Envestnet Inc (ENV) 2015 Q4 法說會逐字稿

Good day, everyone, and welcome to the Envestnet fourth quarter 2015 earnings conference. Today's call is being recorded. At this time, I will hand the conference over to Mr. Pete D'Arrigo, Chief Financial Officer. Please go ahead, sir.

Thank you, and good afternoon, everyone. With me on today's call is Jud Bergman, Chairman and Chief Executive Officer, and Anil Arora, Vice Chairman and Chief Executive of Envestnet Yodlee. Our fourth quarter 2015 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 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 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. I will now turn the call over to Jud.

Why thank you, Pete, I add my own welcome to everyone and thank you for joining us today. On today's call we will review our long-term growth strategies, discuss our fourth-quarter and full-year results and provide an update on what we expect to achieve in the coming year. I probably don't need to remind you that we have had some headwinds in the capital market since last summer and continuing into this year. I expect this environment is going to be with us for a while.

But even in this environment, we posted solid growth in the fourth quarter and full-year in our core business, as measured by our most important metrics. We have been through several cycles of market volatility since our founding, most recently in 2011. Through these periods we experience slower growth rates in our asset-based recurring revenue business, as advisors and investors are more cautious and deliberate when making investment decisions.

We see evidence of this behavior as net flows to money market funds increased over seven fold in 2015 when compared to the year earlier, and in the cyclical slowing of industry-wide advisor account gross. In each of these periods of uncertainty we continued to grow, and we grew faster than the industry during these periods, and this current period is no exception.

From the fourth quarter in 2014 to the fourth quarter of 2015 a peer group of large independent brokerage firms grew advisors by 1%. Wire House firms grew advisors by 5% during the same period. Yet during the same period, Envestnet grew advisors by over 15%. Moreover, account growth per advisor was, although slower than long-term trend, much higher than the industry experienced.

There are several factors that drive our strong long-term growth fundamentals. First, our addressable market is very big. Second is our leadership position within the industry. And third are the macro trends in our favor. We're built (technical difficulty) target and sensible market is huge.

We believe it roughly doubled as a result of new product introductions and our merger with Yodlee, and our wealth management vertical is among the fastest growing segments in financial technology. We estimate the market for wealth management solutions to be $10 billion to $12 billion in annualized revenue in the near term.

We expected that to grow to $14 billion to $16 billion in annual revenue by 2020. We estimate the market for data aggregation and data analytics solutions to be $9 billion to $10 billion in annual revenue in the near term and growing to $15 billion to $17 billion annually by 2020. When we consider our 2015 revenue of some $420 million, we get very enthusiastic about the long-term growth runway in front of us.

Second, we think that Envestnet is very well positioned to become the preeminent financial technology and services provider. Our wealth management technology is highly scaled and best in class. We have built a Company uniquely positioned to deliver better financial outcomes and improve and simplify the financial lives of hundreds of millions of consumers around the world.

By providing financial advisors a holistic view of a client's finances, combined with sophisticated goals-based planning, we empower advisors and enterprises to deepen their engagement with clients and deliver unified planning and investment services that empower the entire lifecycle of advice. We believe this is powerful and transformational. Our research, shared with many of you, suggests that advisors who use Envestnet's Unify technology gain a productivity advantage and grow their fee-based practices significantly faster than the average advisor.

In addition, our research indicates that advisors who use data aggregation and planning have twice the average share of wallet, when compared to advisors who don't incorporate these capabilities into their practice. Financial institutions are increasingly choosing Envestnet and Yodlee as their financial technology partner of choice. Our flexible and open platform supports a light spectrum of integration preferences and practice patterns.

Financial institutions are converting their wealth management business to us at record levels in the past year. Third, we continue to enable and benefit from the industry's super trends. These super trends include the evolution of commission-based products to fee-based solutions, and this evolution as we believe accelerated.

US regulators are moving closer toward adoption of a fiduciary standard in IRA accounts, and we believe in Envestnet is uniquely positioned to support our clients and advisors through this challenge and empower them to benefit from these industry changes. These super trends also include financial institutions and advisors who increasingly turn to outsourcing towards a unified power-based technology in order to increase productivity and grow their businesses faster.

And finally, we think data analytics represents the third wave of the digital age. Information technology has evolved to three major stages of innovation. First, of course, was hardware. Lords Law has repeatedly proven true and today's hardware has tremendous processing power, processing power almost unthinkable a generation ago.

