Chris Curtis - Envestnet, Inc. Judson T. Bergman - Envestnet, Inc. Peter H. D'Arrigo - Envestnet, Inc. Anil Arora - Envestnet, Inc..

Chris Charles Shutler - William Blair & Co. LLC Rishi Jaluria - JMP Securities LLC David Grossman - Stifel, Nicolaus & Co., Inc. Matthew Van Roswell - RBC Capital Markets LLC Surinder Singh Thind - Jefferies LLC Patrick J. O'Shaughnessy - Raymond James & Associates, Inc..

Good day, everyone. Welcome to the Envestnet First Quarter 2017 Earnings Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Mr. Chris Curtis, Division CFO and Head of Investor Relations. Please go ahead, sir..

Thank you, and good afternoon. With me on today's call are Jud Bergman, Chairman and Chief Executive Officer; Pete D'Arrigo, Chief Financial Officer; and Anil Arora, Vice Chairman and Chief Executive of Envestnet | Yodlee.

Our first quarter 2017 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 similar non-GAAP information for other companies. Quantitative reconciliations of our non-GAAP financial information to the most directly comparable GAAP information appeared 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. With that, I will turn the call over to Jud..

it is extracted, refined, valued, bought, and sold in different ways." American Century Investments is the latest example of a firm that is embracing our data driven value proposition.

They recently signed on as a new digital advice client and will soon launch data aggregation, client-facing fin apps (09:33) and data analytics to better serve their clients.

We believe Envestnet is uniquely positioned to help advisors and enterprises deliver better outcomes through this intelligence, based on our unique network of tens of thousands of advisors, thousands of enterprises, millions of investment accounts, over a trillion in advisor supported assets and many trillions in aggregated consumer financial transactions.

This is where we believe the future of wealth management will be, in expert-centric network using smart technology to leverage the creativity and insights that only experienced professionals can provide. We believe we are leading the way.

Envestnet's three broad offerings, wealth management, Software-as-a-Service, fiduciary solutions and services, and data analytics are the building blocks of this financial network we are enabling. All three of these offerings are gaining firm record levels of adoption.

With that, I'll turn it over to Pete to provide more detail on our first quarter results and outlook for the rest of the year..

Thank you, Jud. Good afternoon, everyone. Briefly summarizing Envestnet's first quarter results comparing the first quarter of 2017 to 2016, revenue and adjusted revenue grew 20% to $158 million, asset based revenue grew 14% to $94.2 million, subscription and licensing revenue increased 33% to $57.9 million, up from $43.6 million in 2016.

Professional services and other revenue increased 7% to $5.7 million. I'll point out that the first quarter of 2017 is the first period that Yodlee's results are now fully included in both the current and prior year periods.

Recurring revenue was again 96% of total revenue during the quarter, and we saw revenue from subscriptions and licensing increased to 37% of adjusted revenue from 33% last year. Adjusted EBITDA was $25.8 million, a 35% increase over the $19.2 million we reported last year.

Adjusted earnings per share was $0.25 in the first quarter, $0.07 or 39% higher than the first quarter of last year of $0.18.

Moving to our outlook for the second quarter of 2017, which is also included in our earnings release, in the second quarter, we expect total revenue to be between $163 million and $165 million, up 15% to 16% compared to the prior year made up of asset-based revenue between $96.5 million and $97 million or 12% to 13% higher than last year, reflecting an effective fee rate of approximately 10.7 basis points on our March 31 fee-based assets, subscription and licensing revenue between $58 million and $59 million or 23% to 25% higher than last year, and professional services and other revenue between $8.5 million and $9 million, cost of revenues between $53 million and $53.5 million.

We're assuming approximately $3 million in the second quarter in professional services revenue and cost of revenues associated with the Advisor Summit making the event effectively breakeven. Adjusted EBITDA should be between $27.5 million and $28.5 million in the second quarter, which is a 23% to 28% increase compared to last year.

And using a normalized GAAP tax rate of 40% and assuming approximately 46 million shares outstanding, this translates into adjusted earnings per share of $0.27. For the full year, we are increasing our adjusted revenue guidance to a range of $655 million to $664 million which represents growth of 13% to 15% compared to 2016.

Driven by our increased revenue outlook, we are raising our adjusted EBITDA guidance, now expecting growth of 23% to 28% compared to 2016 to a range of $122 million to $127 million. Thank you again for your time this afternoon. Thank you for your support of Envestnet.

