Envestnet Inc (ENV) 2012 Q3 法說會逐字稿

Good day, and welcome to the Envestnet Third Quarter 2012 Earnings Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Mr. Chris Curtis, Senior Vice President and Treasurer. Please go ahead, sir.

Thank you, and good afternoon, everyone. With me on today's call are Jud Bergman, Chairman and Chief Executive Officer, and Pete D'Arrigo, Chief Financial Officer.

Our third quarter 2012 earnings press release can be found at Envestnet.com under the Investor Relations section.

During this conference call, we will be discussing certain non-GAAP information, including adjusted revenues, adjusted EBITDA, adjusted net income, and adjusted net income per share. This information is not calculated in accordance with GAAP and may be calculated differently than other companies' similarly titled non-GAAP information. Quantitative reconciliations of our non-GAAP financial information to the most directly comparable GAAP information appear in today's press release.

During the call, we will also be discussing certain forward-looking information. These discussions are not guarantees of future performance and, therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Please refer to our most recent SEC filings, as well as our earnings press release, which are available on our website, for more information on factors that could affect these matters.

This call is being webcast live and will be available for replay for one month on our website. All remarks made during the call are current at the time of the call and will not be updated to reflect subsequent material developments. We will take questions after our prepared remarks.

And with that, I will turn the call over to Jud.

Thank you, Chris. Good afternoon, everyone. I add my own welcome and thanks for participating on today's call. Envestnet had a solid third quarter as we continue to enable and benefit from the trends in our business toward fee-based advice and advisor service models that are transparent and free from conflicts. We are delivering on our near term priorities, which include, first, growing our business by adding advisors of assets, second, integrating Tamarac and Prima into the Envestnet organization and product suite, and third, onboarding conversions as they work their way through our pipeline of new business opportunities.

I'd like to some--I'd like to provide some more detail on our progress in meeting these priorities. Growth in our business remains strong. During the third quarter we added 690 new advisors, ending September with nearly 16,000 advisors with assets under management or administration on our platform. That's up 11% from one year ago. Gross sales of assets under management or administration during the quarter were $7.7 billion, excluding conversions, an increase of 32% over the prior period a year ago.

Redemptions averaged 1.9% per month during the quarter, down from last year's 2.5% monthly rate, and as a result, net flows were significantly stronger in this past quarter when compared to the same quarter one year ago. Regarding our integration of Tamarac and Prima's research offerings into the Envestnet organization and product suite, our combined Prima and PMC teams have worked to bring an enhanced research offering to our clients, as well as introducing some very promising new portfolio solutions for our advisors' clients.

Tamarac continues to build on its recent record of very solid growth as we gain further traction with large registered investment advisory firms. Additionally, we continue to onboard significant assets through new client conversions. During the third quarter, conversions totaled some $4.3 billion, nearly all of which were in licensing arrangements. We expect conversions will continue to contribute meaningfully to our organic growth in the coming quarters.

We are helping advisors grow their practices and win in the marketplace for affluent and high net worth clients because our integrated and open architecture wealth management platform, and also our ability to help advisors do right by their clients.

I'd like to provide some color on some of the key trends that we are both enabling and benefiting from. First, in the trend toward independent, unconflicted business models for advisors, [Saruly] recently reported that RIA investor assets grew by nearly 50% between 2008 and 2011, and duly registered advisors' assets grew by more than 140%, while total channel assets for retail grew by only 29%. To quote Saruly, the widespread growth of technology platforms has been driving this trend. Advisors can move into the independent world and still step up their game, offering investments and advice that rival anything a full service firm can offer. There is now much less resistance among advisors to making such a transition.

This is good news not only for advisors, but for Envestnet. And in keeping with this trend, so far this year, according to Investment News, breakaway advisors are bringing about a shift of some $72 billion in client assets. The industry is on track to break the 2010 record of $79 billion in advisor asset shifts.

Interestingly, the percentage of assets from wirehouse breakaways going to another wirehouse, has declined over the past two years, while the proportion of assets moving to the independent space has grown from 16% to 29%. Regarding the ongoing shift from commission-based compensation and towards fee-based compensation, fee-based assets now total more than $4 trillion. A recent price metrics analysis found that advisors who increased their fee-based assets by more than 25% over the last three years saw their revenue increase by more than two times the rate as the revenue growth for the average advisor. So those advisors who were growing their fee-based practices are growing significantly faster than the typical or average advisor. Again, this is good for investors, their advisors, and also for Envestnet.

