Envestnet Inc. Q1 2023 Earnings Call
Greetings and welcome to the investing at first quarter 2023 earnings Conference call.
At this time all participants are in a listen only mode. A brief 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.
It is now my pleasure to introduce your host Pizza Rigo CFO . Thank you Mr. <unk> you may begin.
Good afternoon, everyone. Thank you for joining us on today's first quarter 2023 earnings call I'd like to begin by noting that our earnings press release supplemental presentation and associated Form 10-Q will be available under the Investor Relations section of our website at <unk> Dot com.
This call is being webcast live and a replay will be available for one month under the Investor Relations section of our website as well.
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 and I encourage you to review the cautionary statements on slide two of the supplemental presentation for the potential risks uncertainties and other factors that could cause actual results to differ.
Those expressed by the forward looking statements.
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 the non-GAAP disclosure statement on slide three of the supplemental presentation for an explanation of the non-GAAP financial measures and to the appendix in our supplemental presentation for a reconciliation.
These non-GAAP financial measures to the most directly comparable GAAP measures.
Joining me on today's call is Bill Crager investments, Chief Executive Officer, Bill and I will provide a company update as well as an overview of the company's first quarter 2023 results.
After our prepared remarks, we will open the call to questions. 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 and with that I will turn the call over to bill.
Thank you Pete and thank you everyone for joining us this evening and 2021 investment took a very deliberate stance and announced our strategy to invest in the economic opportunity inherent in our unparalleled client footprint breadth of services and industry leadership, that's been driven by.
Years of innovation.
So we understood better than anyone that our clients would need a partner to provide institutional scale that was connected to a powerful ecosystem that enables more holistic advice connected to more services and more solutions.
We are the category leader we.
We are deepening that position, we are extending market share we are investing into the growth strategy for the industry and for investment.
Despite the macro environment, which includes ongoing banking upheaval and banks to represent an important segment of our client base. The first quarter of 2023 saw very solid results with revenue essentially in line and EBITDA ahead of guidance.
We've created leverage that will continue to drive investments top and bottom line.
We're just back from our annual client conference our elevate summit in Denver, Colorado, a record number of advisors home office decision makers and our best partners engaged with our team there are.
Our clients are telling us that we are delivering a better experience with integrations that are driving business for them. They are saying our infrastructure is the best in the industry. We are delivering the most powerful operating system enhancing the broadest set of marketplace solutions empowering digital engagement tools to more easily connect advisors and <unk>.
Clients, all made more intelligent with our data.
I heard this over and over again in Denver by utilizing the Investnet technology advisors can spend more time offering holistic connected advice driving deeper client engagement and growth.
Our clients are playing back for us the benefits of our strategy and it is translating to significant activity on our platform and increased consolidation of their business with us.
For more than the past 20 years investment has been creating long term value for stakeholders by allocating capital to enable market positioning growth driving industry innovation, creating scale and building sustainable competitive advantage. That's why we increased our investments two years ago and it is paying off.
And the deepening market position, we have but as importantly in the operating leverage we are creating to drive sustained profitability growth while at the same time, we're managing costs as we historically have during both good markets and difficult market periods.
Our investment cycle is mostly complete but we still have some work to do and while we're executing on our plan. We're also making sustained progress towards our margin expansion goals building on EBITDA growth again this quarter.
Market dynamics are important to understand and I want to frame the environment, we operate in despite the headwinds of the macro period that we're experiencing.
This is a growth market in the U S financial advisors manage an estimated 27 trillion of assets and the market continues to expand what's encouraging is that investors and willingness to pay for advice has increased significantly over the last decade and its highest among consumers in their thirties. This.
Opportunity is a tailwind for investments growth first the independent advice channel, where we have our strongest positioning is growing faster than the overall market.
Secondly in these channels fee based assets currently just over half of the industry's total continues to gain ground and when you zoom in on the fee based assets managed accounts in UMH, specifically are growing the fastest.
Now all industry segments, which also includes technology enabled offerings and more and more industry utilization of data and insights the market is moving and investments direction.