And with the completion of these remarks, Jud, Anil, and I are happy to answer any questions..

We'll have our first question from Chris Shutler with William Blair..

Hey, guys. Good afternoon..

Hi, Chris..

So, first I just had a couple of cleanup questions, if you don't mind. There was a re-class into licensing and just curious what that was, if it's a one-off or if should become a trend, and how the revenue on those assets changed, if at all..

So, the revenue isn't going to change. It was a minimum fee type of relationship which got moved from one to the other as the on-boarding completed. It happens. I wouldn't necessary call it a trend, but it certainly happens periodically..

Okay. Got it. And then, any – let's see, it looked like the licensing accounts also dropped quarter-over- quarter.

Could you just talk about that?.

Yeah. There were some small accounts with one of the relatively newer aggregation and reporting agreements that we had put in place that the client thought they were too small to continue the complete recon on. Again, it will have no revenue impact. It was – obviously, if it's in licensing, it's a fixed rate deal.

So there shouldn't be any impact on revenue..

Okay. Sounds good. I just wanted to clarify all that. And then, I guess stepping back on the DOL, Jud, we obviously know there's the June 9 and January 1 dates out there.

What are you seeing in terms of broker-dealer activity preparing for the DOL, and is there still a lot of kind of hesitancy around decision-making?.

Yeah. I feel like it's just the same song, a different verse, that's been the last several quarters, but the tempo is picking up. So as we said, we don't really know, no one knows, how this is all going to shake out. We can make a argument that it will indefinitely be delayed and go away.

That's got a certain probability associated with it, a fairly high one. There's some probability that eventually it will be adopted as a DOL standard.

And then there's a range of outcomes that would mean – that could anticipate a uniform fiduciary standard not overseen by the Department of Labor, but perhaps by the SEC, perhaps somehow in connection with the existing Advisers Act. Whatever it is, the train has left the station for certain types of clients.

Large banks, large insurance companies tend to be a bit more risk averse, a little bit more maybe compliance minded, and many of them are now adopting new programs for IRA assets as well as brokerage assets that emphasize a fee for service level share or level priced shares, ETFs, so called clean shares, if you will, as well as managed accounts.

So we expected that there would be, in the second half of this year, some increase in the pace over what we had last year. And I think, we saw some of that even in the first quarter.

So I don't know if it will quicken from this space, but certainly, what we saw in the first quarter was activity that was enhanced or up tempo, if you will, from the first three quarters of 2016.

We think that, that will continue in major parts of our bank and trust channel, in significant portions of our insurance channel, as we discussed before the RIA channel, which is a very important channel for us, is less impacted by the DOL, because they already act as fiduciaries in all cases or nearly all cases.

And then, it's the independent broker dealer and regional broker dealer world, that now – I think is sort of back to the way it was earlier. Most independent broker dealers are not rushing to implement any new DOL or fiduciary compliant programs, rather they are allowing advisors to continue to do their business, as they've always done it.

So still not, what we would have expected had the DOL gone into effect, but beginning to see some of the benefits of some of the enterprises making determinations that DOL or no DOL, a fiduciary standard is a better duty of care and duty of loyalty to the end client and those enterprises are incentivizing and promoting new fiduciary managed account programs..

Okay. That's helpful.

And then just one last one, Jud, you mentioned the strengthening of the OCIO offering in your prepared, maybe just dive into that a little bit, talk about that opportunity?.

I'm sorry, Dave, strengthening of the what?.

The OCIO, outsourced Chief Investment Officer?.

OCIO, yeah. So that is, as some of these newer programs take what had been brokeraged or commissioned or transaction based accounts, we're finding some number of new advisors. They're with existing enterprises, longstanding or in some cases newer clients.

But these are advisors that are new to the fiduciary standard or to the managed account marketplace within firms that we've been doing business with. So increased investment in our outsourced CIO or Chief Investment Officer offering just provides more CFA type professionals to consult with advisors about what kinds of transition programs.

I've got these portfolios of commissions-based firms with these 130 clients for example. How Envestnet, should I transition these clients in IRA assets to give them a similar risk profile. But to change from a commissions based system to a fee based system with clean shares, that will pass my compliance department.