I'll conclude with a few remarks in a moment, but first I would like to turn it over to Pete D'Arrigo, our Chief Financial Officer, to discuss our financial performance in more detail.

Thank you, Jud. Good afternoon, everyone, and thank you for joining our call today. For the 2012 third quarter, revenues from assets under management or administration grew 28% to $33.2 million, compared to $26 million in the third quarter of 2011. Licensing and professional services revenue in the third quarter was $9.1 million, up 49% from $6.1 million a year ago, primarily due to the addition of Tamarac and Prima, which were both included for the entire quarter. As a result, adjusted revenues increased 33% to $42.7 million in the third quarter, from $32 million in the third quarter of last year.

Our cost of revenues increased to $15.1 million for the quarter from $11.4 million last year. As a percentage of revenue from assets under management or administration, cost of revenues was 45.4%, compared to 43.9% in the third quarter of 2011. Cost of revenues now includes expense related to Prima and Tamarac. We reported GAAP net income in the third quarter of $600,000. Included in the GAAP results are ongoing non-cash expenses, approximately $2.2 million higher than the prior year for stock-based compensation and amortization of acquired intangibles.

On a non-GAAP basis, adjusted EBITDA was $6.4 million for the third quarter. Adjusted EBITDA margin came in at 14.9%, a sequential improvement of 110 basis points over the second quarter of this year. Adjusted earnings per share were $0.09 in the third quarter.

Looking forward, we expect our effective fee rate in the fourth quarter to be about 14.8 basis points on our September 30 AUMA asset base of $93.5 billion. We believe licensing and professional services revenue in the fourth quarter this year will be up 55% to 58% year-over-year on an adjusted basis, reflecting the full quarter of revenue for both Prima and Tamarac. Adjusted revenues for the fourth quarter should increase between 43% and 45% year-over-year.

We expect fourth quarter cost of revenues to be about 45% of AUMA revenue. We expect our adjusted EBITDA margin to be between 15.9% and 16.1% in the fourth quarter of 2012. We expect that our adjusted EBITDA margin will continue to expand into the upcoming quarters.

With that summary, I'll turn it back to Jud for his closing comments.

Thank you, Pete. Through Envestnet's ongoing innovation in wealth management software and advanced portfolio solutions, we believe we are emerging as the innovative leader in wealth management. This leadership translates into significant growth opportunities for us, both organically and through strategic opportunities to further transform the wealth management industry as we empower advisors to improve client outcomes and build their fee based practices. Our long term targets are to grow top line revenue at 20% per year, and to grow adjusted cash flow by 25% per year, reflecting improving operating leverage in our business.

I thank you again for your time this afternoon. We thank you for your support of Envestnet. And with the conclusion of these prepared remarks, we are happy to take your questions.

Thank you. (Operator Instructions) And we'll take our first question from Hugh Miller with Sidoti.

Good evening.

Hi, Hugh.

I had a question about kind of looking at the growth we've seen in kind of the AUMA assets per advisor in that category, and it continued to kind of slowly increase, now standing I think at about $6 million. And was wondering, as you look at those advisors, how far have you penetrated into their books? Like how--as you look at that, what's the potential for really seeing a meaningful expansion from that, based on the assets that are eligible to be managed by the platform?

So we look at that and it's very different depending on the channel that the advisors are in. In the enterprise channel, which comprised--is comprised primarily of independent broker dealer representatives, these are practices that have between $25 million and $40 million per advisor in the practice, but on average only 25% to 30% of their practice is in fee-based assets today. So the real growth driver there for us is to help them transition and transform their practice from commission dominant practices to fee-based dominant practices. And that's something that happens not overnight, but over time. So we believe that they're significant and we measure it significant long term potential to go deeper into these practices and to add meaningfully to the average asset under management or administration by an independent broker dealer representative.

Within the registered investment advisor channel, you have larger practices, an average industry-wide of around $85 million per RIA, although with Tamarac, the average practice is significantly higher than that, as well as with Envestnet's traditional RIA business. It's also higher than that. So there the practices seem--the practices are larger, and unlike the transitioning advisor, they are nearly all or all fee-based in their practice. So the opportunity profile there is to go deeper with additional services or different products and also to add our penetration of the registered investment advisor channel.