The second wave was software built on this powerful infrastructure. Accelerated by high-speed networks and of course what we now call cloud computing. We believe the third wave of the digital age will be data analytics. The data will become the fuel that powers the next wave of productivity and value creation. The ability to harness, synthesize, and drive insights from vast stores of data will unlock the potential of ever more intelligent systems that improve productivity and the lives of advisors, investment managers, investors, and consumers.

We believe we are uniquely positioned to leverage this network effect, building on Yodlee's leading data science capabilities, represented by over 70 global patents, our thousands of combined enterprise clients, tens of thousands of advisers, millions of investor accounts, hundreds of billions of investment assets, and trillions of transactions. We have a very strong foundation from which to lead big data innovation and help our clients benefit from it.

I would like to turn now to review some highlights from our fourth-quarter and the most recent full-year results. During the most recent quarter we added some 3,700 advisors to our platform, bringing the total number advisors to more than 47,000. Nearly 34,000 of these advisors have assets under management or administration, fee-based assets that now total almost $290 billion, providing a solid base of asset-based recurring revenue.

Despite a tough market environment, advisers are continuing to do more business with us. Low sales of assets under management or administration, excluding conversion activity, were over $22 billion. Redemptions averaged 2.1% per month during the fourth quarter, slightly above long-term trend. As a result we had net flows from existing business of $6.5 billion.

During 2015, we onboarded a record $130 billion in conversion assets. Asset-base revenued conversions contributed $32 billion to the platform, and we onboarded $98 billion in subscription-based or license-based conversions, reflecting strong demand for unified our offerings from large institutions and registered investment advisors.

Our strong organic growth plus acquisitions resulted in full-year adjusted revenue growth of 21% and adjusted EBITDA growth of over 35%. During this period of market uncertainty, we see the benefits of an increased revenue mix into subscription revenue. While 96% of our fourth-quarter revenue was recurring, 73% of it is AUM/A revenue which is of course subject to market values. As we discussed in our last call, a growing base of subscription revenue can help stabilize our overall revenue growth.

We see continued strength in our subscription-based business at Envestnet and at Envestnet Yodlee, and these provide a above-trend growth rates in this environment. For these reasons, I have never been more optimistic about our long-term growth potential. I am going to turn it over to Pete to discuss Envestnet's fourth quarter results in more detail, and also provide an update for our expectations in the coming year.

Thanks, Jud. As Jud mentioned, adjusted revenue grew 21% to $421.2 million, adjusted EBITDA grew 36% to $76.1 million on a consolidated basis in 2015 compared to 2014. In the fourth quarter revenue from assets under management or administration grew 2% to $83.2 million, compared to $81.5 million in the fourth quarter of 2014. With the inclusion of Yodlee as of November 19, subscriptions and licensing revenue in the fourth quarter was $30.1 million, up 117% from $13.9 million a year ago.

In total, adjusted revenue increased 23% to $118.6 million in the fourth quarter from $96.8 million in the fourth quarter of last year. Our cost of revenue increased to $39.1 million for the quarter from $38.6 million last year. As a percentage of revenue from assets under management and administration, cost of revenue was approximately 47% which was unchanged from a year ago. Adjusted EBITDA was $22.5 million for the quarter, 35% higher than the 2014 fourth quarter.

Adjusted earnings per share was $0.28 in the fourth quarter, increasing 22% from $0.23 last year. About $0.05 of the $0.28 are explained by our ability to reverse some allowances for uncertain tax provisions which gave us a benefit to adjusted EPS.

In the fourth quarter, our effective GAAP tax rate was approximately 31%; on a GAAP basis, pretax basis, the rate was impacted primarily by nondeductible transaction costs offset by the pretax book loss. On a cash basis our cash tax rate year-to-date or for the full year is about 5%. The diluted share count during the fourth quarter for adjusted EPS was 40.5 million shares, up 3.2 million shares from the fourth quarter of last -- of 2014. The increase is due primarily to the acquisition of Yodlee. Deferred revenue increased by approximately $8 million from September 30, which includes about $5 million from Yodlee.

In the fourth quarter, we moved to segment reporting for Envestnet to reflect the distinct businesses represented by our traditional wealth management business, which we call Envestnet, and Envestnet Yodlee for data aggregation and data analytics. In the fourth quarter, results for Envestnet Yodlee reflect performance from the date of acquisition, November 19, through year-end. In addition, we are reporting expenses not allocated to the individual segments separately. These expenses reflect primarily corporate overhead.