We are capitalizing by gaining share in the first quarter net flows from M&A, where 20 billion, representing an annualized organic asset growth rate of 11%. These flows are very healthy, especially in the context of the broader industry. For example, long term mutual fund and ETF flows.
Across the industry were essentially flat in the first quarter.
Looking at annualized organic asset growth for public companies that have reported thus far this quarter. The average growth was between 2% and 6% compared to our 11%.
It is considerable outperformance, which we've been delivering quarter after quarter.
This is reflected in more activity utilizing more services buy more advisors in the first quarter. The number of accounts on our platform grew 4% year over year to $18 5 million.
AUM and AA accounts per advisor grew 6% year over year.
Our personalized investment solutions like direct indexing and overlay services continues to grow new advisors and new accounts.
We've been investing to modernize the platform to deliver for our clients and better integrate their workflows, increasing our operating leverage through automation of processes and monetizing higher margin solutions on the revenue side.
Guests will be challenged by choppy markets, but we are gaining share and that will drive faster organic growth rate in more normalized conditions, we're going deeper with more clients cross selling more solutions, and our renewals and winning new logos and new conversions as well our pipelines and bookings are up significantly.
<unk> since last year, let me share a few highlights of the impact that we're seeing this year.
Our high net worth solutions.
These are comprised of our investments specialists, who construct custom portfolios for advisors and their clients. These solutions leverage all the investment products on our platform to highlight their growth last year, we had $4 5 billion in gross flows from a universe of approximately 12000 advisors, who had access to our high net worth program and the <unk>.
First quarter of this year, we drove $1 3 billion of flows and project 6 billion inflows in 2023 with a footprint of now approximately 30000 advisors, we're increasing firm an advisor access and increasing the penetration of existing high net worth advisors by up selling tax overlay and <unk>.
<unk> in indexing.
We expect flows to continue to grow new solutions carrying average fee rate of 20 to 30 basis points.
And the RIAA channel.
We have over 2000 firms using our software we're leveraging our integrated platform to expand the adoption of investment management solutions currently of $6 billion of assets and we forecast 10 billion by the end of this year as we sell our managed account product will be able to cross sell additional investment solutions, increasing our revenue opportunity.
By 10 to 15 basis points. We're also beginning to drive adoption of other solutions, such as alternatives insurance and credit.
The retirement space is another important growth segment for investment fundamentally we're making it easier for our core segment of advisors beyond just retirement specialists to provide 401k solutions to their end business owning clients.
We're capturing the regulatory tailwind created by the secure act to point out and delivering a simpler integrated technology and data platform, we're winning new mandates, we're winning new logos, including agreements with global warehouse and recently announced a partnership with empower one of the largest retirement plan service providers in the United States.
The adviser footprint, including newly signed firms is at 30 <unk>.
Providing a lift in subscription revenue and expands the opportunity for investment fiduciary solutions with fees that range from three to nine basis points.
Lastly, in our wealth data platform, we've launched an integrated holistic data environment delivered through digital experiences that make our analytics even more actionable.
Client and prospect pipeline has doubled since September because we were able to cross sell very unique capabilities like our insights engine.
The feedback from our clients last week at our elevate summit was outstanding as firms want to get insights into their advisors hands as soon as possible here's why.
Today, we are publishing $24 million of these insights today across 96 different use cases network to our broad range of solutions insights can drive on average a 31% organic deeper wallet share revenue gain and an advisory practice while they.
Better client outcomes and more use of Investnet solutions.
Today, we serve 106000 financial advisers on our platform today, we know we can grow the average advisor by 31% and today more of our clients are asking us to connect them to the insight engine, because we can help them grow and in turn invest net growth.
And all of these important segments to tangible proof of our investments integrating our data and our technology is giving us the right to win and go deeper with more clients.
On the expense side with a modernizing our platform to drive greater operating leverage when managing controllable costs in the near term.
Our investment cycle peaked in 2022.
For 2023, our forecast for adjusted operating expenses is down approximately 4% year over year, despite the inflationary environment.