So the two channels pose unique opportunities and we're well positioned to continue to go deeper on each of those.

Okay. And within the RIA channel especially, what's the kind of feedback that you hear about the challenges of really kind of penetrating deeper into the book?

Well, the RIA channel is--right now we're finding a lot of success by broadening the service offering. If we're providing performance reporting today, it may be adding rebalancing or perhaps access to separate account managers. If it's a rebalancing client, today we're able to perhaps offer an integrated practice management suite that might include CRM or performance reporting. So it's additional services and product access as we begin to prove up the relationships that we have with those advisors.

Okay. And you commented about with the Prima and the Tamarac acquisitions and the integration process there and some of the enhancements that you're making with the product offerings, just as we think about--obviously you gave some color on the revenue growth we should expect in the fourth quarter. But as we head into 2013, what are the primary areas that you're really focusing on in order to grow the business there?

Well, the business there is really an extension of our core business--of our business, which is ore advisors and deeper share of practice with those advisors. So we're incorporating the product offerings into the overall investment product suite, but the strategy is to just go deeper with advisors and go deeper with their share of practice. We've got more ways to do that now with the expanded product set.

Okay. And last question I had was during the first quarter of the year, you guys I guess had made a comment about how as you looked out at that point going over the next five quarters at the conversion rate would likely kind of accelerate. And we've seen that here. I think back then the average conversion rate per quarter was probably a little under $3 million, now we're a touch over $4 million. But is that kind of what you were expecting at that point and this is kind of a good flat run rate, or would you anticipate that there's the opportunity to see acceleration from the current pace?

Well, I would be very cautionary about any guidance on conversions. On the one hand, we are very encouraged by the robust level of conversions we have at various stages of our pipeline. That's good. On the other hand, I think we've tried to be very clear that these conversions are lumpy. They come in bunches. And there will be ups and downs quarter to quarter that we just--we expect in our business. Overall, over a three-quarter or four-quarter or five-quarter period looking forward, we expect you're going to be seeing nice increases of conversions versus the same relevant period of three quarters, four quarters, five quarters, looking backward. But I think it would be overly analyzing and trying to predict with too fine a matrix or a set of metrics to try to normalize these and say now we're at a $5 billion rate per quarter.

Yes. Okay. I understand. Thank you.

And we'll take our next question from Chris Shutler with William Blair.

Hey, guys. Good afternoon.

Hi, Chris.

Hey, Chris.

I guess first, could you just give a quick update on pricing trends that you're seeing in the market? Are you getting a little bit over one basis point still on reporting, about eight for advisor suite, and low 40s for PMC? Is that still sort of the right range to be thinking about?

Yes, we've seen within the performance reporting area stability in pricing, and also stability in pricing maybe even strengthening on the assets under management area. But the reason for the pricing strengthening in AUM slightly is a product mix issue, not because there's more pricing power within PMC's offering. Also for the full advisor suite we're seeing good price stability. Within the overall area, the only area that we're seeing some increasing competition is for the subset offering, which services the advisor portfolio manager with the rebalancing and trading solution, which is a subset of our advisor suite assets. But overall, all the product lines are pretty stable in terms of pricing. There's ups and downs within each one, depending on is it fixed income or equity dominant, is it a separate account or ETF dominant in terms of the underlying vehicles? And then, performance reporting though has stabilized and we haven't seen downward pressure on there all year.

Okay, thanks, Jud. And then, given kind of the rough start here to the fourth quarter for market, just curious if you're still standing behind the comments you made last quarter that you can grow adjusted EBITDA 100 basis points to 200 basis points sequentially beginning in Q4. I mean, it sounds like that's the case, but just wanted to get a little bit more color there. And then, you talked about a market neutral environment I think on the last call as what would be the environment that you could generate that type of growth in. I mean, what--can you define market neutral for us?

Well, yes. Just--it's now we're kind of in a real time opportunity to provide some better examples of what we mean by that. So a market neutral environment would be one where there is not excessive volatility and we are not counting on market movement to increase revenue for us in our projections or in our business. So on the first piece of the margin progression, we would expect that the margin progression that we had outlined would continue, albeit at the lower end of that range for the fourth quarter. There's a fair amount of visibility we have in our revenue for the fourth quarter because of how we billed on a license basis and on an AUA or AUM basis. But there still is some delta that we can't quantify at this point because some of our assets do get billed based on quarter-end values, as opposed to quarter--beginning quarter values. And then, there is also the business that does come in during the quarter, which we have made some estimates on. But we--our estimates could be off.

