It’s not just RIAs that are keen on ramping up their subscription fees.
After cementing two blockbuster deals in the first half of the year, Envestnet is landing larger enterprise clients willing to pay for more services on an ongoing basis, CEO Jud Bergman told analysts on a second quarter earnings call. The leading turnkey asset management platform increased subscription-based revenue 33% from the year-ago period, due in part to the acquisition of
Of the $228 million in adjusted revenue, about $11 million came from MoneyGuide and PortfolioCenter combined, said Chris Curtis, CFO of the Wealth Solutions business in an email. Overall subscription growth increased 18% if you exclude contributions from the two acquisitions.
Envestnet’s main targets are firms willing to pay at least $100,000 per year, Bergman said. Less than a decade ago, the average advisory firm paid less than $20,000 annually.
“We think that there is significant upside in the revenue-per-advisor on the subscription side,” said Bergman. “And that's the result of bringing out new products, new offerings and we expect that that's going to continue.”
In fact, adjusted subscription-based revenue accounted for 57% of adjusted net revenues for the second quarter, according to Envestnet CFO Pete D’Arrigo. “We do continue to diversify the markets we are addressing and the products we're offering within that segment beyond just investment managers,” D’Arrigo said during the call.
Although terms of the PortfolioCenter deal were undisclosed, the transaction was “immaterial” to Envestnet’s overall balance sheet when it was acquired in February. The goal was to transition existing PortfolioCenter clients onto the Tamarac platform and upsell them to premium products.
However, Envestnet’s rival firms had the same idea, leading to a
So, how did Envestnet fair?
On the earnings call, Bergman cited 50 new long-term contracts that had been tacked on since the deal was announced in March. “Annual subscription revenue will increase meaningfully for these firms once they fully leverage Tamarac's platform offerings,” he said.
Subscription-based revenue is expected to climb to $101 million on an adjusted basis next quarter, up approximately 34% compared to the prior year period, D’Arrigo said.
The other blockbuster deal,
Nearly two million financial plans had been created using MoneyGuide solutions in the 12-month period ending in March,
The Chicago-based TAMP has $3.3 trillion in platform assets and 11.5 million investor accounts, according to Bergman. Nearly 100,000 advisors now use Envestnet's wealth management technology. Envestnet Yodlee's data aggregation platform has more than 24 million active users.
However, Envestnet will have to contend with headwinds, Bergman said. An ongoing dispute with a technology provider has caused some loss of revenue for Envestnet | Yodlee after the vendor pulled its technology from the Envestnet platform. The data analytics startup
Bergman expects the dispute to negatively impact revenues through the end of 2019.
