctly.

When the markets are volatile. There's also maybe advisers have a preference for more of an HOA type model versus an EUM model is that also true as well and if you can just talk about those dynamics.

Surrender, a recipe it I'll start with with some of that in terms of what our assumptions our ability to get into the color on the on the advisors, but yeah. I think we had expected that we would be seeing.

Closer to mid teens low to mid teens growth. This year in terms of our organic asset growth Q1 came in.

At about 10%, which is.

Again still healthy and we think highly competitive in the marketplace.

Just not where we might have otherwise expected.

Yeah.

Surrender I would just add.

Organic AUM up about 14%.

During the quarter, but as we look forward.

Or as we had planned for the year, we were looking for.

A slight uptick to that.

We've we've modified that as we've provided our outlook for the rest of the year.

To something that's very reasonable I believe and.

We will continue to grow through this period of time anecdotally well.

Well industrywide, if you look into the beginning of it.

Look into the beginning of this quarter.

Q.

I don't want to provide any real real data here, but the industry has seen outflows.

During the biggie.

The beginning of the quarter anecdotally you look at.

Asset manager to talk as managers and.

They are feeling some softness.

We I would say anecdotally, we're continuing to kind of clip along at where.

Where we were at and one Q.

Of the year, but but again too.

Today, the volatility that comes up each and every day may change People's attitudes as we get through the quarter. So what we did was we provided a pretty reasonable outlook going forward.

Fair enough and then.

I guess more of a philosophical question I'm not sure there's a right answer a wrong answer here, but.

Obviously, there appears to be leaks to the media regarding <unk>.

Potentially strategic options, whether or not you are pursuing them or not.

Can you just talk about the strategic rationale of not commenting on them in the sense that obviously the market itself is speculating based on what may be leaks or not obviously, we saw a leak at the Supreme Court.

And then the Chief Justice came out any effectively confirmed what was going on so any color on the strategic rationale or the path that you've chosen.

Regarding the weeks that maybe well I I appreciate that question a lot surrender because.

You know what what I would say is that there are always more of them before your account them and I got that from.

Something I read recently, it was Ulysses S Grant and the young.

In the army and he was with salt the Guy in West Texas.

Horseback and at night that here these howls of the Wolves and the next day the salty.

Grant how many think there are in grant.

Underestimated and said, there's about 20 of them while they came upon the wolves they were too.

So there's always a little more noise than.

We would want.

But.

We are head down on the execution of our strategy.

I don't believe it does any good to spend a lotta time.

Thinking about a dwelling.

On it surrender.

It's noise.

I'm not focused on it.

I hear it.

Where head down and focusing.

And as I said earlier I'm not going to comment on any rumor. If there was something to it we would clearly announcements and that's that's.

Essentially what we've told the media.

Okay now that I appreciate that responsibility. So thank you much for my two question and that was kind of a philosophical response [laughter].

Initiate that it can be there's multiple ways to address that right. So there is no right or wrong answer here, yeah, I appreciate that a lot sooner.

Okay.

Thanks.

Yeah next question, Patrick O'shaughnessy with Raymond James Please go ahead.

[laughter].

Good afternoon.

So what kind of view do you guys have into the pipeline for customer adoption of personalized solutions and while data solution. Embarrassed exchanges are you able to see building demand ahead of time to have a sensor one that revenue is going to come on line.

Patrick we have visibility into flows.

About a quarter ahead on solutions.

So we have a proposal pipeline that sits in our platform and that pipeline in that in that proposal are solutions their portfolios portfolios have parks those parts or parts that we can understand and we understand what the historic clothes rate is on those and they're going to understand the timing of those so yes, we have visibility there. We also have visibility in our.

Data business because people are spending their earning you can begin to anticipate the climate and you can understand also from an anticipated.

Anticipate begin to anticipate.

The activity.

User ship and things like that especially around something like Verifications.

So we do have visibility.

With our data ahead.

Got helpful. Thank you.

And then Pete I think it was last quarter you spoke to the impact of a 5% market move is seven to 8 million of EBITDA, if I remember that correctly and then in the slide to date speaks to a 5% move being 16 million of EBITDA impact. So if I'm remembering correctly and have the math right can you speak to what your refined and your sensitivity analysis.

Yeah. So the 5% before was really focused on the equity markets, assuming a 60 40 mix and that fixed income markets, where virtually flat as they have been over time.

What we've updated here is to assume a similar move and that illustration in both the equity and fixed income markets and so that virtually doubled the impact.

Got it makes sense. Thank you.

Thank you I will now.

It's also.

I'm sorry. It was also 12 months versus nine months I think.

Okay. There are no further questions I will now turn the call over to Bill for closing remark.

Thank you everybody for joining the call. This evening I want.

Everybody on the investment team.

You all are driving amazing things were making extraordinary progress and excited for the week ahead for investment and I want to thank everybody, who joined the call Tonight and for your support of investment and I look forward to speaking everybody.

<unk> with everybody next quarter. Thank you very much.

This concludes today's teleconference disconnect your lines at this time, thank you for your participation.

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