So clearly, that portion of the business that will have--if the quarter were to end today, that portion of the business that's based on quarterly billing and arrears would pull us down a little bit from where we started the quarter at. But we still feel comfortable at these levels that we're going to be able to hit that margin expansion range at the lower end of what we had identified. Now, what are things that could make us go towards the high end of that range? A quarter of very large conversions during the quarter we may find in the subsequent quarter that the range would be toward the mid or even higher levels of that range. And then also we have identified that over time consolidating acquisitions are an important part of our strategic plan. And as we gain scale and operating leverage, as we bring more assets to the platform, a smaller or medium sized consolidated transaction would push us to the high end of that quarterly range or even higher.

So long answer, but yes, we're comfortable with that range in the fourth quarter.

Okay. Thanks, Jud. And then, I guess on that last point, on the acquisition front, I mean, are you still seeing a good number of opportunities on that consolidation type of opportunity?

There's--we expect that there is going to be opportunities in the coming quarters and years, yes.

All right. I'll let somebody else jump on. Thank you.

And we'll take our next question from Chris Donat with Sandler O'Neill.

Hi. Good afternoon, everyone. Jud, I just wanted to ask about the redemption rate. You commented that it was slower this past quarter than it had been a year ago. And comparing markets condition in 2012, a little more favorable than 2011--well, a lot more favorable. Anyway, I'm wondering if you--if that's the primary factor there or if there are other things going on, and then I guess also the implications for the fourth quarter given the choppier market we've had particularly this month.

So the redemption rate is pretty highly correlated although there's a fatter negative tail on redemption rates. But it's fairly highly correlated with VIX. As VIX comes down, so does--so do redemption rates although not as fast. So redemption rates go up just as quickly as VIX does. As VIX comes down, it takes longer for redemption rates to come down. Another factor with redemption rates is when there are fairly large reallocations of assets by advisors, there's a tendency of investors to sideline more of their assets, move it into cash. So a year ago the--certainly the perception of volatility in the third quarter among advisors and their investors was lower than it had been a year ago. And the movements out of one asset class to another, out of fixed income into equities or out of equities into fixed income or real assets or even alternative assets slowed in the third quarter.

And so, it's too early to give a picture for where we are in the fourth quarter. But if it looks like other fourth quarters, if volatility does stay up, we would expect the redemption rates to move up from the 1.9% that we had in the third quarter.

Okay, that's helpful. And then, in terms of revenue guidance on the licensing side, that 55% to 58% year-on-year, that compares to the third quarter growing only 49% year-on-year. And you've got the acquisitions with the full quarter. So I'm wondering, is that saying something about an acceleration in your Tamarac business or other businesses, or is there something in the year-on-year comparison that's going on there?

No. It's a confluence of things that are in that line compared to last year that are there and that were there last year, but aren't there last year, the things that we've added through the acquisition. So when you look at it sequentially, it's a shorter term reflection of just kind of a shorter period. The longer term growth in that though is consistent--what we see is still consistent with what we've out--laid out previously.

Okay. And then, just Pete, sort of on the accounting side, this deferred revenue number, this will ultimately fade away, right, that $240,000 this quarter and I think around $400,000 last quarter, the fair value adjustment?

Deferred revenue adjustment, it was about $600,000 last quarter and $400,000 this quarter. And that's certainly fading down. There'll be--I think it will all be gone by the end of the second quarter of next year. And the amount continues to get smaller as well. We'll be by the end of the year basically 90% through the total.

Okay.

So just about 10% of that left of the total amount. So the $600,000 and the $400,000 in the second and third quarter that we've already seen, that makes up about 75% of it.

Okay, thanks very much.

And we'll take our next question from Peter Heckman with Avondale Partners.

Good afternoon, gentlemen. Nice quarter. I had a couple of things--.

--Thanks, Peter.

No problem. I wanted to see--there's been a fairly significant amount of M&A amongst your competitors. And I wanted to see if you feel like there have been certain deals that have gone where they've created some type of opportunities, or if some of these consolidations have made you realize that there's some holes you'd like to fill.

You mean holes in the product suite?

Yes.