We are continuing to gain efficiency from modernization.
Processed another record number of trades last quarter $58 million with lower head count and fewer errors as we continue to automate service request and reduce the number of support tickets that we serve.
We continue to reduce our real estate footprint and optimize our office space occupancy costs are down 35% since 2021.
We are doing more for more clients than ever before but we're doing it with more and more streamlined operating infrastructure and fewer personnel. Our data business has begun to leverage an outsourced environment. Our wealth business is beginning to leverage our modernization efforts the benefits of each of these.
Or just beginning to be experienced in our service model and in our financial results bottom line is this we are driving multiple new higher margin revenue streams leveraging investments for operating efficiency, while carefully managing expenses all of this will propel us towards our 25% adjusted EBITDA margin target.
By 2025.
We will keep innovating and adding to our ecosystem to drive more and more engagement on the platform, creating greater value for our clients and creating greater distance from our competitors, let me take a moment to share some very tangible examples.
We invested in our next generation proposal engine, which is a critical piece of technology and at the center of driving more utilization of the platform.
Is rolled out and by the end of the year. It will be live in 5000 firms covering 77000 financial advisors. This is so important because this proposal engine not only has best in class user experience. It also allows for personalization of portfolio that scale by fully integrating.
The entirety of the investment ecosystem, that's data plus planning network to all of our solutions investments insurance credit the entirety of what we offer being available to all of our advisers at speeds adoption reduces administrative friction is just one of the ways, we are enabling service and operating scale.
For our company.
Our partnership with <unk> Z is creating tremendous interest in the marketplace and with a highlight in standing room only discussion at the summit.
Together, we are solving real challenges for the industry and the work we're doing at <unk> is on schedule. We are hitting all the milestones on our roadmap to build out an end to end invest net plus F&B technology option.
We expect to be in the market by the end of this year and see gaining traction starting in 2024.
Put a little perspective or color around it and the RIAA World All economics related to custody average around 15 basis points and in the broker dealer market around nine basis points.
With <unk>, we will begin to participate in those economics for the first time and the opportunity that we have is significant exemplified by the one trillion plus of annual gross flows that runs through our platform every year.
We are making considerable progress our clients are leaning in with us and we're going deeper.
I am Super energized by the progress we've made and the validation of the market is reflecting to us. It is important to understand the impact investment is making for our clients as we deliver our results.
I'll turn the call now over to Pete who will provide details on this quarter's performance and our outlook for the rest of the year.
Thank you Bill our first quarter results continue to reflect the impact of our strategy and the anticipated progression from 2022 into 2023.
During the first quarter the economic environment brought further uncertainty with regard to continued market volatility inflation liquidity of regional banks and so on our first quarter further demonstrates the attractiveness of our business model and the impact of the actions we've taken amidst this current economic environment.
As we think about the first quarter and the rest of 2023 I want to remind you of the context of our financial performance in 2021, we announced our long range plan to better organize and streamline the company working more deeply with our clients and in more ways ultimately paving the way for longer term sustainable revenue growth.
And higher levels of profitability.
We began these investments in 2021.
And had them fully included in our operating expense base in 2022.
Now 2023 becomes a year focused on execution and delivery with the anticipated result of margin expansion.
We saw at the beginning of this in Q4, 2022, and continuing sequentially into the first quarter of 2023.
For the first quarter, although the challenging environment continued to have an impact on our clients adjusted revenue was approximately $299 million.
And adjusted EBITDA was $55 $4 million and adjusted EPS was <unk> 46 in Q1.
Our guidance for Q2, and the rest of 2023 as laid out in the earnings release and in the supplemental presentation.
Overall, the economic environment in Q1 produced a difficult time for clients and prospective clients impacting both segments of our business with extended decision, making processes and ultimately prolonged sales cycles in some cases.
This dynamic affected both segments have asset based subscription and professional services revenue in Q1.
While industry wide flows remain under pressure the wealth segment continues to experience positive net flows in our asset based products.
Subscription and professional services revenue was relatively more impacted by the economy.
