Envestnet earnings top estimates as CEO eyes industry's next supercycle

November 10, 2022 11:05 AM

Bill Crager at MarketCounsel 1219.jpg — Envestnet CEO Bill Crager, right, speaks to MarketCounsel CEO Brian Hamburger at MarketCounsel Summit 2019.

Envestnet CEO Bill Crager says the financial services industry is currently experiencing a supercycle, and he believes that his organization is driving the change.

He also says this isn't the first time they've done it.

To illustrate how he sees Envestnet once again shaping the future, the leader of the Berwyn, Pennsylvania-based tech firm and turnkey program took those who joined him on a Tuesday evening earnings call on a trip to the past.

"Envestent drove the last transforming cycle (to) cloud-based, fee-based, independent advice," Crager said. "As we enabled the movement to fee-based, the assets on our platform grew at 42% ... from 2010 to 2020 while the total advice industry grew only at 13% during the same period of time … Today, we are leading the future again."

Fintech

Envestnet taps Flourish, Gemini and Anthony Pompliano to deploy crypto strategy

October 6, 2022 12:21 PM

While celebrating third-quarter earnings that topped industry estimates as well as their own Q3 outlook, Crager said his company continues to generate growth in the face of a "significant global financial downturn.

"This is a testament to the essential nature of what we do. Envestnet is growing. We've generated net assets flows. We've grown the accounts we serve. We've grown the number of services our clients are leveraging from us, grown the number of users utilizing our DNA products and won the important mandates weve competed for," he said. "It is important to understand that while we navigate the market and economic cycle, there is another very powerful trend at work. This is a supercycle as data, intelligence and digital engagement transform our industry to connected, hyper-personalized, active advice. Envestet is forging this. We're executing on it."

To see the key takeaways from the company's third-quarter results, scroll down our slideshow. For previous coverage of Envestnet's earnings, click here.

By the numbers

Envestnet posted total revenue of $306.7 million in the period, up 9% year over year and 1.3% better than Zacks Equity Research consensus estimates. On a per-share basis, the company posted a loss of 25 cents. Earnings, adjusted for one-time gains and costs, came to 45 cents per share, also better than Zacks estimates by 7.1%, but down 26.2% year over year.

For the current quarter, Envestnet expects per-share earnings to range from 42 cents to 43 cents. Lower revenue in the range of $294 million to $296 million is expected for Q4. Envestnet now expects full-year earnings in the range of $1.82 to $1.84 per share, with estimated revenue of $1.24 billion.

Revenue

Envestnet reported a 4% quarter-to-quarter decrease in asset-based recurring revenues, which represented 58% of total revenues for the third quarter of 2022 compared to 61% for Q3 2021. Subscription-based recurring revenues, which represented 40% of total revenues, were up 9%. Professional services and other non-recurring revenues increased 6% from the prior-year period.

Expenses and losses

Total operating expenses for the third quarter increased 7% to $307.7 million from $288.9 million one year ago. Compensation and benefits increased 6% to $116.8 million while general and administrative expenses increased 20% to $47.4 million.

Loss from operations was $1 million for the third quarter compared to income of $14.1 million for Q3 2021. The company posted a net loss of $8.7 million for the third quarter, a far cry from the net income of $11.4 million for the first quarter of 2021. Net loss per diluted share attributable to Envestnet was 13 cents, down from 21 cents last year.

Adjusted revenue

Adjusted revenue for the first quarter of 2022 grew by 17% to $321.4 million compared to $275.2 million one year ago. But adjusted EBITDA for the first quarter of 2022 dropped 18% year over year to $55.7 million, down from $68.3 million. Adjusted net income decreased 26% to $31 million, and adjusted net income per diluted share decreased 27% to 47 cents from 64 cents in the first quarter of 2021.

Remarks

"Envestnet continued to successfully execute our strategy while driving positive net flows and accounts growth during the third quarter," Crager said. He also highlighted recent strategic partnerships with Indian information technology services and consulting company Tata Consultancy Services and global wealth platform FNZ, saying the pair of deals built on Envestnet's position as a leader in the digital engagement marketplace.

"Our partnership with TCS provides increased scale while simultaneously reducing our expenses, and by partnering with FNZ we will create real-time account opening and funding, as well as automating key servicing and maintenance for the life cycle of the client/account," Crager said. "These collaborations will ultimately create additional revenue streams as we continue to focus on driving better outcomes for enterprises, advisors, and their clients."