Well, no, there aren't any acquisitions or activity that's happened outside of our own that have identified any current holes or gaps that we're trying to solve for. We've got a very strong platform that does everything from the portfolio analytics to the [total] generation, the product selection, the rebalancing, the performance reporting. And this integrates into various CRM systems, as well as to several financial planning applications or financial planning providers. And we think that's the right way to enable and power the advisor - let them use a CRM or a financial planning package of their choice, and then integrate the wealth management, the rebalancing, and the performance reporting applications around that. So no, that's the latter part of your question.

The former part of your question is that--and help me understand it. It sounds like you were asking is--are any of the opportunities that are out there changing the competitive--?

--Right. If you--yes, you've had some cases where large custodian firms have acquired technology. You've had some instances where one technology company acquired some additional technology and that may be accelerated the sunset of something else that was being used. And so, I'm just trying to see if there has been some opportunity to--some new opportunities basically from some M&A activity or--inferring from your pricing comment, it doesn't sound like there has been a lot of change, but just wanted to check because there has been a fairly high level of M&A activity amongst your competitors.

Okay. So, yes, thank you. And we expect that there is going to be a fair amount of consolidation and additional opportunity in this space. So at one level, any merger or acquisition activity is by definition strategic. We understand that. But within the area of merger and acquisition activity, we think about transactions as falling into one of two opportunity profiles. One is the consolidating transaction. The other is more of a strategic. And we identify the strategic transaction as one that would bring us into a new market or bring us new capabilities in our platform or our portfolio offerings.

So we don't see near term opportunities (inaudible - technical difficulty) which is just another (inaudible - technical difficulty) question, do we see any gaps in our offering. So we currently don't see opportunities on the strategic side to enter new markets or to expand our platform with new services. However, on the consolidating side, we're going to--we are expecting a lot of activity coming up in the coming quarters and years and we're going to continue to look at those. We're going to be very disciplined as we look at those and we're going to be price sensitive acquirers. We've got an expectation of being able to deliver in the very short run returns on invested capital of 20% or more and the profile of a consolidating transaction, given the efficiencies that we expect, we would proceed very vigorously where that return profile results in long term ROIs of 25% and higher. But we're going to be very disciplined in it because the consolidating transaction is not something that improves the competitive position of the company from a product offering set. It does add scale and it does help with pricing, but we are not going to chase price in any consolidating transaction.

Okay. That's fair. A similar question, maybe a little bit differently, is have you seen the relative interest from your customers in terms of the way they're paying you for their services from--based on AUMA, a flat licensing fee, or in unbundled fee-based services? Has there been any change there and do you contemplate any major shifts between those revenue models?

No, we don't anticipate major shifts. We feel very well positioned with our pricing and service offering. We're able to offer unbundled licensing pricing, if the advisor or the firm wants more of a software type solution, and that ends up being AUA or license-based pricing then. Other advisors want more services, they want a trade assurance on their rebalancing or on their advisors' portfolio manager tools. They want billing administration that assures that there won't be any errors in the monthly or the quarterly billing cycle. So there are things that we do that enhance the service offering and lower the risk for the advisors. Some advisors want that and they're willing to pay for it. Other advisors want just the software and base [level] services. So we expect that this is going to continue to every--each one of our offerings will find its right marketplace. And some of the larger firms will opt for lower price and greater risk that they bring on. Some of the smaller firms will opt for greater pricing and at the same time take on lower risk as they move their business forward.

So we like how we've evolved and we like the pricing power that we've--that we're experiencing in the marketplace.

Okay. All right, I appreciate your feedback. Thanks.

(Operator Instructions) And we'll take our next question from David Grossman with Stifel Nicolaus.

Thank you. Good afternoon.

Hi, David.

Hey, David.

Hi. I'm wondering do you happen to--I just do some back of the envelope math and I was just wondering ex the impact of the Fidelity--the new Fidelity agreement, can you give us a sense of what the organic growth may look like in the quarter?

The third quarter?

Yes, and how that compared with the second quarter.

Ex Fidelity, so--.

--I'm just thinking, if you take Prima and Tamarac out, what did the growth rate look like in Fidelity on a year-over-year basis?

So the question is if we take out Prima and Tamarac, what's the growth rate at Fidelity?

No, what's the growth rate of the business adjusting for Fidelity.

And--.

--I don't have that at my fingertips, David. We can probably come up with that, but I don't have that at my fingertips.

