Key Takeaways NTAM will offer its institutional-quality direct indexing solution on Envestnet.The Envestnet platform enables customized equity portfolios with factor tilts, exclusions, and tax efficiency.The partnership expands NTRS's distribution for personalized, tax-efficient UHNW portfolios.Northern Trust Asset Management (“NTAM”), an investment management division of Northern Trust Corporation (NTRS) , has announced a partnership with Envestnet to offer its institutional-quality, tax-managed direct ind ...

Core Viewpoint - Envestnet has been sanctioned by a Delaware federal court for destroying evidence that could support allegations made by FinancialApps in an ongoing lawsuit, allowing the case to proceed to trial [1][2]. Group 1: Legal Proceedings - Judge Jennifer L. Hall's decision allows FinancialApps' case against Envestnet and its former subsidiary Yodlee to move forward [1]. - The court appointed Chad S.C. Stover as a special master to investigate FinancialApps' allegations against Envestnet [2]. Group 2: Allegations and Evidence - FinancialApps alleges that Envestnet approached them in 2016 to license their product "Risk Insight," which assesses credit applicants for financial institutions [2]. - In 2019, FinancialApps suspected that Envestnet/Yodlee might steal their technology, leading to a cease-and-desist letter and a lawsuit claiming theft of trade secrets [3]. - FinancialApps claims that Envestnet lost or destroyed evidence that could substantiate their allegations shortly after filing their complaint [3]. Group 3: Data Management and Implications - Envestnet/Yodlee canceled their subscription to Papertrail, a logging app that could provide crucial data regarding access to Risk Insight functionality [4]. - The cancellation of the subscription led to automatic deletion of data, despite legal counsel advising retention of potentially relevant evidence [5]. - Stover's report indicated that there was no substitute for the Papertrail data, and a jury should be allowed to presume that the data would have been unfavorable for Envestnet [6].

Core Insights - Envestnet has launched professionally managed model portfolios featuring interval funds on its WealthTech platform to meet the increasing demand for alternative investments among high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients [1][2] - The new offerings aim to provide seamless access to institutional-grade solutions for advisors, integrating semi-liquid and liquid strategies for easier allocation to alternatives [2][3] Product Offerings - The Franklin Templeton Multi-Manager HNW Portfolios include five risk-based options with a strategic 10% allocation to alternatives, designed to enhance income potential and simplify access to private markets [3] - BlackRock's Multi-Asset Income with Private Markets Models are structured as Fund Strategist Portfolios with a minimum investment of $25,000, blending public and private credit along with dividend-focused equities across three risk-based allocations [4] Operational Considerations - Envestnet has established operational protocols for advisors regarding Limited Trade Window (LTW) funds, emphasizing the importance of observing redemption windows and managing liquidation responsibilities [5][6] - The company highlights the necessity for wealth management firms to sign agreements with Envestnet to enable LTW fund capabilities, reflecting the growing trend of advisors allocating to alternative investments [5] Market Context - The shift towards alternative investments is driven by the shrinking public markets and the need for diversified portfolios, as noted by Envestnet's Co-CIO Dana D'Auria [2] - With over half of alternatives held by HNW and affluent investors, the demand for expanded capabilities and access on Envestnet's platform is critical for advisors [5]

Core Insights - CAIS, a New York City-based alternative investment platform, has expanded partnerships with Envestnet, Orion, and Vestmark to enhance the management of public and private assets for users [1][3] Group 1: Partnerships and Integrations - The new partnerships will allow users to manage the full lifecycle of alternative investments, reducing operational friction in onboarding, trade processing, fund administration, and custodial connectivity [4] - The integration with Envestnet will provide advisors a single platform to source, allocate, and oversee alternative investments, transforming portfolio management across asset classes [5] - Orion Wealth Management emphasizes that collaboration with CAIS will streamline the integration of public and private investments, enhancing efficiency and transparency for clients [5] - Vestmark's integration with CAIS aims to create a modern foundation for advisors to build diversified portfolios and operate more efficiently [5] Group 2: Industry Context and Trends - The announcement follows CAIS's earlier capability to integrate with third-party TAMPs and managed account platforms, indicating a trend towards expanding access to private markets [2][3] - The industry is witnessing a convergence of technology and alternative investments, which is redefining wealth management practices [5]