Our outlook for the rest of the year. It takes further onboarding delays throughout the rest of the year into consideration to some extent offsetting higher revenue from Q1 capital markets increases.
The data and analytics segment had a number of potential and existing clients affected by the regional banking crisis. We saw a number of smaller tech clients put a hold on data spending due to liquidity challenges. However, we remain encouraged by the level of interest and the progress we're making in building the overall pipeline.
For the second quarter, we expect adjusted revenue to be between 312 and $315 million adjusted EBITDA to be between 55 and $57 million and adjusted EPS to be 45 to <unk> 46.
For the full year, we are raising our revenue guidance to be between one six and $1 $2 7 billion.
Adjusted EBITDA to a range of 253 and $260 million and EPS of $2 11.
At $2 19.
Our guidance is always does not assume any changes in the capital markets from prior quarter end and is based on market levels as of March 31.
Also Q2 carries with it a seasonal increase in professional services revenue and cost of revenue related to the elevate summit.
Turning to the balance sheet, we ended March with $53 million in cash and debt of $938 million, making our net leverage ratio just below four times EBITDA.
Seasonally the first quarter is always the highest use of cash as we pay the majority of our incentive compensation in Q1 as well as the most significant vesting dates for employee equity compensation, giving rise to high employment taxes due.
Additionally, as we manage through the impact to our asset based revenue from declining capital markets in 2022.
Q4 of last year in Q1 of this year also carried with it elevated severance expense.
Which we expect to decline in the last three quarters of the year.
We expect our high point for the leverage ratio to be in the first half of the year dropping below three five times by the end of the year.
Thank you for your support of investment and before we open it up for Q&A I'll turn it back to Bill for his final remarks.
Thank you Pete.
Investment of succeeding in a challenging market by delivering what we've committed to our business is executing on this strategy and we have a leading competitive position in a growing marketplace.
We are delivering significantly for all stakeholders. It is through our deep understanding of the marketplace our drive to serve our clients today and into the future through the dedication and hard work of our team, we're managing expenses and leveraging our investments and scale to drive organic growth and margin expansion we are building.
On the progress that we've invested in driving margin expansion throughout 2023, and reaffirming our goal of 25% adjusted EBITDA margins in 2025, we're doing what we said we would do well.
We are modernizing the platform and integrating it for our clients, we are increasing our operating leverage becoming more efficient.
We're also going deeper with clients and growing higher margin solutions.
I want to thank our clients for the trust they put in US a recognized the value we provide for them today and into the future.
Also want to add a very special note of immense gratitude to retiring director Ross shaping he has been a tremendous steward of the business and an incredible support to invest net during the highs of this incredible journey as well as an essential pillar in the company's hardest days following the death of Jud Bergman at every turn Ross has been a driver.
And a tremendous steward on behalf of the company and our shareholders finally.
To the investment team.
Every day, you execute building innovating enhancing the advice to drive the success of our clients and millions of millions of end consumers and you were driving the success of our business is one client of ours said to me last week at the conference what Youre doing is extraordinary I. Thank you.
Now I'll hand, it over to the operator for questions.
Thank you.
We'll now be conducting a question and answer session.
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One moment, please while we poll for questions.
Thank you.
Our first question comes from the line of Devin Ryan with JMP Securities. Please proceed with your question.
Hi, This is actually Michael Falcon I'm filling in for Debbie Good afternoon Hello.
Sorry, Michael.
Good good.
Maybe to start you had a pretty healthy quarter of asset flows and grew new accounts, but there has been some press in the earnings cycle around tech budgets overall being under pressure across enterprises.
Are you seeing this in the financial advice space and can you give us a little bit of flavor for where demand for your solutions is strongest and maybe where it's weekend both by product and by channel.
Yeah, Michael I would say I would characterize it this way I would say that there is.
Very very strong activity deepen our pipeline so late stage pipeline and our bookings.
Are up significantly as we look towards the end of <unk> why is that because there is keen interest and a lot of the subs capabilities that we offer our data our wealth data platform, our financial planning capabilities.
