Financial services companies rely on the health of the markets to bring them business from the large institutions that are their best customers. With a bull market that's lasted almost a decade at this point, Wall Street has never been stronger, and that's given a big boost to financial information technology specialist Envestnet (ENV 0.02%). Yet as volatility returns to the stock market in early 2018, some investors feared that Envestnet's time in the sun might soon end and give way to more difficult conditions looking ahead.
Coming into Wednesday's first-quarter financial report, Envestnet investors had high hopes that the fintech specialist would continue to produce good growth. Envestnet exceeded expectations, and if anything, customers seem to be more appreciative of its services as industry conditions grow more uncertain. As connectivity among financial institutions becomes more critical, Envestnet will likely see even more customers come through its doors.
Image source: Envestnet.
How Envestnet started the year strong
Envestnet's first-quarter results continued the good momentum that the fintech company generated in 2017. Revenue was higher by 25% to $198 million, outpacing the already ambitious 23% growth rate that investors had wanted to see. Adjusted net income soared by more than 50% to $17.7 million, and that produced adjusted earnings of $0.37 per share. That topped the consensus forecast among those following the stock by $0.01.
The acquisition of FolioDynamix in January had a monumental impact on Envestnet's fundamental metrics. Total platform assets soared by more than half in just three months to $2.57 trillion, and total platform accounts rose by more 3.1 million in just a single quarter to top the 10.1 million mark. The acquisition also helped push the number of advisors using the platform to nearly 88,000, up from just 60,000 a year ago.
Gains in non-subscription assets were more modest, but they also gave a better sense of how Envestnet's business did organically, independent of the FolioDynamix acquisition. Assets under management rose only slightly from end-of-2017 levels, but the $143.9 billion was still 27% higher than it was a year ago. Assets under administration saw an even bigger jump of 42% to $353.4 billion. Net flows were mixed, with outflows of $4.2 billion in assets under management, but inflows of $15.7 billion on the administration side of the business. Counts of fee-based accounts jumped to more than 2.11 million, with more than 74,000 new accounts coming organically rather than through FolioDynamix. Performance between the legacy Envestnet business and the Yodlee segment was once again well-balanced, with only slight disparities in relative changes.
CEO Jud Bergman was pleased with how things went. "Envestnet's growth continued in the first quarter," Bergman said, "with revenues, adjusted EBITDA, and adjusted earnings per share exceeding our expectations." The CEO pointed to both good internal performance and the FolioDynamix acquisition as playing key roles in pushing the company forward.
What's ahead for Envestnet?
Envestnet fully expects to maintain its momentum. Bergman thinks that the best way to do so will be to "enhance our operating system for wealth management that connects advisors, enterprises, clients, and service providers and enables better financial outcomes through better intelligence."
Envestnet's financial outlook seemed to be in line with that enthusiasm. For the second quarter, the fintech company expects adjusted revenue of $197 million to $200 million, and earnings should be around $0.37 per share on an adjusted basis. Envestnet didn't make huge changes to its full-year fiscal 2018 guidance, but it did narrow its revenue range slightly on both ends, giving new projections for between $811 million and $821 million. The company kept its adjusted earnings guidance for $1.78 to $1.83 per share.
Envestnet shareholders didn't have a big reaction to the news, and the stock rose only slightly in Thursday morning's session following the late-Wednesday announcement. Going forward, investors can expect to see more positives emerge from the FolioDynamix acquisition, and it'll be interesting to watch what new opportunities the combined company finds as they integrate more fully into a single cohesive unit.