And so while the technology does a tremendous amount of mapping and presenting through a search engine suitable solutions, many times there will be several or even dozens of potential alternatives.

And this is just a human element, an expert element that we are adding to the algorithms, to the technology to provide that human-machine point of service with advisors that are transitioning their businesses, in some cases for the first time..

Okay. Thank you..

We'll go next to Rishi Jaluria with JMP Securities..

Hi, Rishi..

Hi, guys. Thanks for taking my question, and then good afternoon to you guys as well. A couple of quick questions, I wanted to drill down the number and then one for you Jud, but starting with the fee rate. It looks like the calculated fee rate came in a little lighter than the 10.7 to 10.8 points that was discussed on the Q4 earnings call.

Can you just help us understand the dynamics here, and if this is maybe a noisy number and we should see that number stabilize or tick up or what's the right way to think about that?.

Yeah, we can probably answer this better in more detail afterwards, but our calculation was about 10.9 basis points, a little stronger than what we had guided at 10.7 basis points to 10.8 basis points..

Okay. All right. Yeah. I'm happy to chat about that offline.

And then it looks like in this quarter, redemptions ticked up as well, was there any driver or anything in particular behind that one?.

I think what you're seeing there, and we'll have to see in the future, but I think what you're seeing there is the downside of an increased return to business as usual from advisors in the first quarter. So we saw gross sales higher than expected.

We also saw redemptions only slightly higher than expected and that 2.3% rate in the first quarter is spot on with the broader industry's redemption rate as measured by, I think it's Cerulli, ICI which is tied to mutual funds and ETFs. So it dipped – it was up a little bit, I think that it's the flip side of the coin, to the increased sales activity.

And that's, that's, that's the fullest insight we have at this point. And it's one quarter, don't know, how that's going to continue or not..

Okay. Great. That's helpful. And then for you, Jud, (24:33).

One other thing is that, just for some additional color, the redemption rates were higher for some reason in the first quarter, in some of the reporting and ATM assets and lower in the fiduciary solutions, which are higher yielding portion of our asset based technology and services offering..

Okay, got it. Thanks. And one for Jud and maybe I know you can help on this one as well, but we saw some nice growth in Yodlee in the quarter, especially compared to last year. And is this something out of the Advisor Summit last week? There is definitely some customer excitement around the Yodlee and hopefully, some future adoption.

Could you give us an idea for just what you're seeing in terms of adoption of Yodlee with existing Envestnet client and maybe from a product roadmap perspective, when we can expect to see full integration, that might help take that number up towards your longer term target of 30% penetration?.

So we're very. very encouraged by the response of advisors and enterprises. As I've said before, that response – first of all, they have to see it, which they have now, the first version was out last August, a better version in November.

And then in April, as you saw last week, an enhanced client portal with a lot more features and functionality in it, this both for the enterprise portal and for the advisor platform. And we're struck.

We're surprised by a big difference in terms of enthusiasm from our clients, and still a fair amount of questions from investors, when is this going to happen, when are you going to show real results? And when we first outlined the Yodlee opportunity, the data aggregation opportunity, we said this is a long-term strategic benefit.

We expect that it will result in material enhancement of revenue and cash flow over time.

A big part of that is cross-sell, but that's not the only part of it, it's also just the business that we were in before Yodlee, increasing our data analytics, and our performance analytics offering that continues to be the fastest growing element of the Envestnet enterprise offering. So we still expect that this will be material.

We think that it will begin to move the needle probably in a discernible way.

We originally set out for by 2020, a very significant impact, and we expect that that will have some kind of geometric function that will be – it will be a growth at an increasing rate, as the network effect goes and first early satisfied adaptors become reference points for additional.

And I don't expect significant needle moving of revenue or cash flow in 2017 and didn't a year ago and don't now..

Okay. Got it. That's very helpful. Thank you so much..

We'll go next to David Grossman, Stifel Financial..

Thank you. Good afternoon..

Hi, David..

Hey, Jud. Just looking at some of the key metrics that we always look at, including account growth and advisor growth, and if the numbers that I have are right, that I'm looking at, it looks like we saw another deceleration on the year-over-year basis in terms of year-over-year growth.

So, I'm wondering can you frame for us, maybe there is some comparisons, maybe it's the mix shift to the licensing platform that is going to continue to kind of skew these numbers down, when in fact fundamentally, there is something else happening in the business, just trying to better understand the dynamic of that number and when those growth rates may start plateauing?.