And in our raw technologies, particularly are all showing really strong signs of strength, where the headwind is going to be through the year is in the bank segment as <unk>.
Both on the data side of our business and the wealth side of our business as we deploy.
New clients, new logos, who are in that pipeline to be deployed.
<unk> them out a few quarters.
We kind of work with them to make sure that.
Everyone's got the focus on the project.
And then also on the data side.
We've got a pretty healthy.
Business in the in the banking segment and there has been while the.
Pipelines and bookings are pretty.
Encouraging there again, we anticipate some delay in new logo rollout in that segment.
Sure that makes sense.
And then maybe for my follow up just switching gears a little bit.
There's been a ton of attention around artificial intelligence and new applications in the market I know thats an area you've been focused on for some time.
But maybe remind us how you think about the potential applications for AI for investment over time, and how you would tie that to either existing or new rubber revenue opportunities for the firm and then related you mentioned gaining efficiency from modernization as you look deeper into the model or are there ways that AI applications can actually drive a more efficient expense base, whether that's by doing more with fewer people.
Or just helping drive efficiencies more broadly.
Yeah, absolutely Michael I think in this category, we're really kind of carving a leadership position in being stewards in the data and thinking very.
Ah responsibly about the use of AI in the ways that we are using it today is in looking at our data set in our dataset spans from.
People's Daily financial activity through our traditional yield the capability into the welfare portfolio strategy and beyond into the plan.
<unk> plans. So we can connect People's daily financial lives to their long term goals and by doing that we can create insights our suggestions for financial advisors to more deeply engage their customers and we're doing that at scale. So today.
Published $24 million of those insights for our network and that ranges across just shy of 100 different use cases use case might be around taxes or about risk or about insurance coverage et cetera et cetera. So we're surfacing these insights and know where the advisor can do more for their client and <unk>.
Pinpoint these opportunities to go deeper when we looked at the the macro set of insights that we're creating and we look at our financial advisers same store are going deeper with their current clients that are on the investment platform. We saw that they could grow an average of 31% based on the insights we surface.
For them today, so they're being that's highly coveted information because it clients they work with and services. They can provide that that that client is likely a need up and so what that does is we look at the data even more closely we see that advisors, who are using those insights Michael.
Growing faster than the other advisers on our platform.
I mentioned that last week, we were.
At our annual conference in Denver, Colorado standing room, only at any session that was related to our data platform into our insight engine.
Firms' advisers want the insights in their hands and so there is growing demand and at the back end of that pipeline at the top end of that pipeline for our wealth data platform and insights is very very strong and so we will be deploying that wealth data platform and insights to more and more firms and more and more advisors. This quarter next.
Quarter end beyond so so we're very encouraged by it.
But at the end of the day, what I think are really important messages around AI as money equals trust and at the end of the day that human adviser is going to be the navigator is going to be the that the steward of that relationship. The scale that AI provides to them is going to be the support mechanism that they'll lean back on.
And utilized more and more with them in the cockpit with them at the helm in that relationship with the household and that's really what we're enabling from a administrative or operating standpoint, absolutely. When we look at our business. It's administrative heavy we're regulated business process.
<unk> need to be.
Repeated and scale and so again, just given our data heritage, which is unique in the industry. We are building that deeply into our modernization efforts so that we.
We can scale and respond to service issues support ticket.
Routinize type administrative processes and ways that utilizes the technology and our intelligence versus.
More and more personnel and Thats really just beginning to be realized inside the business. You look at I noted in my prepared remarks, a record number of trades last quarter, I guess was $58 million trade blocks fewer service tickets.
Decline in also support request, we did that with lower personnel and a lower degree of errors across that enormous trading activity. How do we do that we use the intelligence of the platform plus the experts that we have that execute that.
That volume and.
That's just one example of many that that's kind of beginning to really take root inside the company.
Okay.
Yes.
Thanks, that's great color. Thank you I'll hop back in the queue.
Good thank you.
Thank you. Our next question comes from Michael Cho with Jpmorgan. Please proceed with your question.