The Envestnet segment was in line with our expectations, adjusted revenue increasing 8% to $104.3 million for the fourth quarter of 2015, from $96.8 million for the 2014 fourth quarter. Adjusted EBITDA increased 14% to $21.8 million for the fourth quarter of 2015, compared to $19 million for the fourth quarter 2014. For Envestnet Yodlee during the period from November 19 through the end of year, adjusted revenue was $14.3 million and adjusted EBITDA was $3.4 million, slightly ahead of expectations

More detail on the core AUM/A business. With an AUM/A revenue in 2015 grew approximately 14% if you exclude the impact of the market, WMS, and Placemark, and EBITDA grew approximately 21%. Including the market impact, revenue growth was down to 12% and EBITDA growth was approximately 17%. Conversions were on target; advisor growth was almost 20% in that core segment, largely impacted by strong conversion activity in Q4.

As Jud mentioned, accounts per adviser were lower than our longer-term targets. The increase in accounts per advisor was only around 6%. Our subscription wealth management revenue grew approximately 30%, driven primarily by our Envestnet Tamarac business unit, and Yodlee subscription revenue increased 24% for the full year of 2015 compared to 2014.

We continue to stay on pace for the integration of our most recent consolidating transactions, WMS and Placemark, providing some specific expectations for each of these, WMS had annualized of approximately $63 million and EBITDA of $1.5 million at the time the transaction closed in 2013. We expect the run rate in Q3 of 2016 to be approximately $56 million for revenue and $12 million for EBITDA. Those are the run rate for Q3 of 2016.

Placemark was contributing about $24 million of annual revenue and $2 million of EBITDA at the time that transaction closed in 2014. We expect in the first quarter of 2017, Placemark will have approximately $23 million of revenue and $12 million to $14 million of EBITDA.

Moving to 2016, in the first quarter we expect our revenue from assets under management or ministration to be up approximately 1% to 3% compared to the first quarter of last year, which shows growth despite a weakened and volatile market. This reflects an effective key rate of approximately 11.3 to 11.5 basis points, and our beginning AUM/A asset-base of $290 billion.

Subscription licensing and professional services revenue for the first quarter 2016 should be up approximately 210% to 220% year-over-year, which includes Yodlee for the full quarter. What we have historically titled licensing revenue represents client agreements that are highly comparable to subscription revenues, meaning they are based on fixed, recurring fee agreements as opposed to one-time or transaction-based licensing sales.

Adjusted revenues for the first quarter should increase approximately 35% to 38% from Q1 of 2015 to Q1 of 2016. We expect our first quarter cost of revenues to be between 48% and 49% of AUM/A revenue. We expect our adjusted EBITDA to increase 1% to 3% in the first quarter compared to the first quarter of 2015, which reflects increasing seasonality with the effects of the size of the Company, number of employees, employee-based taxes, and seasonality due to Q4 impact at Yodlee.

Regarding income taxes, we expect our effective GAAP tax rate for 2016 to be approximately 40%. Diluted shares outstanding for the first quarter should be approximately 43.7 million shares based on the current stock price, and these expectations translate to adjusted earnings per share of approximately $0.15. Our 2016 estimates will be impacted by the market decline that has occurred since our third-quarter earnings call, when we introduces preliminary estimates for 2016.

Including Yodlee for the full year, we expect adjusted revenue to come in between $575 million and $590 million and adjusted EBITDA between $90 million and $100 million. Breaking it down into individual components we expect revenue growth of our core AUM/A business, again excluding market, WMS, and Placemark to grow approximately 14% and 10% after the effect of the market is taken into consideration.

Subscription and licensing revenue including Yodlee is expected to grow between 28% and 33% compared to 2015 on a consolidated basis. Our expectation is that 95% of revenue will be recurring in nature, and only 63% of revenue in 2016 will be market-sensitive, compared to 84% in 2015. With that, I will turn the call back to Jud.

Thank you, Pete. I would like to wrap up by summarizing our growth strategy for achieving a significant potential on business offers. First, we look to drive core organic growth at Envestnet and Yodlee by doing what we have been doing in the past decade and longer. Adding new financial institutions, adding new advisors, increasing advisor utilization, and increasing user adoption.