Okay. And then, just--and sorry if I missed this or maybe in the--it was in the release. But when you look at those license revenue--or the conversions in the license area, obviously that's not in the growth sales numbers for AUMA. But how do we think about how that flows into revenue?

Well, over time license arrangements more or less reflect the assets that are there. But on license arrangements, it takes longer to make that adjustment. And I think that you should be thinking about how we--I don't know--we think about conversions that are asset-based in pricing, AUM or AUA, as having a much more immediate, like the next quarter effect on our revenue. We think about the license activity as indicating core acceptance of the platform and increased adoption of our solutions. But the avenue is not as immediate on the license side.

So the revenues that we'll see then on the license line in the fourth quarter will not necessarily reflect those conversions?

Not necessarily, that's correct.

Right. So Jud, how long do you think it takes based on the portfolio that you--or based on what you know about the conversion?

That's a hard question to answer because license arrangements by definition are longer term. A minimum of two years, as many as five years, so the average time to renewal on the license arrangements is probably, I don't know, 18 months to 30 months. And I'd certainly--there's a constant upgrade, so it's not 18 months to 30 months before you start seeing the effect. But as old license arrangements come to maturity, then you--then we expect to see the addition--the price adjust to new volumes.

Got it. Okay. And then, I guess, secondly, just on the margins--and maybe I'm not looking at this the right way. But since we got--or we had a tailwind from the market in the September quarter and it looks like you added 100 basis points to the EBITDA margin sequentially, was there something that would have absorbed the excess if we're--so let's say we're 100 basis points to 200 basis points up sequentially in a market neutral environment, and I think we had tailwinds this quarters. Is there a reason that it wouldn't have migrated to the higher end of that range, or even above, or were there other things happening that may have skewed the results?

I understand the question. If you look back at what we actually guided to in the third quarter, it was significantly less than the 100 because we were coming off of the opposite of the tailwind from the third to the second quarter. So we had guided in that third quarter to a number, Pete, 60 to 70 maybe?

20 to 70.

20 to 70.

Right.

And we had said that long term we had--that the 100 to 200 was something that we thought was doable. But we also guided in that third quarter to a number less than that. The tailwinds that you're seeing explain some or maybe even most of the difference between what we guided to and where we ended up.

I got it. Okay. And then, just one last question, perhaps for you, Jud. As you think about your acquisition strategy among some of the other things that you're doing, and you put that in the context of driving a higher revenue per advisor, can you help us understand where you are in that process, and particularly given the recent acquisition activity? And is there a lead time to really start seeing the benefits of expanding the portfolio of services? And if so, when do you really start to see the impact of that, or whether you're successful, I should say, at--once you've added some new products and services?

Well, first of all, we're very busy onboarding new business with really all of our key product offerings. So that's priority one is onboarding the business that's just in the pipeline. The second priority is to really integrate the product offerings. And we're doing very well in the integration of Prima and Tamarac. With respect to Tamarac, we are able to offer servicing now and reconciliation services and some onboarding services utilizing our India resources, which are cost effective and there are significant resources there. We're also able to offer more alternatives to how that Tamarac business is accounted for. Up until our merger with Tamarac, Schwab portfolio center was really the only solution that an advisor could utilize as they went forward, if they wanted Tamarac's rebalancing or performance reporting or CRM. So now we're able to offer not only Schwab portfolio center as a portfolio accounting system of record, but Envestnet's own internal system as well. And that is a nice choice for advisors who aren't using Schwab portfolio center. They may be using a different portfolio kind of system. So there's a lot of integration steps that we have to do at the backend as well as the front of the software, and we expect that we will be almost all the way through that with our February release. So that process of integrating Tamarac and Prima into the Envestnet offering is something that takes time. And then, we expect that once that's done we'll be able to do the cross-selling and the upselling and we expect that's not going to begin to be a material effect on this till probably at the earliest the second or the third quarter of next year.

All right. Got it. Great. Thank you.

(Operator Instructions) And it appears there are no further questions at this time. I'd like to turn the conference back over to our speakers for any additional or closing remarks.

This is Jud Bergman again. I do thank you for the very good questions. I thank you for your participation in this call. I thank you for your continued support of Envestnet and interest in Envestnet, and we look forward to talking with you in early February. Thank you very much.

And, ladies and gentlemen, that does conclude today's conference call. We thank you for your participation.