Hi, Good afternoon. Thanks for taking my question I just wanted to touch on.
Hi.
I'll touch on on the F&B partnership on Jamie.
Bill you mentioned the <unk>.
Packed room at the conference.
And you can appreciate the.
And then the numbers you gave but.
But I guess my question is I guess I'm, just trying to get a better sense, you mentioned second half or rollout property platform by the end of 'twenty three.
And I guess I'm, just curious kind of informed.
Rolling it out to clients and the rollout plan once the solution is live and if you can just kind of give us any color around there and then also the <unk>.
Contribution to top line and on margins seen ball incremental to that 2025 plan.
We shed any color it great. Thank you that's awesome Michael.
In Denver.
Those rooms were full because the reality is.
We're solving.
This partnership begins to solve some hard problems for our clients and really for the industry.
And it's 2023, but the average time to open a new account. Many times has five last for five business days.
With our partnership you bring that down to a couple of minutes right. So it becomes a more real time fully digital.
Paperless environment that streamlines account opening that provides real time activity. So the trades that are made during the day are made during the day.
The execution happens for a customer in seconds not in a batch in the overnight.
The service cycle also becomes bad because it's all connected to workflows right. So so what this is is really next generation capability that catches up to the 2023 expectation that we have everywhere else in our lives. When we ask some of the machine to do something that does something.
And so we're excited about it and I think.
I'd go back to last week, which is a terrific week for our company.
Yes.
Interest from our customers both large and small is very high because this not only.
Next time it takes a lot of labor and there is probably a higher degree of error rate or administrative patch up that you have to do on a large large number of accounts as you go to administrate serve open open accounts. So there is going to take a lot of friction out and really I think of it is just that the viscosity.
The account opening our access to our network of solutions will speed because of the relationship with F&B, but F&B is just a choice. It's just going to be an option for firms to utilize we continue to have very deep and good relationships and great partnerships with all of the.
<unk> that we work with pretty much the entire industry.
And enable those for our customers.
From a rollout standpoint, I'd say, we're exactly on schedule. We've hit all the milestones that we need to from a project standpoint, we will do a reasonably probably are contained a deployment of that partnership to select clients by year end and so that to look forward you look forward.
Contribution of revenue and EBITDA from this partnership in 2024, beginning in 2024.
As we get going the other note I'd really just kind of emphasize here through the partnership we're not taking on a ton of costs right. We thought about this in lots of ways on how we enabled this environment for our customers and do that through partnership versus taking on the administrative burden and the administrative.
Kind of.
Responsibility that F N Z, who is expert in global and has really cracked some hard problems around the globe.
They are great at it and we will be our partner here. So.
As we roll this out I see good adoption I see interest in what we're doing I see it also being pretty high margin revenue for us as we get going.
Wonderful. Thank you so much Joe.
Thank you Michael.
Okay.
Thank you.
Our next question is from Alex Kramm with UBS.
Please proceed with your question.
Yeah, Hi, good evening everyone.
Good evening.
Simple one to start just on the updated guidance I mean, obviously.
EBITDA and EBITDA margin came up for the full year nice to see that but the question is really is this just a market performance or are there. Some other things contributing here, maybe maybe on the cost side. So maybe just run through the Delta here.
As we thought.
Well I mean mechanically it's mostly.
Where we've re forecast was that kind of discussed in the prepared remarks.
There is upside from the guidance and there is a little bit offsetting that based on some of the.
Onboarding delays that we've that we forecast we've kind of pushed things out maybe a quarter to two probably less than two on average to what the extreme for certain.
Expected.
New clients new logos, but.
As we've adjusted that.
As all of the of what's reflected in the guidance both markets as well as the client impact, yes, and Alex what I would add on the expense side as well.
We're tactically being very very conscious of.
Every cost across the company, but Youre also beginning to see some of that operating leverage that we have spoken about in the automation of our processes is beginning to take root.
What you get this year is kind of the full year benefit from the Tata relationship on the data side and the ops modernization.
