Envestnet Inc (ENV) 2013 Q3 法說會逐字稿

Good day, everyone, and welcome to the Envestnet third-quarter 2013 earnings conference. Today's call is being recorded. At this time, I would 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 2013 earnings press release and associated Form 8-K 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 them 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 in will be available for replay for one month on our website. All remarks made during the call our 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. I add my own welcome to everyone on today's call, particularly to the new investors who are with us today as a result of our recently completed secondary offering, as well as to those existing investors who affirm their support with their strong participation.

Envestnet is uniquely positioned to both lead and benefit from the continuing transformation of the wealth management industry as we unify the process for advisors and empower them to deliver better outcomes and portfolio management and to run their practices more effectively. We believe this transformation may be entering a third stage of growth. During the first phase of our Company's history, growth was tough. Our platform from day one has been web-based and hosted. And now that is called software as a service or cloud-based solutions. But early on prospects were not familiar with and not comfortable with employing a software solution that didn't reside on their own servers or wasn't installed on their own desktops. So early, on our meetings with interested prospects often ran aground when we informed the prospect that our software was not installed but hosted.

But by late 2003, 2004, as cloud-based software seems to be seen -- came to be seen as more beneficial, we had an initial growth inflection which commenced a very strong second leg of our Company's history and a time of very strong growth.

Now today, eight or nine years after that first inflection point, the questions we hear more and more from enterprises include -- can we benchmark advisor performance across all our advisors' fee-based business? Or can you support a tablet environment for all our advisors?

Advisors tell us that they want their clients to be able to review their performance online with full-fledged performance reporting. And through continued innovation and development of our platform capabilities, innovation on our product offerings, more and more Envestnet has the solutions that advisors and enterprises are seeking, enabling us to take advantage of our leadership position and benefit from this next growth phase for our Company.

We have been working hard to execute on our growth strategy and achieve our long-term growth targets. Our organic growth comes as we add advisors and grow the number of accounts per advisor. We target mid- to high-teens growth in total accounts from our same-store sales. This comes from mid- to high-single-digit growth in advisors and low double-digit growth in accounts per advisor.

Conversions can typically add 3% to 5% per year in organic growth over this base level of growth over the long term although conversions numbers are much lumpy or, as we have often discussed, based on size and timing of specific client onboarding. And disciplined acquisition activity can accelerate our growth beyond our long-term target of 20%.

So far this year we have exceeded our organic growth targets. In the third quarter we grew our top line by 64% when compared to year ago, and we grew adjusted cash flow or adjusted EBITDA by 58% over the same period. Gross sales during the quarter were more than $15 billion including over $3 billion in assets under management or administration for new client conversions. All told, more than 29,000 advisors and $486 billion in advisor assets are supported by Envestnet.

Our near-term growth outlook is solid as we see significant opportunities to further deepen our relationship with existing customers; to add new clients; to expand our presence in the channels; and to accelerate our growth through continued in disciplined acquisition activity. We feel we have a very long runway for growth.

Today the 29,000 advisors we serve with a nearly $0.5 trillion in assets on the platform. But existing enterprise contractual relationships represent over 90,000 advisors and more than $2 trillion in assets. Even after excluding those advisors that may never do fee-based business, we have significant opportunity to go deeper through our existing relationships. And we have the opportunity to build new relationships with firms that we don't have contracts with. Those firms that we don't have contracts with that are in the current channels that we operate in represent another 138,000 advisors and another $4.5 trillion in assets in the channels we currently serve.

Combined, our total addressable market of more than 250,000 advisors and $7 trillion of assets leave us ample opportunity for continued long-term growth.

And while growing our same-store sales is our primary organic growth driver, we continue to see meaningful opportunities to convert large books of business on to our platform. So far this year, we have completed some $18 billion in asset-based conversions and an additional $21 billion in license-based conversions.

Our implementation pipeline remains full. We are focused on accelerating our onboarding time to reduce the backlog of new client conversions. We have made meaningful progress, and we believe we are at a reasonable level. Our sales effort continues to be strong, so we will need to continue to invest in our conversion efforts in order to get clients onto the platform as soon as possible.

We've made several acquisitions in our time as a public company, most recently, Prudential's unit, WMS, or Wealth Management Solutions.