2015 was another record year for both Envestnet and Yodlee. Our financial enterprise pipeline is strong and our ability to increase adoption is enhanced by an expanding platform and the network respect created by the increasing number of enterprises, advisors, managers, and investors leveraging our platform.

Secondary to growth comes from cross-sales synergies from strategic activities. We're focused on a cross-sell addressable market opportunity of over $8 billion. We don't expect a meaningful impact in 2016 from realizing these synergies, but we have identified over $200 million in achievable potential over the next five years. We expect more than $55 million to $60 million in annual incremental revenue, which will arise from these cross-sell opportunities, and if we achieve that we will significantly exceed a rate of return required for the Yodlee business combination.

As a reminder, our team is focused on four areas of cross-sell opportunities. The first is selling basic data aggregation into the advisor base that is represented by investments. The second is offering Envestnet's performance reporting and enterprise data solutions into Yodlee financial institutions.

The third, perhaps the biggest long-term opportunity, is data analytics and research. And the fourth, is following behind Yodlee's lead in expanding an international footprint. We expect that will pay dividends for us for many years to come.

With over 15 years of transactional-level data, over 20 million users, we are proving ways even today to commercialize data and research at very attractive margins, and we are on track to roll out the first version of the data aggregation at very attractive margins. And we are on track to rollout the first version of the data aggregation capabilities concurrent with our May Advisor Summit occurring in Chicago, May 15 through May 18, and they are expecting a tremendous amount of interest in that capability.

The third area of growth is developing new products and businesses that increase our presence in existing markets or open market new segments for us. Some examples of these are factor enhanced portfolios, our QPs, that are responsive to investors' increasing preference for tax-managed smart data investment solutions. Our enterprise account aggregation and performance reporting solution expands our financial-institutional addressable market and helps enterprises better manage their book of business and the regulatory risks that are coming from Department of Labor changes in the regulatory environment.

And then finally, innovative consumer products from Yodlee, like Tandem and Sense, utilize predictive analytics and are increasing advisor adoption. We expect the execution of this strategy to continue to deliver strong revenue growth and strong cash flow when fully matured. This all leads to a solid long-term growth opportunity. Even with the headwinds of the current market, we expect our core asset-sustained maturing revenue business to grow by more than 10%, despite a 5% to 10% cyclical headwind.

As Pete indicated, we expect Envestnet's subscription base recurring revenue business to grow by significantly more than 25%, reflecting a growing preference for subscription-based pricing in certain enterprises and large registered investment advisors. And as indicated, we expect Envestnet Yodlee subscription base, their recurring revenue to grow in advance of over 25% this coming year.

As Pete also mentioned, we expect to meet or exceed our EBITDA targets from consolidating conversions of WMS and Placemark, and are able to deliver a very high yield of post-tax free cash flow as a percentage of our EBITDA. In summary, our business has a huge opportunity for sustainable long-term growth. In spite of some cyclical headwinds, we are growing based on very strong fundamentals.

Thank you, again, for your time this afternoon. Thank you for your support of Envestnet. With that our prepared remarks are complete, and Pete, Anil, and I are happy to take your questions at this time.

(Operator Instructions)

Peter Heckmann, Avondale Partners.

Peter, Go ahead.

Yes, sorry about that. I am in an airport and it was just a problem with my phone. Sorry about that. I had a couple questions, in terms of your 2016 guide, should we infer that the reduction in the guide is entirely due to market actions from the last time you guided? Or are there other items that are worth calling out there in terms of changes in assumptions?

Good question. More than 90% of the delta is directly related to asset valuations. There's less than 10% that result from the cyclical effects of those asset valuations.

That's helpful. And then in terms of the integration of Yodlee, can you talk a little bit about that one piece of, basically anonymized data stream? Can you talk a little bit about the opportunity there, refresh us -- that seems to be maybe a smaller portion of Yodlee, but quite perhaps the best growing piece of it? And have you identified additional opportunities to grow that revenue stream?

Yes, Peter, I think you are referring to the data analytics and research subscription revenue. This is the fastest-growing part of Yodlee's subscription business. We expect that at some point within the next year or so that business will be generating on a run rate basis $40 million per year in annualized revenue or more.