Market Overview - The Open Banking Solutions Market is projected to grow from USD 5.5 billion in 2023 to USD 11.7 billion by 2028, reflecting a Compound Annual Growth Rate (CAGR) of 16.0% during the forecast period [1] Market Drivers - Increasing consumer preference for mobile apps for banking transactions, which facilitate seamless fund transfers, bill payments, and account management [1] - The rise of web portals that serve as comprehensive platforms for digital banking, enhancing transparency and control for users [1] - Growing demand for cloud-based solutions among financial institutions, driven by compliance requirements and the need for better visibility for borrowers and lenders [5][8] Technology Trends - Mobile apps are becoming essential tools in the digital channel for open banking solutions, providing users with convenience and accessibility to manage finances on the go [4] - Cloud deployment is expected to record a higher CAGR, offering scalable and cost-effective infrastructure that enhances agility and operational efficiency for banks and fintech companies [8] Market Segmentation - The third-party providers (TPPs) segment is anticipated to hold a larger market share, acting as intermediaries between banks and customers, and leveraging standardized APIs for account information services and payment initiation [7] - TPPs include Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs), empowering consumers with greater control over their financial data [7] Competitive Landscape - Key players in the Open Banking Solutions Market include Plaid (US), Envestnet (US), Tink (Sweden), Finicity (US), Trustly (Sweden), MX Technologies (US), Worldline (France), Volt.io (UK), and Temenos (UK) [5]

Core Viewpoint - Envestnet plans to sell its subsidiary Yodlee to private equity firm STG, allowing Envestnet to focus on its core wealth management offerings [1][4]. Group 1: Transaction Details - The sale of Yodlee is expected to close in the third quarter, pending customary closing conditions [2]. - STG specializes in investing in innovative software, data, and analytics firms, and Yodlee will be integrated into STG's global technology portfolio [2]. Group 2: Strategic Implications - STG's managing director, Marc Bala, stated that the partnership will enhance Yodlee's investment in product innovation, customer success, and long-term growth [3]. - Yodlee aims to focus on technological innovation and improved solutions for the financial sector with STG's support [3]. Group 3: Envestnet's Focus - Envestnet's CEO, Chris Todd, indicated that the transaction will enable the company to concentrate on its core offerings, including its wealth management platform [4]. - Envestnet retains access to Yodlee's data aggregation technology, which is essential for financial advisors [5]. Group 4: Company Background - Envestnet became a private company in November after being acquired by Bain Capital affiliates in a deal valued at approximately $4.5 billion [5]. - The company reported $6.5 trillion in platform assets, over 20 million accounts, and services more than 111,000 financial advisors [6]. - Envestnet is enhancing its wealth management solutions by investing in tax intelligence, trading flexibility, client engagement, and advisor productivity [6]. Group 5: Historical Context - Envestnet acquired Yodlee in 2015 for a cash and stock transaction valued at about $660 million [7].

Core Insights - Zacks Premium provides tools for investors to enhance their stock market engagement and confidence, including daily updates, research reports, and stock screens [1][2] Zacks Style Scores - The Zacks Style Scores are indicators that rate stocks based on value, growth, and momentum methodologies, helping investors identify stocks likely to outperform in the next 30 days [3][4] - Stocks are rated from A to F, with A indicating the highest potential for outperformance [4] Categories of Style Scores - **Value Score**: Focuses on identifying undervalued stocks using ratios like P/E, PEG, and Price/Sales [5] - **Growth Score**: Evaluates a company's financial health and future outlook based on earnings, sales, and cash flow [6] - **Momentum Score**: Assesses trends in stock price and earnings estimates to identify optimal buying times [7] - **VGM Score**: Combines the three Style Scores to highlight stocks with attractive value, growth potential, and momentum [8] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to guide investors in building successful portfolios [9] - Stocks rated 1 (Strong Buy) have historically achieved an average annual return of +25.41%, significantly outperforming the S&P 500 [10] Stock Selection Strategy - To maximize returns, investors should target stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [12] - Stocks with lower ranks but high Style Scores may still pose risks if they have downward-trending earnings forecasts [13] Company Spotlight: Envestnet (ENV) - Envestnet, founded in 1999, is a leading provider of wealth management and financial systems [15] - ENV holds a Zacks Rank of 2 (Buy) and has a VGM Score of A, with a Momentum Style Score of B [16] - ENV's shares have increased by 0.3% over the past four weeks, and its earnings estimate for fiscal 2024 has been revised upward [16][17]