We are beginning to affect on the well in the wealth business and so.
As we kind of roll through 'twenty three.
We are operating in a pretty kind of.
Unknown climate operating climate.
Especially this banking issues is resilient this quarter, where our client base.
And so at the top line, we're being thoughtful about when we're going to onboard some of these new clients on the bottom line. We're just executing is it just simply us executing and the platform beginning to respond to the enhancements and the decisions that we've made and that will roll through 'twenty four new roll into 'twenty, five which we re.
Iterating, our adjusted EBITDA of 25% by 2025.
And then secondly.
I think also quick one but yeah.
Year to date.
Maybe this is not completely new but.
Clearly we've been finding ourselves in a.
Type of fixed income environment.
Rates are much higher behavior is changing.
<unk> also on the advisor side. So just maybe just review what you're seeing out there maybe the summit's actually.
Something on that I assume so is there is there more reallocation to fixed income because of the higher rates and if so does that change the pricing environment anything we should be watching out for us maybe flows going into different directions, and they were over the last decade or so that we've been following the company.
Yes, it's a great observation, Alex and I think across the board behavior Leigh things are changing right. So you've got.
You have your bank deposits in the bank deposit go into money markets you look at the flows in the money markets.
Year to date or by quarter end I mean, they are very significant up 12% I think quarter over quarter.
And we track a lot of data so what we're able to see Alex's.
What was interesting in this doesn't I'm going to get to your answer but just an anecdote I think that is interesting for analysts on the call is that we.
We can see where the bank deposits and the transition of dollars that went very quickly.
To the money market from banks to money markets and.
Particularly of interest to us was that the high net worth did that so that the beyond secured deposits.
At the banks had a high outflow two to money markets, whereas the average or lower.
Deposit.
Value kind of stayed put so they moved at a 3% rate where the where the higher deposit moved at a 40% rate. So that's a very significant shift of money right. So now the advisors in the mix on that and Theyre looking at the overall allocation of that client Theyre looking at the returns that you can get some cash in all.
So from a fixed short term fixed income instruments to longer term fixed income instruments. So we are seeing a rebalancing we're seeing a flow there, but we've also.
Innovated as part of the overall fiduciary work that we've done kind of this idea that we can latter bonds and we can specialize and uniquely positioned bond portfolios for more and more clients and so in our <unk> business, we are seeing flow into into that product, which is kind of commensurate with that and equity based.
<unk>.
Direct index type portfolio.
So nothing on the fee side, we should be worried about or anything else.
Thank you.
No not meaningful.
It's good for advisors to be able to provide advice in this market because what they're able to do is look what this is motivating advisors do again conversation.
Conversation that I had I don't know, how many times dozens and dozens since march 10th.
Silicon Valley is that this is really taking consumer clients and asking their adviser to take them.
A broader look at all of their money I've got the money at the bank here, what do I do and that question is really motivating more of this holistic kind of conflicted advice. They are using money market that is not necessarily a real benefit to invest net but that money is going to go and it's going to come back into a more holistic advice packages that that.
Pfizer is going to argue.
Okay helpful. Thank you very much.
Thanks, Alex.
Thank you.
Our next question comes from Surinder <unk> with Jefferies.
Please proceed with your question.
Hi, Surinder how are you.
Pretty good yourselves guys.
Excellent. Thank you.
Fantastic.
I guess I'd like to start with a question about the subscription licensing business and more specifically the data and analytics just given the challenging environment that you've cited how should we think about.
The sub segment on a go forward basis here.
Yes.
Given contracts I assume have been renewed at this point, so revenues to be stable on a quarter over quarter basis going forward.
Or how should we think about that.
So sundar I think.
There have been headwinds on the sub side in the data business, particularly as I look at the research business I circle that one and then I would say.
What we saw in the first quarter was you know VC or PE backed fintech type companies that are data consumers absolutely rattled by what occurred at FCB is we got to the end of the quarter and signaling.
Just just that we've probably seen the delinquency rate on on those smaller fintech companies.
Right.
Rise a bit.