We think that that business within 3 to 5 years will be a $100 million per-year business. And this is not only Yodlee's data which is being mined, but also it's the combination of Envestnet's data targeted more towards the product development and distribution side of asset managers. Then its the Yodlee data analytics targeted towards the buy side, the portfolio management side of asset managers, as well as retailers and also some of the emerging credit and lending sectors of the new economy. So we see tremendous potential in the data analytics and research business and we are very strong on the potential there.

Great. Thank you. I'll get back into the queue.

Chris Donat with Sandler O'Neill. Chris your line is open, please go ahead

I am the second analyst who can't work the phone today. Thanks for taking my question.

Just in terms of the $0.15 you're guiding to for the first quarter, and thinking about your expenses, when we think about the full year, it's a really -- just thinking about it from an EPS perspective, is that kind of the way to think about for the run rate for the next four quarters or so? I apologize I haven't done all the your math around guidance for the full year.

Well, we expect to be growing over the year. I think again Q1 is going to be affected more at an operating level due to the factors I mentioned earlier. And we will expect to grow throughout the course of the year.

Okay. All right.

And then just on -- some of the signs that you are seeing, I know it's early in the acquisition, it's about six months from when you announced it, is there anything we can point to on early success or knowledge in the four areas you discussed, Jud, just if you're getting anything from clients on responsiveness, or is this a sales cycle with, like, advisors that maybe comes up once a year that they will consider your basic data aggregation? Or does it come up really at any point you could make the sale?

So the first we have to do, and again they are tiered or they are sequenced in terms of where we're expecting to see the early results, and then also where we are expecting to see the biggest results. The very first of these is the cross-sell of Yodlee's core capabilities into our advisor base. We expect that the integration of that capability will be fully functional by the end of April, in line for our May Advisor Summit May 15 through May18.

And we expect that we will be able to take business as soon as mid-May, and we expect that the first engagements will happen in the second half of this year. On the enterprise data solution, this has a longer lead cycle. We expect that we may get one financial institutions for that second synergy cross-sell by the end of 2016, and a handful during the next 12 months to 24 months. The data analytics is in full sway, if you will, in terms of identifying opportunities, following up on those opportunities, and growing that business.

The area that we do not expect to get very much traction on over the coming year is international. And given the focus that we have on the first three, we don't expect to really even get to that in 2016. But we would expect to show some early adoption, some initial traction even there in 2017.

Okay. And then just one quick one for me, on the conversion pipeline, looked like a good quarter, and I would imagine you have been focused on Yodlee a lot. Can you give some color on the pipeline for future conversions? And I recognize it's always a lumpy process, just any change.

Yes.

Conversions are -- we have tried not to give specific guidance since 2011. What I did indicate was that our large institution pipeline is as strong as ever. That doesn't mean that you should expect or straight-line conversion over the next quarters, but we expect that -- a look back over any four or five-quarter period that there is a nice trend upward, and we expect that that will continue.

Got it. Thank you.

Our next question comes from Jeff Huston with Northland Securities

Thanks for taking my questions.

Sure.

I was wondering if you could provide an update on the access you did about a year ago of upside, and just how Robo advisors in general are being incorporated into your solutions, and how some of the other competitive offerings are shaping up?

So, thanks for asking. Upside gave us helpful and valuable front end user experience that we have been able to incorporate into a broader offering that we call Advisor Now. Advisor Now is our private labeled digital offering for enterprises and registered investment advisors. We believe that digital -- turnkey digital solutions are table stakes.

We believe that most Robo advisors today will end up being very important channel strategies for larger organizations. And we currently have some $16 billion to $17 billion, some 60,000 accounts. It's a small percentage of our overall account base, but it's a significant and growing presence of purely digital solutions for our advisor client base.

We expect that that's going to continue to grow. We see it as a necessary element of helping advisors cross what we call the digital divide. And that's the divide that separates certain advisors from their best prospects and their best new younger generation potential clients.

And the elements of this include robust reporting, some very basic goals-based planning capability, automated account work, systematic rebalancing, and then of course, portfolio construction and asset class selection. So we are very much in the process of rolling this out to a number of early adopters and we expect it's going to be an increasingly important part of our overall platform offering in the future.

Great.

Then switching gears, I have a question for Anil. Anil, could you update us on your -- Yodlee's partnership with Salesforce and the financial services cloud that they've been talking a bit about. And I know you had the partnership before the Envestnet acquisition was announced, and with that partnership is Envestnet being pulled into some of the early works for the Salesforce financial service cloud?