What makes our acquisition strategy successful is not our ability to structure deals well, although I believe we do good job of that. Our competitive advantage, particularly with consolidating acquisitions like WMS or FundQuest, is our core competence in converting large and complex books of the business. Our track record of completing large-scale conversion successfully is unmatched in the industry, and this makes us a worthy partner in acquisition discussions. It gives us confidence in our ability to convert and integrate the businesses once acquired. This core competence enables us to both accelerate our organic growth but also achieve additional strategic growth following our disciplined acquisition process.

And the WMS integration effort is well underway. We expect to convert some smaller clients early in 2014 and complete the implementation process for all clients by the end of 2014. At that point, we expect the financial accretion will be significant, generating an additional $10 million of cash flow to the business once fully consolidated.

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

Thank you, Jud. Good afternoon. And I like to extend my own welcome to those of you who have continued to support Envestnet and new investors from our successful secondary offering. The offering was completed on October 10. In total, pre-IPO shareholders sold 5.8 million shares at a price of $29.25. Over two days of marketing, we met with more than 50 potential investors and successfully continued to expand the breadth of our investor base.

Turning to the third quarter results, I will start with the components of revenue. Revenue from assets under management or administration grew 79% to $59.6 million compared to $33.2 million in the third quarter of 2012. This and all of our third-quarter 2013 results include the WMS acquisition which closed on July 1.

Licensing and professional services revenue in the third quarter was $10.3 million, up 14% from $9.1 million a year ago on an adjusted basis. In total, adjusted revenue increased 64% to $69.9 million in the third quarter found $42.7 million in the third quarter of last year.

Our cost of revenue increased to $30.2 million for the quarter from $15.1 million last year. As a percentage of revenue from assets under management and administration, cost of revenue was 50.6%.

Adjusted EBITDA was $10 million for the third quarter, 58% higher than the 2012 third quarter. Adjusted earnings per share was $0.14 in the third quarter, increasing 56% from $0.09 last year.

We reported GAAP net income in the third quarter of $1.3 million, which is $0.04 per diluted share. This third quarter's GAAP net income includes approximately $1.5 million of after-tax expense related to amortization of acquired intangibles which has increased from prior periods due to the acquisition of WMS. And the amount also includes approximately $650,000 of after-tax expenses related to a few discrete events, the WMS transaction, the secondary offering, and one-time charges related to restructuring office leases at a couple of our locations.

I will note that in the third quarter our effective tax rate was 25% on a GAAP pretax basis. This lower-than-expected rate was driven by several factors, most notably research and development tax credits and foreign tax credits. This resulted in favorable tax positions, and we recognized the cumulative benefit for the first nine months of 2013 in the third quarter provision. Additionally, we recorded a benefit in the third quarter of 2013 due to the release of several uncertain tax positions. The resulting provision true-up had a net favorable impact to our tax expense for this quarter.

Our diluted share count during the third quarter was 35.9 million shares, up 2.5 million shares from the third quarter of last year due to a higher stock price and the resulting impact on the calculation of diluted shares.

Looking forward, we expect our revenue from assets under management or administration to be up 80% to 83% in the fourth quarter compared to the fourth quarter of last year. This reflects an effective fee rate of approximately 15.6 to 15.9 basis points on our beginning AUM/A asset base of $160 billion.

Licensing and professional services revenue for the fourth quarter this year should be up approximately 12% to 14% year over year on a GAAP basis. Adjusted revenues for the fourth quarter should increase between 65% and 67% year over year. We expect fourth-quarter cost of revenues to be between 51% and 52% of AUM/A revenue.

We expect our adjusted EBITDA to increase 48% to 52% in the fourth quarter compared to the fourth quarter of last year.

We expect our effective tax rate in the fourth quarter to be approximately 30%. We expect to continue to benefit from R&D credits in the fourth quarter.

Diluted shares outstanding should be approximately 36.5 million shares for the fourth quarter based on the current stock price, a meaningful increase from the third quarter of 2013.

Thank you again for your interest and support of Envestnet, and I will hand it back to Jud for his closing remarks.

Thank you, Pete. Envestnet empowers advisors to deliver better outcomes for their clients as we unify and fortify the wealth management process for advisors. We believe we are well positioned to deliver substantial revenue and cash flow growth this year and beyond. Our long-term targets are to grow top line revenue by 20% per year and to grow adjusted cash flow at 25% per year, reflecting improving operating leverage in our business.