Over the quarter because of the economic condition right. So.
That's that's a headwind, but the prompt the predominant headwind remains in the research business.
But as we look forward here.
A couple of things that you should note.
We have on boarded contracted on boarded datasets that really create a distinctive.
Advantage for our overall data research product.
Utilizing data from a consumer base that is very interesting to the.
Research consumers, who typically are hedge funds.
And.
That dataset really enriches the invest net offering I would say over the last three years. The Investnet dataset has been fairly constant and has been competitive datasets that debt.
Became choice in the marketplace. So as we get to the back half of this year not the second quarter, but as we get to the back half of this year, we see a.
We're very encouraged by both the deep pipeline on the research side, given given the enhancement to the dataset.
And also the bookings that also give us a lot of encouraging kind of outlook for <unk> and then more significantly in <unk> around the subs right for research and that has been the real challenge that we've had for a long for a long time.
Got it.
The things that have occurred I'll just repeat them is we've enhanced the dataset, it's a very attractive and interesting consumer base for the users of the research product and we think we have a competitively differentiated offering and that is resonating and visible to me anyway in deep.
Our pipeline and in our increased bookings as we got to the end of the quarter last quarter.
Got it that's actually really helpful.
And then switching to kind of the EU made business.
The disclosures that you provided on slide 11.
And more specifically related to the first party managed assets can you talk a little bit about the guest count growth that youre seeing there because.
First party managed assets, our sub segment of the <unk> segment, and so that is correct.
Growth rate in the accounts at 1% this quarter.
Its below the actual.
AUM account growth so just any color there would be helpful.
Yeah, absolutely so.
There is.
The dynamic there is.
I'd like to look at the glass always more than half full.
So.
We have built.
The leading strategists marketplace in the industry period and.
And.
That is part of that strategy.
<unk> is the investment PMC mutual fund strategies or wrap accounts right and so the industry.
The marketplace has really shifted towards ETF based portfolios and so that so there is a headwind for our proprietary wrap type portfolios and outflows for the mutual fund offering that said just recently, we launched our first Etfs and those so those portfolios.
We will begin to transition to more ETF based portfolios be able to bring down the internal cost of those and regain some competitiveness there.
So there is a headwind that we've been managing I mean, the good news is that we've got this extraordinary marketplace that we've built and we're competing against everybody that the negative is that we've seen some headwinds in our proprietary portfolios, but enhancing those so that we can regain some traction that is grouped in with the.
Solutions and services that I highlighted in the call our direct indexing our high net worth.
As well as our overlay capabilities in there, we're adding advisors at a very rapid rate, who are adding accounts at a faster rate and nos accounts contain assets had depressed values, but are adding assets at a faster rate than any of the flows on our platform and that is what we've been focused on.
We keep really focused and piling assets accounts and advisors.
Onto the platform and I've called that in the past is this this coiled spring, but what's really important surinder.
We're stacking these new opportunities that we've focused on and they're kind of connecting to each other.
And this is building momentum and really a lot of enthusiasm last week in Denver was loud and clear interest in di interest and overlay interest in high net worth interest in retirement interest in RIAA type.
Managed accounts so.
This momentum in DIY overlay of high net worth or a fiduciary retirement, and our insurance platform and Fedex.
Those are really important and they've been kind of surfaced I also noted and I spent time on the proposal tool modernized into more accessible environment and we expect that that will continue to build so the headwind or the growth in.
<unk> is really mitigated by the by the.
By the outflows in our in our mutual fund wrap portfolios carry lower basis points than the other products I just outlined it for you.
Thank you that's actually helpful and really good to hear thanks for the color.
Yes.
Thank you Sundar.
Thank you.
A reminder, if you would like to ask a question it is star.
One on your telephone keypad.
There are no further questions at this time I would like to turn the floor back over to CEO Greg here.
Ed for closing comments.
Thank you Camilla.
I want to thank everybody for your support of investment and I look forward to speaking with all of you next quarter. Thank you very much have a very good evening and we'll talk to you next quarter. Thank you.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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