Core Viewpoint - Envestnet, Inc. (ENV) reported mixed third-quarter 2024 results, with earnings exceeding estimates while revenues fell short [1][2]. Financial Performance - Earnings per share were 70 cents, beating the Zacks Consensus Estimate by 2.9% and reflecting a 25% year-over-year increase [2]. - Total revenues amounted to $345.9 million, missing the consensus estimate by 1.2% but showing a 9.2% year-over-year growth [2]. - Asset-based recurring revenues reached $225 million, accounting for 65% of total revenues, and increased by 16% year-over-year [4]. - Subscription-based recurring revenues were $115.4 million, remaining flat compared to the same quarter in 2023, contributing 36% to total revenues [4]. - Professional services and other non-recurring revenues declined by 30% year-over-year to $5.6 million [4]. - Adjusted EBITDA rose by 23% year-over-year to $80.5 million, with an adjusted EBITDA margin of 23.3%, up 270 basis points [5]. Cash Flow and Debt - Cash and cash equivalents stood at $193.4 million, up from $122 million in the previous quarter [6]. - Total debt at the end of Q3 2024 was $892.5 million, unchanged from the previous quarter [6]. - Operating activities generated $95.4 million in cash, with capital expenditures of $767 thousand and adjusted free cash flow of $76.2 million [6]. Stock Performance - ENV's shares have increased by 67.2% over the past year, outperforming the industry and the Zacks S&P 500 composite, which grew by 35.1% and 33%, respectively [3].