We expect to exceed these targets significantly this year. As we previously indicated, we looked to grow revenue by at least 30% this year and adjusted EBITDA by at least 50%. Following up on Pete's comments, full-year revenue should be at least 53% higher than it was in 2012, and we expect adjusted EBITDA will be at least 59% higher than it was last year.

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

(Operator Instructions) Peter Heckmann, Avondale Partners.

Nice quarter. I wanted to ask the question, it looks like the redemption rate picked up just a bit in the quarter. Anything, additional color you can give as regards to that or just normal quarterly fluctuations?

It did kick up a little bit, about 0.1% that we don't see that that is appreciable, and we're not really concerned about it.

Okay. Maybe just be with a bigger base of assets that maybe it stands out a little bit more. And then as regards WMS and hitting some milestones, it sounds like you hope to convert some of the institutions here in 2014 and then knock the rest out as you go -- I'm sorry, 2013 and knock the rest out as you go through 2014.

What type of milestones should we be looking for? And how do you anticipate giving us updates as it regards the conversion success?

Well, first of all, Peter, we're not expecting to do any of the companies in 2013. We will begin expecting to do the smaller companies in 2014 early and have all of them done by the end of 2014.

And I don't intend nor do I expect to give any real benchmarks up until that -- if by any chance that is going to be moved up to let's say, the third quarter, I don't think we're going to telegraph that or suggest it is happening beforehand. But you will basically be hearing the same progress report from us over the next three quarters.

Okay. And then just one additional question, and I will get back in the queue. Yesterday you announcement out on Cetera and adding some functionality there. From the press release it wasn't clear, is that going to be over all of their assets? Or will that be a menu option for Cetera's advisors? And then if you could talk about exactly what type of functionality you are providing.

Initially it is over there fee-based asset based, all of their fee-based asset based. And it is essentially our full service reporting solution with some of Envestnet intelligence built into it.

Okay, that's helpful. I will get back in the queue. Appreciate it.

Chris Shutler, William Blair.

So you obviously believe there's a lot of opportunity for additional conversions, I think, over the next couple of years. I just wanted to get a better sense -- I know that you already serve the vast majority of the IBDs out there. I know there is an opportunity with RIAs on the licensing side. But can you just help us better understand on the AUM on the business the channels or types of partners that you might be looking at for conversions there? Thanks.

Sure, Chris. Well, for both AUM and AUA we are seeing continued opportunity in the independent broker/dealer channel even though we've got a lot of penetration there, there are still converging opportunities from turnkey asset management platforms at firms. There may be one, two, or three platforms that are at a particular broker/dealer, and the enterprise wants to bring more of that onto a single unifying platform. And so, we are seeing a fair amount of conversion activity from relationships that we've had for three, four, five, years and even longer.

Significant opportunity in the registered investment advisor channel; significant opportunity in the insurance channel. And more and more, we're seeing opportunities in the bank and the regional brokerage channel. So we see a lot of opportunities for both AUM and AUA or asset-based conversions in those channels.

Okay, thanks, Jud. And then just wanted to get your latest thoughts on the trajectory of the adjusted EBITDA margin now that we have felt the full first full quarter impact of WMS. And specifically I know that last year you laid out that the target of 100-plus basis points of sequential margin expansion. So just wondering, does that still hold today barring any additional acquisitions and assuming neutral markets?

Well, it is kind of a hard question to answer. And the reason is that we've taken on a large revenue block with WMS. And we are a year away from achieving any kind of efficiencies and margin efficiencies that will result from the conversion and then full integration of the business.

So for this next period of time, I would say for the next three or four quarters, what we're focusing on is growth in cash flow, growth in EBITDA, and growth in top line. And we are committed to growing our bottom line and our cash flow faster than our top line. But we are not able to generate anything close to 100 basis points of margin expansion, operating margin on a sequential basis while we're working through the integration of WMS.

And so for these next three to four quarters, what we're going to be focusing on is, as I have indicated, the absolute growth in revenue and absolute growth in cash flow.

And then the last one if you don't mind, just one more question, on the QPs, just curious have those been rolled out yet? And I know you don't -- you probably don't want to predict the size of how big those could ultimately be, but could you frame out the opportunity for us in terms of the amount of assets on the platform in ETFs or SMAs or just any other types of assets on the platform that could be addressable by the QPs? Thanks.