So, we did not have a significant number of conversions in the first quarter. That's a factor.

The continued mix shift – asset based technology and services are growing at 12% to 14%, annualized rate right now, subscription and licensing based technology and services are growing at significantly higher rates, that over time has an effect on the comparables.

There was a time, when we were 90% of our revenue was asset-based technology and services. So, the relative slowness of conversions in the first quarter would affect organic advisor growth rates.

The ongoing shift, little by little each quarter into a higher mix of advisor and enterprise is opting for the subscription and licensing based form of payment is another factor. And those are the two main things, David. I don't know of any other, but I will dig into it, and if we find anything useful, we will communicate that to you..

Okay. And just the second question I had was on the conversion activity.

I think you told us at the end of last year that you expect a slow start to the year, any updated thoughts on how you expect conversion activity to evolve as the year progresses, given that we're three, four months or actually four-and-a-half months into the year?.

Yeah. The big ones that we've got are on track. I think we did a more intentional job of – I think we use the term risk-adjusting the probabilities on the conversions that are in the pipeline. So, I think the only update I would have is that the updated guidance that we have takes into affect now one quarter of better market than where we were.

We don't want to get too far out over our skis. It also affects the expectation that is intact of those risk-adjusted conversions coming over at rates that we had previously thought that they would..

Got it. And just one more. Just in terms of – I think this came out maybe in the previous question. But as you kind of move to more of an integrated platform, it would seem that the trend in the revenue per account or revenue per advisor would start migrating higher at some point.

And a, I just want to make sure, I'm thinking about that the right way and if not, how should we start benchmarking your success if you will in selling that more integrated platform where you would get hopefully a higher revenue, if you will, per advisor?.

So that's how we think about it. A healthy business will show growth in, if you will the same-store advisors, growth in revenue in the same-store advisors. Course, we don't break out the growth in revenue of same-store advisors. But a healthy business and ours is experiencing growth in that.

Of course, as you add new advisors, they come in and they're not as productive and they're just getting started. So that has a factor and there are some things that we've been able to expect over time. But again, we don't break out the metrics on same-store advisor revenue growth.

Pete, what would you add to that?.

I think you're thinking about it the right way, David. I do expect that as we have further success, we will see that revenue per advisor metric grow..

Okay..

And over time, if you plot it out, that's been a significant part of our overall growth..

Right.

So is there any way for us to do it, kind of given the information that you provide, particularly given that when conversions start re-entering the mix, that can actually skew that number, right, in any given quarter, given the type of advisor and assets that come on?.

I'm going to leave that to Pete and Chris..

Okay..

Yeah, I think, again we can start digging into it. It's on a quarter-to-quarter basis, but it's kind of a hard thing to track. Over longer periods of time, there are numerous changes in the revenue profile and the mix and it can depend on conversions, can depend on acquisitions.

As I look back over eight quarters or so, we can get into more detail on it, but while I believe that effect, Jud has described is happening, it's hard to see it in the numbers that we put out..

Okay. All right, guys. Thanks very much..

We'll go next to Matthew Roswell, RBC Capital Markets..

Yes. Good afternoon. Two questions.

First, can you talk about the competitive and pricing environment? And then second, can you talk about or provide examples of cross-selling core Envestnet product into former Yodlee clients?.

So, the competitive environment on pricing, we've seen that apples-to-apples, the pricing from one product to another over time has been very consistent. There's been very little fee decline or degradation if you look at an actively managed, unified managed account with several sleeves of active equity managers and tax overlay.

Three years ago, that was a 60 plus basis point revenue product, and today it still is. Reporting has had very little change. Reporting, when we first unbundled that, that's a 1 basis point to 1.5 basis point product. That's was it was three, four years ago; that's what it is today.

There's been some decline due to competitive pressures in the APM or the advisors portfolio manager offering.

Advisors have the choice of paying basis points for that technology and services bundle, pay as they go or in some cases, the enterprise, the home office elect to have a much higher minimum amount and opts for a license or a subscription based form of that same service.

The drivers of the gross fee rates decline can almost entirely be explained by the movement from active investment management to passive investment management. And in the last quarter, you'll see that we have results much like the industry.

The industry I think had reported by Cerulli was something like $650 billion of net flows into passive and significant net flows out of active – I'm sorry, $130 billion of net flows into passive and about $8 billion of net outflows, out of active. So that's a primary factor.