Financial Performance - Envestnet reported a non-cash impairment charge to goodwill of $96.3 million due to a strategic shift in the Envestnet Data & Analytics segment as of June 30, 2024[108]. - The company recognized a $19.5 million non-cash gain from the deconsolidation of a private company's assets and liabilities effective April 1, 2024[109]. - Envestnet's asset-based recurring revenue has been steadily increasing since the three months ended March 31, 2023, following a downturn in 2022[113]. - The company incurred $14.2 million in write-offs of net capitalized internally developed software costs during the nine months ended September 30, 2024[110]. - Envestnet has experienced losses from operations in every quarter since December 31, 2021, except for September 30, 2023, March 31, 2024, and September 30, 2024[112]. - Net income attributable to Envestnet, Inc. for the three months ended September 30, 2024 was a loss of $1,661 thousand, compared to a profit of $7,091 thousand in the same period last year, representing a decline of 123%[126]. - Net loss attributable to Envestnet, Inc. was $78.3 million for the nine months ended September 30, 2024, compared to a net loss of $55.6 million in the same period of 2023, representing a 41% increase in loss[1]. - The total income (loss) from operations for the nine months ended September 30, 2024, was $(59,833), compared to $(25,768) for the same period in 2023, reflecting a decline in profitability[227]. Revenue and Growth - Total revenue for the three months ended September 30, 2024, was $345.9 million, a 9% increase from $316.8 million in the same period of 2023[127]. - Total recurring revenue for Envestnet Wealth Solutions was $307,697 thousand for the three months ended September 30, 2024, a 12% increase from $274,901 thousand in the same period last year[126]. - Total recurring revenue for the nine months ended September 30, 2024, was $997.9 million, a 10% increase from $903.6 million in the same period of 2023[1]. - Total AUM/A reached $495,995 million as of September 30, 2024, up from $430,846 million at the end of December 2023, reflecting a growth of 15.1%[123]. - Subscription conversions for the three months ended September 30, 2024 totaled $76.2 billion, including $13.6 billion in new client conversions[122]. - Asset-based recurring revenue increased by $31.1 million, or 16%, reaching $225.0 million, primarily due to an increase in asset values[128]. - Total AUM/A reached $1,006,448 million as of September 30, 2024, up from $846,847 million at the end of December 2023, marking an 18.8% increase[123]. Operating Expenses - Total operating expenses increased by $22.7 million, or 7%, totaling $338.9 million, driven by higher general and administrative expenses[127]. - Employee compensation decreased by $9.8 million, or 9%, to $103.5 million, mainly due to reductions in severance and payroll-related expenses[135]. - General and administrative expenses rose by $13.3 million, or 27%, primarily due to merger-related costs and other charges[137]. - Total operating expenses increased by $125.2 million, or 13%, for the nine months ended September 30, 2024, compared to the same period in 2023[1]. - Employee compensation decreased by $33.4 million, or 10%, for the nine months ended September 30, 2024, primarily due to reductions in severance and salaries[150]. Strategic Initiatives - The merger with Bain Capital Private Equity is expected to close in the fourth quarter of 2024, with shareholders approving the merger on September 24, 2024[107]. - Envestnet's strategic initiatives aim to reshape the organization and reduce future operating expenses, despite negatively impacting short-term results[114]. - The company has changed its reportable segments as of October 1, 2023, to better reflect its operational structure[119]. Cash Flow and Liquidity - Free cash flow for the three months ended September 30, 2024, was $123.343 million, a significant improvement from a negative free cash flow of $(15.626) million in the same period of 2023[224]. - Net cash provided by operating activities for the three months ended September 30, 2024, was $186.409 million, compared to $73.766 million for the same period in 2023, indicating a substantial increase of 152.5%[224]. - The company plans to actively manage cash balances to ensure liquidity requirements are met for both short and long-term operations[231]. - As of September 30, 2024, the Company had total cash and cash equivalents of $193.4 million, with no amounts outstanding under the Revolving Credit Facility and $500.0 million available to borrow[234]. Impairment and Non-Cash Charges - Goodwill impairment increased by $96.3 million, or 100%, for the nine months ended September 30, 2024, due to a non-cash impairment charge recognized in the Envestnet Data & Analytics segment[154]. - The company reported a goodwill impairment of $96.269 million for the nine months ended September 30, 2024, with no such impairment reported for the same period in 2023[222]. - Non-cash compensation expenses for the nine months ended September 30, 2024, totaled $53,204, compared to $58,141 for the same period in 2023, showing a decrease of approximately 8.3%[227][228].

Core Insights - Envestnet reported revenue of $345.95 million for Q3 2024, reflecting a 9.2% increase year-over-year, with EPS at $0.70 compared to $0.56 in the same quarter last year [1] - The revenue fell short of the Zacks Consensus Estimate of $350.27 million, resulting in a surprise of -1.23%, while the EPS exceeded expectations by 2.94% [1] Financial Performance Metrics - Total Assets Under Management (AUM) stood at $773.49 billion, significantly below the average estimate of $965.45 billion [3] - Assets Under Administration (AUA) were reported at $398.08 billion, compared to the estimated $482.7 billion [3] - Recurring revenue from asset-based sources was $224.98 million, slightly below the average estimate of $225.33 million, marking a 16% year-over-year increase [3] - Total recurring revenue reached $340.38 million, compared to the average estimate of $344.03 million, representing a 10.2% year-over-year increase [3] - Professional services and other revenue amounted to $5.57 million, below the average estimate of $6.23 million, indicating a 30.5% year-over-year decline [3] - Subscription-based recurring revenue was $115.40 million, compared to the average estimate of $118.70 million, with a modest year-over-year increase of 0.4% [3] - Revenue from Envestnet Data & Analytics was $34.43 million, below the average estimate of $35.30 million, reflecting a 17.7% year-over-year decline [3] - Envestnet Wealth Solutions generated $311.52 million, slightly below the average estimate of $312.65 million, with a year-over-year increase of 13.3% [3] Stock Performance - Envestnet's shares have returned +0.4% over the past month, underperforming the Zacks S&P 500 composite's +3.2% change [4] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [4]