So we have completed the soft launch phase, which was through September 30 and really fell into the first couple of weeks of October. We are now very much in full launch with our QPs, or our quantitative portfolios, getting the approval for shelf space and selection at the various enterprises and advisory firms that we work with. And we think that it is a potential game changer for how a certain type of advisor invests.

There is a tremendous amounts of research, most often cited by Fama and French as to the benefits of low-cost, index-based investing with tilts toward small cap and towards value.

And there are fund companies and exchange-traded fund strategies that have benefited from the low cost and from the index-based approach. And where we see this as being hugely beneficial is that these are low cost, and they will be able to be structured with factored tilts, towards value or towards small cap or on the fixed-income side, a different set of factored tilts.

But the end investor owns the basis so these are tax manageable. And they are also customizable around concentrated stock positions. And many of the more successful RIAs have a significant portion of their client base that have created substantial wealth by single-stock positions -- entrepreneurs, founders, early-on investors in technology startups.

So we see that of the assets under management that we have on our platform today and for the advisors that are using that, we see that this is going to be a very valuable product that simply doesn't exist today. And we think like all new product introductions, there's going to be a very slow build at first. We are not expecting significant flows in this through the first half of next year or for the next three quarters. But as things ramp up, we think this could be a hugely successful product. And we would not be at all surprised but to see imitators out there.

Now, we do have the competitive advantage of having separately managed account software that works and it is the core engine that supports the over 2 million accounts that we are already servicing. We think that our separate managed account technology, which enables managers to manage centrally portfolios for thousands or even hundreds of thousands of accounts, is going to be a very clear differential advantage for us and be very difficult for any new entrants to replicate in any short order.

So that's a long answer. And we've got the target channels, the target enterprises and the target advisors. And we're making very good progress. But I don't expect that this is going to be a meaningful contributor to our results until later in 2014.

Okay, that is very helpful. Thanks, Jud.

David Grossman, Stifel Nicolaus.

I was wondering if we could just look at the growth sales trend. It looks like it's the fourth consecutive quarter of very strong sequential sales growth improvement. Can you help us understand, at least from your own perspective, how much of this may be cyclical from an improving market versus some of the secular trends that you talk about?

You now, that is the question, David, isn't it? It feels like there's still some strong element, which is coming from the strength of the markets. Certainly, we have seen redemption rates moderate although they did tick up just a hair in the third quarter.

The macro environment is useful for the investing base of advisors that we have, and their business model is winning. And they are winning at the expense of the incumbents, which are primarily the national wirehouses. So we see that the base level of organic sales is strengthening, and we're encouraged by that.

We certainly not expecting or extrapolating out that that movement is going to continue into the foreseeable future, but we're happy with it while it's there. And we certainly see that as -- we are noticing that it is building. And in my first comment, moving away from just a cyclical strength, we have seen over the last three to four to five quarters in the conversion activity a different type of enterprise conversion where a higher percentage of these -- it used to be that we would be getting some from competitors and some from home-grown solutions that the enterprises were now converting onto the Envestnet or a version of the Envestnet solution.

Some of the larger enterprises are more consistently coming from legacy homegrown systems. And I believe that that is being driven by things like the tablet environment that their advisor base is asking for.

So, I think that there is -- we're seeing some pent-up demand that is being satisfied now. And I don't think that's going to be forever, but it certainly looks like it is for -- we can see out a couple of years and it looks -- we don't see that abating right now. I don't know if that is helpful or not, but that is how we're looking at it; that is how we're seeing it.

No, no, it is. And can I ask you, Jud, then, when you look at the segments of the market that you talk about including the dually- registered, the RIA, and the insurance verticals, do they respond differently in your experience historically, to fluctuations in the market where one may be more cyclical than the other?

What we're finding is that the segment, the channel that is most forward in its technology adoption patterns is the hybrid, the dually-registered advisor channel. They are driving innovation and technology change at the advisor level. Those advisors are growing their practices faster. And then the other channels and again, that dually registered is an important part of both the independent broker dealer channel and the registered investment advisor channel. But that practice pattern -- that practice model is growing faster. And then there's an adjustment within the firms of the various channels to keep up to that.

Okay. And I'm wondering if -- you talked about conversion capacity. And I'm wondering if you could just revisit it for a minute. There have been certain points historically when you been capacity constrained. It sounds like you're feeling much better about where you are in terms of your delivery capacity. Did I hear that right and if so, have you had good success in working off the backlog over the last three to six months?