Sure, Jeff, good afternoon. This is Anil.

We did announce a partnership with Salesforce as you mentioned earlier on. We're in the process right now of both product integration, as well as selling to customers and prospects. I think it's too early to comment on any specific wins at the moment. Obviously, we're looking to build on the partnership we have right now.

Great.

Then last question for you, Anil, can you talk a bit about Yodlee's retention rates for your flagship products, how they fared in the quarter and when clients do leave the solution, where do they typically go into?

Right.

So typically, we've looked at retention through an annual measure, which is a dollar retention rate number. That number has consistently been well above 100. If you look at the past quarters -- I'm sorry, annual reporting that we've done on that, we continue to have a consistent result on our retention, which is very, very low retention.

We have very little churn with our financial enterprise, financial institution customers. There tends to be a little bit of churn with what we call Yodlee Interactive or the nonfinancial institution Internet startup disruptors, because many of them end up don't getting funded or go out of business, somewhere in the 10% range. But the rates for retention have been very stable, well above 100 over the last couple of years. And we saw consistent performance on that metric in Q4 and in 2014.

Great. Thank you.

Our next question will come form Chris Shutler with William Blair & Company.

I want to ask on the guidance. For first-quarter, the AUM/A revenue growth of 1% to 3%, that includes -- I mean you're pricing that off of the 12/31 markets, which Q4 markets were actually decent. So it just seems to me like the guidance for the first quarter in particular on the AUM/A side seems low.

So am I missing something? Or is it redemption rates? What is going on there?

Well I think it's the impact primarily of the client transition we discussed in the last quarter in November. One of the WMS clients we actually got more assets, but it was a different solution that was being provided. And so, the fee rates are down on a sequential basis from over 13 to, what did we guide to today, the low to mid 11 basis point range.

Okay. So it's mainly a function of the conversions? What you are saying was a WMS waited conversion and the fee rate associated with that?

It was a transition of a client relationship. So there was one side of a large financial institution that we were serving, and we were -- converted that business from side to the other side of the business, and the side we had before took more of an in-house approach than the outsourced solution that we were providing. But there was a broker-dealer subsidiary that adopted the full platform.

But very different fee rates on that.

Okay. Maybe we can follow up off-line, so did you essentially lose a client? Is that what the issue is?

Well, there was a transition of a client, a WMS client, that went from essentially gross revenue to essentially net revenue as part of the transition.

Got it. Okay. Got it.

And then, on the -- for both Q1 and the full year, can you talk about what you're assuming for markets? I think that you're assuming markets as of -- what in the last couple of days and then flat from there? Let me just confirm that. And then what you're assuming for redemption rates in each period?

We updated our markets through the middle of February. So, I don't remember the exact date, but at some point last week, the redemption rates we're assuming 2% per month.

Okay. Got it.

And then -- I'm sorry if I missed this, there's a lot of stuff on the guidance -- that the Yodlee revenue and EBITDA that's baked into the 2016 full-year guide -- ?

We didn't separate that out, but is unchanged from where we had talked about in November. Revenue for full-year, $135 million to $139 million, and EBITDA around $18 million or $19 million.

Okay. Got it.

Sorry, one second, and then the last one is just on the conversion activity. Jud, I know you got asked about it earlier, but you've had this big insurance company, you're still working through some other large clients, I know why Dell has announced that they expect their conversion to be completed later this year.

Beyond those, those clients though of the insurance company, William Blair and Waddell, how much visibility do you have into the pipeline for larger conversions beyond that. I recognized they're lumpy, I'm just trying to get a sense of should we expect that it continue with the strong activity?

So as I said before, we have a high degree of visibility into signed contracts. We have a high degree of visibility into the identified assets that will be converted. And that gets down to account size, account types, and asset levels. And so it's on the basis of signed agreements and in-process conversions that we -- that I can say with a high degree of assurance -- that our conversion activity is as strong as it has ever been.

With that said, the timing of when the insurance company or the bank or the regional brokerage firm or the Canadian firm actually completes the transaction is something that we really can't give guidance on, because there's factors beyond our control. So this is an important part of our organic growth. Conversions are -- we target 500 basis points of topline growth per year in conversions. And the last several years, we've been running ahead of that. We expect that this year will also be like that.

