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Envestnet Finishes 2017 Strong

By Dan Caplinger - Feb 22, 2018 at 5:57PM

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Find out what's helping out the fintech player's results.

The recovery of the financial industry hasn't just benefited the big banking institutions that found themselves on the brink of collapse in 2008 and 2009. It has also helped lift the prospects of those smaller businesses that support banking and investment giants. Financial information-technology specialist Envestnet (ENV 2.44%) came into 2017 getting a big boost from bullish conditions in the U.S. stock market, and at least until the past month, there haven't been many signs that the bull market was coming to an end.

Coming into Thursday's fourth-quarter financial report, Envestnet investors wanted to see continued steady progress in growing earnings and revenue. Envestnet succeeded on that front and it remains confident that it can continue to grow, even if industry conditions become slightly less favorable than they've been in recent years. Let's take a closer look at Envestnet and what its latest results mean for its future.

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Envestnet keeps winning

Envestnet's fourth-quarter results showed the consistent performance that many have come to expect from the fintech company. Sales climbed 17% on an adjusted basis, to $182.9 million, outpacing the 15% growth rate that most investors were looking to see. Adjusted net income climbed at a more impressive 32% pace, to $18.7 million, and that produced adjusted earnings of $0.40 per share. That was better than the consensus forecast among those following the stock, for $0.39 per share.

From an operational standpoint, Envestnet showed similar performance to what we've seen in past quarters. Total platform assets climbed to $1.38 billion, up more than 25% from where the company started the year. Total platform accounts rose to 6.93 million, which was up more than 830,000 accounts in just the past 12 months. The total number of advisors using Envestnet's fintech system came just shy of reaching the 60,000 mark, up from just over 54,000 a year ago.

Underpinning those gains was a strong rise in assets under management or administration, which rose by more than $100 billion since the beginning of 2017. Net inflows represented more than half of that total increase, while favorable market impacts accounted for $49 billion in increased assets. The number of fee-based accounts using Envestnet's capabilities climbed above the 1.9 million mark.

Envestnet, once again, got balanced performance from its two main business segments. The core business enjoyed an 18% rise in adjusted revenue, while the Yodlee business came in at 14% growth. Profit growth was stronger at the core Envestment division, coming in at more than 30%. That was more than double the 14% rise in adjusted pre-tax operating earnings that Yodlee squeaked out.

CEO Jud Bergman celebrated 2017. "The fourth quarter completed a year of solid organic growth in revenue, adjusted EBITDA and earnings for Envestnet," Bergman said, "driven by strong execution and a healthy market environment." The CEO also noted that efforts to broaden the scope of its financial-information platforms have been instrumental in attracting clients.

Can Envestnet keep doing well?

Envestnet has high hopes for 2018. The acquisition of FolioDynamix offers the opportunity to bring on new clients and find quick growth for its business. Having been completed in January, the FolioDynamix purchase brings on 28,000 advisors, 3.2 million accounts, and almost $900 billion in assets as of the end of 2017, and that will have a big impact on how the overall company does in the coming year.

Envestnet's guidance tried to put some numbers on those expectations. For the first quarter of 2018, Envestnet is looking for adjusted revenue of $192 million to $195 million, with the expectation that it will be able to produce adjusted earnings of $0.36 per share. Those numbers were mixed in investors' eyes, with most expecting slightly better bottom-line figures on weaker sales. For the full year, revenue expectations of $808 million to $823 million and adjusted earnings of $1.78 to $1.83 per share are relatively close to what investors are already expecting, although the company's numbers imply slightly faster revenue growth.

Envestnet didn't react sharply immediately following the report, and the stock was up less than 1% in after-hours trading following the announcement. More broadly, if Envestnet can keep finding ways to grow through both strategic acquisitions and enhancing the power of its products, then even a market downturn might not be enough to stop the company from seeing further success.

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