So, we are working hard on that, and we are investing in that. We are investing in additional resources -- additional onboarding resources. And we've made real progress in some areas. We've made good progress on our capacity to do Wirehouse breakaways. We are able to, with very little leadtime, respond to a firm that is able to attract a breakaway advisor from Wirehouse and have had very good success with that.

We've also had a fair amount of success over the last couple of quarters in lowering the backlog, the number of months of backlog for RIA firms, registered investment advisory firms, that want to convert off of a legacy portfolio accounting system onto the web-based offerings that we have either Envestnet or Envestnet Tamarac. And the investment we have made there has made that backlog come down.

It is still at just under six months, but that's a little bit less than what it has been even last quarter -- two quarters ago.

Where we still have the longest leadtime is in the large enterprise conversion backlog. And this is not something that is entirely under our control. In fact, it's very much a case where the enterprise -- there are logical times to complete these conversions. People -- everybody wants to have them at year end but they are willing to accept in some cases, quarter end. And so that is -- and because many of them are complex and they've got underlying contracts that may be coming up for renewal with a competitor or with single-point application providers to the legacy platform, there is a lot of competing variables to get that timing down. And I would say we're still at 6 to 12 months or more in terms the backlog from our large enterprise conversion pipeline.

And I don't see that ever really changing. So, we're making progress where we can and where our dependencies are less -- we are less dependent on the other side to make this conversions work. I hope that is helpful.

No, it is. And if I can ask one quick one -- and I think you address this at least partially -- was on the WMS, can you at least -- I can understand your reluctance to provide any updates, but could you perhaps help us understand how the expenses flow over the course of the next 12 months? Does the expense stay relatively flat and then just fall off when you fully convert or do they gradually come off?

It is basically the former. We have -- there's many components to the ongoing operating expense support base. And the largest single component of that is a master services agreement that we still are paying the parent, Prudential, for a shared services agreement. When all of the assets are converted, that is when that legacy system can be retired. So, the big savings occurs when the last account gets converted.

Okay, got it. Thanks very much.

Greg Smith, Sterne, Agee.

Just looking at the cost of revenue, it was 50.6% of AUM and AUM/A revenue in the quarter. And then you guys are guiding to 51% to 52%, little bit of a jump up. Is that just mix or anything else going on there?

It is largely mix. It is a trend that we have been seeing over the last several quarters and expect, given the mix of the business that we have been experiencing coming on the platform, we will continue to watch and we're working on it. But for the near-term that trend will likely continue.

Okay. And then just back to WMS, I think you guys are talked about the Canadian opportunity and also getting into the bank trust market. I know it's early days, but any positive signs during the quarter that you can talk about?

We're very encouraged by the opportunity in both the trust and private bank markets, and that's not just stateside but also in Canada. And so, we're very pleased with the acquisition of WMS and the attendant opportunities that we're seeing from it.

Okay, and then lastly, obviously you have done the WMS acquisition, but is there anything in the near-term acquisition pipeline or nothing at all imminent?

Certainly, there's nothing that we have to report right now. It's not our policy to comment or make any suggestions until there's something that is newsworthy. What we have said is at least in the consolidating acquisition side, we are taking a bit of a rest until we get further down the consolidation and into conversion and integration path on WMS.

Okay, thanks, guys.

Chris Donat, Sandler O'Neill.

It is actually [Rob Hatter] filling in for Chris tonight. So most of mine have been answered at this point, but I just wanted to go back to the M&A front. And just looking historically, you guys have tended to use cash when doing deals, but just with the stock moving higher here, just wanted to take the temperature of what you guys would be willing to do maybe using stock in a deal. Or, I guess, more importantly, is it just more about potential targets favoring taking cash in a deal? Just want to get your thoughts there.

Yes, I would say we focus on the deals more on a case-by-case basis. And whatever the appropriate structure for a certain situation may be is what we will pursue. Obviously we have use cash in the past, as you noted. And we expect that would be typically our first choice, but, again, I think we are not adverse to using whatever funding mechanism makes the most sense.

Okay, got it. That's helpful. Thanks for taking my questions.

[Matthew Roswell], RBC Capital Markets.

I just wanted a couple of clarification points. First of all, I think this goes back to question before last, should we essentially think that in terms of the big enterprise acquisition, you guys are out of the market until you get WMS fully integrated next year? Is a fair statement?