Although, we haven't specifically quantified an amount into the guidance other than things that are already contractually committed with very strong delivery dates and high expectations that will hit them. So that's a long way of saying that there's a lot more visibility in terms of enterprises, assets and accounts than what you indicated. There is the known backlog, if you will.

Okay. Think you.

Next we'll hear from Pete Lowry, JMP Securities.

Could you give us an update on the broader competitive landscape? And then in particular, given the market dislocation, are you seeing any distress among private competitors? And how might you take advantage of that, given where you are now?

So, thanks Peter. The competitive environment is one where we have the opportunity to look at a lot of what's in the space. There does seem to be an increase in valuations that make it harder to hit the required rate of return for us because we're very disciplined in terms of the consolidating transactions. I do note that we don't expect any strategic significance -- strategic activity over the near or intermediate term.

We would like to be in a position so that we are able to be responsive to financially accretive and value accretive consolidating transactions. But there's a lot of private equity money that is seeking to put dollars to work in this space. So we don't expect anything imminently or in the near-term even on the consolidating transaction side, but it's something that we continue to look at.

Do not see any sign of distress in any of the competitors, at least not yet. As tough as this market seems, it's only down some, what, 10% or 11% from its highs, and it's maybe not even quite that. So we don't see any real distressed properties, and as long it's staying at these levels or around, I don't really expect that we will.

Now, what we do expect is that scale and super scale will become increasingly important to all participants in wealth management technology. And that includes the tamps, the turnkey asset management platforms, as well as more of the single point provider -- solution providers.

So scale is something that we believe is a competitive advantage for us. It enables us to invest, it enables us to have hundreds of engineers focused on just the wealth management technology vertical. And so, we expect that overtime that will continue to be a very powerful competitive advantage for us.

Okay. Great. Thank you.

Our next question comes from David Grossman Stifel Financial.

Thank you. Sorry. I am on the road, so I apologize if I missed a couple things here. But can you update us just on the conversion activity in the fourth quarter and what we expect for the first quarter? Have the deferrals that we talked about earlier in the year, how much do they contribute in the fourth quarter, and is that pretty much played out, the deferrals, or do you accept more in the first quarter, as well?

Yes. They continue through Q4 and there will be a component of Q1 prior to the implementation date of the client. That will continue to increase. And for -- which has been the largest contributor. Obviously there are more clients, which will continue to increase deferred revenue. We do expect that the bigger the clients are and the more implementation activity there is, that there will be more deferred revenue related to that.

But it will start coming off a little bit after the implementation dates of these clients. And that's when it would start to come down. So the net effect is going to depend on implementation cycles and how that all works out.

I would expect the high watermark to be sometime around the end of the first quarter, the beginning of the second quarter of this year. And it would start ramping down towards more normal levels on a ratable basis.

It is never going to go away, but some of these larger ones begin to be implemented. It would only be replaced by other large ones. And so, I think there would be more -- some stability and maybe even ramping down in the second half of the year.

Right, and just so I can get my head around exactly the flow of last year versus 2016, of the contracts that we talked about that we thought were going to contribute earlier in the year and in the fourth quarter, I thought you had said that was about $22 billion. Is that about what the number was for the fourth quarter? In conversions?

That's about right, David. There was $27 billion in the fourth quarter. There still is a significant enterprise data piece that we expected to hit in the fourth quarter, which we indicated would not hit until sometime in the first quarter, or possibly even early the second quarter in 2016. But that was not expressed in terms of assets. It was more expressed in terms of revenue.

I see. Okay.

And then, again, sorry if this was covered already. But did you give the ending accounts and adviser metrics at the end of December. I know you gave the growth in one of the metrics, but I don't know if you'd actually given the actual numbers.

They are in the press release, David.

Oh they are? Okay, so ending account and advisors?

Yes, ending accounts and advisors. And then just -- I would just caution, is that that number is of course affected by conversion activities. So it's not an apples-to-apples comparison.

Okay. But there's -- Yodlee isn't in the accounts or adviser number, is there any contribution?

No, Yodlee is different metrics.

Right. Exactly.

And then just while were quickly on Yodlee, can you give us just a sense where the current mix of business stands between the major segments, the major customer segments? In the fourth quarter?

Anil, why don't you go ahead?

Sure. David, we haven't done segment reporting, but we have a little over 950 customers at investment Yodlee driving about 21.3 million paid users. A little over 500 of them are financial institutional customers. And then the remaining part, a little less than 450 of them, are Yodlee Interactive, or what we call internet innovators.

