Envestnet, Inc

Greetings and welcome to the InvestNet first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is 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 10Q can be found under the investor relations section of our website and investnet.com. This call is being webcast live and a replay will be available for one month on our website. During the call, we will be discussing certain forward-looking information. This information is based on our current expectations and is not a guarantee of future performance. 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 file. During this call, we will be referring to certain non-GAAP financial measures. Please refer to the appendix in our presentation for reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. The presentation is also posted to the InvestNet Investor Relations website. Joining me on today's call are Bill Krager, InvestNet's Chief Executive Officer, and Pete DiRigo, the company's Chief Financial Officer. Bill and 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 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 is a case study of when 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 of volatility, we saw advisors and 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 InvestNet. Our clients are supporting tens of millions of families who are navigating the challenges of inflationary pressures and rising interest rates, while also the uncertainty of volatile markets. What we do for our clients is really more critical than ever before. These times underline the importance of connecting people's daily financial lives with their long-term goals. And this is something that investment is delivering today. You know, during the quarter, I was able to spend much of my time on the road with clients and partners hearing how they viewed 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 InvestNet is delivering on it. Our clients are focused first and foremost on meeting their customers' digital expectations. As you know, consumers who access digital experiences throughout their lives expect the same from their financial provider. The digital expectation is coupled with this 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 atop 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 and really everywhere. It's 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. InvestNet 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 and the entirety of their financial life has a profound impact on how they experience markets, periods like these, and even, you know, strong market experiences. The personalization is what matters. With inflation and rising rates, whether someone is planning for, you know, short-term cash flows or with volatility, investing for generations ahead, The importance of personalized strategies that can be created and managed at scale is something we keep hearing over and over again from our clients. And 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're delivering for them today and we are more essential than ever before. At the same time, we are introducing powerfully aligned, data-driven, intelligent 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 received has been overwhelmingly positive. Frankly, it is validating and it is exciting. This year is really that headline. InvestNet 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 is the InvestNet 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 InvestNet client portal will be on display. This is the fully integrated, data-driven, white-labeled environment our clients will deliver to their customers and is a 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 enterprises data together. It will enrich it, empower it with new advanced analytics to help clients grow and to help them scale. We'll also introduce technology 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. And 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 going to continue to innovate and expand our capabilities here. At the summit, we'll introduce personalized QPs. 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, and 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 in asset management. There's lots of secular current behind it, and this demonstrates how we are connecting data and tech 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'll be very evident that we are doing these things. We're going deeper in our existing client base with value-added solutions. We are modernizing the digital marketplace to pave the way for the future. And we're opening our ecosystem to more and more providers. I want to just spotlight now a few results for you, things 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 $5.5 trillion. The number of accounts we serve is up 29% year over year. 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 market conditions we experienced. And our annualized organic AUM and A growth in the quarter was 10%, which included, importantly, annualized organic assets under management growth of 14%. InvestNet continues to meaningfully outpace the industry as this compares to annualized organic growth rates closer to the mid single digits for most other publicly traded firms in our industry. Given the volatility and uncertainty of the quarter, we were extremely pleased with the continued growth that we are seeing, although we had anticipated a step up in our asset flows in the quarter. Taking a step back just for a minute to dig a little deeper on some of the underlying data that I think is important to understand. Value-added fiduciary solutions, including our direct index, tax overlay, and sustainability offerings are growing impressively. Over the last year, the number of advisors using these solutions grew by 66%. The AUM of these solutions grew by 45%. And the number of accounts that we serve with these value-added services grew by 76%. We've created a waterfall effect that moves from assets under administration to AUM to flows into our value-added services. The stats that I just cited are near the end of this funnel. From our $5.5 trillion that we serve today to to now seeing real momentum in the execution end of our pipeline. And we are accelerating our progress. We are using data insights today. I've spoken about this in the past. Today we generate more than 11 million of these a day to identify accounts that are opportunities for advisors 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 every day and create far more streamlined workflows that advisors 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 InvestNet uses it. We serve more accounts and more assets. We process more trades and more service requests than anyone in the wealth advisory business. We do that across more than 20 different custodial or trust environments, 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 from more data sources on more consumer accounts than anyone in the aggregation business. The scale of investment, I believe, is very important to understand. 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 are streamlining, and we are driving up our customer satisfaction. Simply put, InvestNet is executing. As we invest in the data, technology, and solutions our clients use, it's important to know that we are also investing in our infrastructure, creating even greater scale, greater efficiency, and ultimately driving meaningfully higher profitability for our business over these next few years. While the needle will begin to move in the quarters ahead, we are increasingly confident in our opportunity to deliver on 25% plus adjusted EBITDA margins by 2025. I'll include more detail on these efforts over the next few quarters. InvestNet is executing on its strategy, and we are making very meaningful progress. The market will do what it does. The world will twist and turn. But after being with so many people this past quarter, the very clear conclusion I've come away with is that more than ever before, InvestNet is incredibly well positioned to help our clients drive more intelligent, connected advice, and better outcomes for their customers. We are 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 for 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.