Well, from a consolidating acquisition standpoint, I think that's a good conclusion to make. From the part of our business that relies on organic growth through conversions, no, we're still very much in that business. Business is open.

Okay. And do you feel now that with the WMS that you have all of the various channels filled? You mentioned insurance; WMS brought you a bank; you obviously had the independent advisor to begin with. Are we pretty much -- all the boxes checked?

Well, it's an interesting question. When we started the business 12 years ago, I didn't anticipate the number of regional firms -- large regional firms that would be looking to outsource core wealth management technology. And so, we're finding some of our biggest opportunities right now with self-clearing regional firms. And that is relatively new, but it's very promising.

So right now the channels that we're serving, that we are currently in, have got tremendous growth for us in every single channel, even the ones that we have been in the longest.

We are interested in expanding our footprint in the Canadian market, which we already were in, but the WMS acquisition strengthens that presence. And for now, we think that is really where our channel opportunities are going to be best attended to. North America, in the channels that we have identified.

Okay. Switching gears a little bit, I know it's a little early, but as we think about calendar 2014, fiscal 2014, is there anything that should cause the fee rates to change from 15.6 to 15.9 basis point level either in terms of asset mix or product mix or anything like that?

We haven't given any guidance on that. And I'm going to be reluctant to give any real answer. I would just point out that if you think about the WMS acquisition, which raised that average fee rate, during the next three, four quarters we're going to be consolidating that base. And in that integration process, it's the best of the business that will -- I would expect grow at a faster rate than the acquired business.

That will have -- the math just will work out to have an effect on our fee rates.

Okay. And just ask somewhat in a slightly different way, are you seeing a shift back towards equity in the asset base, because I think earlier in the year was a little more fixed income?

We are seeing a slight shift, but it is -- I look back to where it was at the beginning of 2008, and it is significantly down still. Domestic equity allocations on new accounts, even more fully invested accounts, are still around 50% on the new accounts. We are seeing larger allocations to international; larger allocations to alternative asset classes; larger allocations to cash. We are seeing some of the allocations of fixed income coming down; that is true. But we have not seeing big allocations back to domestic equities yet.

Okay. Well, thank you very much and congratulations on a good quarter.

Thank you.

(Operator Instructions) Jeff Houston, Barrington Research.

To start with, with equity markets having improved and just curious if you've noticed any slowdown, even moderate, in that trend of advisors leaving Wirehouses.

The year's data is not in yet, but 2012 was a big increase over 2011. 2013, everybody is expecting will be an increase over 2012. We've got a very good seat in the arena, as it were. And we're not seeing any abatement in that activity.

Okay. And then separately, I was hoping to dig a little bit deeper into the business intelligence tools and the new mobile functionality. Could you talk a bit about the timeline for rolling those out and maybe how many advisors are currently up and running the beta versions of that or may be fully rolled out?

On the tablets, on the mobile offering, that is not a beta offering. That is a fully functioning offering now. And we're going on a fairly systematic level, going through our enterprise and advisor base. And we have had a number that raised their hands and said that they wanted to start, they wanted to be first in the queue. Others said, I want to be in as soon as possible. I expect that -- and it's not a back office or account conversion; it's just merely a front end or a technology conversion for the enterprise, which require some training and some education. We expect that that is going to continue through all of 2014 and probably in 2015.

So that process of going from the last generation of the Envestnet platform to ENV2 is well underway.

On investment intelligence, this is increasingly a feature of ENV2. It is built into the features and functionality with enhanced benchmarking, enhanced analytics for the advisor. And so we see that investment intelligence, which is essentially business intelligence for the enterprise and the advisor, is going to be primary driver of adoption for ENV2 and for continued conversion activities.

We are never going to report, here's a line of revenue that is coming from Envestnet intelligence. But Envestnet intelligence and the analytics, benchmarking, and reporting that we have built into ENV2 is a fundamental part of the value proposition. And we expect that it's going to be a factor in keeping conversion rates high for us.

Got it. That is good detail. I appreciate it. Thank you.

And at this time, I will turn things back to Mr. Bergman for closing remarks.

Well, thank you. It was a good quarter, a solid quarter. And we very much appreciate our new investors on the call. We thank you for your support, and we look forward to talking with you in a few months' time. Good evening.

Again, that will conclude today's conference. Thank you all for joining us.