So that should give you directionally a sense of number of customers. Now this is spread across 15-plus countries, international has been roughly about 15% or so of our revenues. I did want to build on one of the questions that came up earlier, which is, when you look at it holistically, our customer base grew very nicely last year from about 800 million-plus to about 950 million-plus customers for the full year.

And that's part of what's driving our full-year subscription revenue growth, which is 87% of our revenues and that grew by 24%. So I feel like we had a strong year in terms of customers, users, subscription revenue growth. Of course EBITDA grew very nicely, too, but that was admittedly over smaller numbers.

And in the midst of all of that is the highlight of signing some very key customers, as well. We now have 12 of the top 20 FIs as customers in North America. We signed three new top 10 wealth management enterprise customers, the sales force partnership, et cetera. So the fundamentals for 2015 was strong for us, and with the synergies that Jud referenced, we are expecting to continue that robust growth if not increase it slightly going into 2016.

Okay, great. And just one last question for you, Pete. Can you just give us a sense magnitude for some of the more important non-GAAP adjustments for 2016, like stock comp and depreciation and amortization, et cetera?

Yes. So stock comp is -- maybe we should follow-up on this. I've got the models here, but I have to do a little digging. So we can follow up.

Okay, absolutely. All right. Thank you very much.

Thank you, David. And ladies and gentlemen, our last question will come from Patrick O'Shaughnessey with Raymond James.

I want to dig in a little bit further into some of the pricing compression that you are guiding towards on the AUM/A revenues. Kind of following up that line of the conversation, so the midpoint of your first-quarter guidance would imply about a 14% quarter-over-quarter decline in your fee rate there. How much of that is due to this repricing of this one contract?

How much of it is due to maybe some of the big conversions that you brought on during the fourth quarter coming on at lower price points? Or are there some other factors involved in that as well? Because that's a pretty big drop.

Yes, the biggest drop was the restructuring of the WMS client, which went from predominantly gross revenue, having to do with separately managed accounts, to predominantly net revenue, having to do with Assets Under Administration, and some reporting and some APM, advisors portfolio manager assets.

So the gross effect was of course bigger than the net effect was. And then that's the biggest single factor. There is some additional piece from moving from reporting assets that come in at one to two basis points, or APM assets that come in at the four to five basis-point range, and they're coming in at a much faster rate than the AUM came in. But the biggest thing was the repricing due to the WMS client. That was the biggest single factor.

Got you, and that was a big enough client in terms of percentage of your total revenue to really move the needle that much?

Yes. If you back in, if you look at what Pete's breakout of WMS from the time of announcement to where we're expecting Q3, that's another way -- that delta will give you the gross differential right there.

Got you. So that $7 million --

Which will get you pretty close -- which will get you pretty darn close to it. It was a big client, an important client, and continues to be.

Got you. Okay, I appreciate that. Is there any correspondent decrease to your cost of revenues because of that new pricing scheme?

There would be. And if we had not added assets in the quarter, then you have seen it. But we added a bunch of assets during the quarter, and so it kind of -- it's hard to track it, because it's a different starting point, September 30, then where we ended, December 31.

Okay, got you. That's fair. A follow up question for me, then. How's the depth of talent bench that you feel you have there.

Lori Hardwick obviously was a very key contributer to the Company, and unfortunately she left us last quarter. I'm hoping you can talk about how you feel the strength of the bench is at Envestnet.

We are sorry to see anyone like Lori talented go. She went on to a great opportunity and we wish her well. We've got very strong leadership in our business units. Bill Crager who's the President of the Company runs the Envestnet business unit. Anil Arora, Vice Charman, Chief Executive of the Yodlee business unit, Stuart DePina who runs the Tamarac business unit, and we've got very strong executive talent.

And we feel that people are going to come and look our way, and it's going to be our responsibility and our opportunity to keep our best people. And we expect to do that.

All right great. I know we're up against the clock, so I will it go at that. Thank you.

Okay, thank you.

Thank you, and that concludes today's question-and-answer session. I will turn the conference back over to our speakers for any additional or closing remarks.

Thank you for the questions, and I thank you for the session. We look forward to speaking with everybody in about three months' time. Thank you.

Thank you, and again, ladies and gentlemen, that does conclude our conference for today. Thank you for your participation.