Another primary factor is the account mix moving away from more full fiduciary solutions and relatively more advisors portfolio manager and reporting solutions. So that's an example of the competitive pricing pressure.

With respect to the services that Envestnet is offering to Yodlee's client base, we recently announced one of the three or four largest wealth management firms, that was engaged in adopting a joint offering, which was the Yodlee's data aggregation capability, their personal financial management apps, fortified by Envestnet's data integrity and reconciliation efforts and announced that, talked about it.

I think you'll remember when we talked about that, we also identified a large insurance company, a Yodlee client as well as a Canadian bank, a Yodlee client where we have added to the services that are being offered to that client by offering either data reconciliation or performance analytics. And we expect that, that's going to continue..

Excellent. Thank you..

We'll go next to Surinder Thind with Jefferies..

Hi Surinder..

Good afternoon, guys. I'd just like to start with a question on guidance. When I kind of think about the new guidance point and I look at the Q1 EBITDA beat by $1.5 million, it seems like the revenue guidance isn't quite as high as I would have expected perhaps given the strong market move.

And then given that you guys did beat in Q1 on EBITDA or adjusted EBITDA and given the strong market move, I would have expected maybe perhaps the adjusted EBITDA guidance to be a little bit higher, any color there?.

Again, we're adjusting given our forecast for the second half of the year. And in the same vein, we described the level of risk that we were adjusting for and assuming for the back half of the year. We took the same approach with adjusting the guidance for the current period.

And as we move forward throughout the year and look to see differences, there may be an opportunity to adjust further. But that will be dependent on what happens with business and the market..

Understood.

So it seems like, so on a risk adjusted basis or if you were to remove the risk adjustment, then the EBITDA guidance should have been higher, is that the right messaging?.

I wouldn't go quite that far. What I would say is that, it's still early in the year. And I don't want to get out – we don't want to get out ahead of ourselves. We're seeing some very favorable responsiveness to these new features and functionality to the new outsourced CIO offering.

Our quantitative portfolio offering or QPs that we introduced by the year and a half ago just crossed a fairly significant milestone for us of over $500 million in net new product. And the first $0.5 billion is always the hardest $0.5 billion to come up with the new product.

So, we're continuing to make investments in the business, and this is particularly true in the analytics business that Anil was running. And so, that's how I would describe our approach..

Understood. And then maybe focusing on kind of the core business, or the asset based business. So when I think about AUM/A. When I look at the AUM, it seems like gross sales were strong and the net flows there have been improving over the previous year and they were especially strong this quarter. And so from my perspective, they surprised the upside.

But when I look at the AUA business, it seems like the gross sales of kind of more been flattish over the past year but redemption activity has been generally been picking up. And so as a result the net flows have been weakening.

Is there anything that we should be thinking about between those two, I'll call it, types of offerings at this point that you're seeing in the marketplace?.

So, that's actually a very good point, it's a very good insight. Of course, we don't show, we don't break out data, but it is a dynamic that we're aware, we've noticed it. If you look at where the flows are going, the flow is in the asset-based technology and services revenue, that has a fiduciary element to it, the AUM.

We're seeing very strong flows into that strategist network. And a source of those flows is out of advisor as portfolio manager, APM which is an AUA.

So if you will as there's an increased scrutiny and this is in part due to top to bottom evaluations of these enterprises looking at their firms, how are the advisors performing, who are discharging the duties of a fiduciary as a portfolio manager.

And there is a certain set of advisors, who are looking to rely less, these are not the CFA type registered investment advisors, who rightly consider themselves the Chief Investment Officers of their practices.

This is rather a different profile, a different advisor persona, if you will, more of a wealth advisor, more than a journalist but somebody that is a financial planner, a tax planner, a wealth advisor.

There is some indication that a subset of those are looking to employ more of the strategists and more of the sleeves into unified managed account offerings and waiting slightly less out of the advisors portfolio manager offerings and in some cases the reporting.

So, that is a dynamic that's happened with some increased frequency over the last couple of quarters. I am making no claims or predictions that it will continue to happen in the future, but yes, you've placed your finger on one of the dynamics that's happening.

And of course, with tens of thousands of advisors and thousands of firms, these are happening in essence tens of thousands of accounts. And it's playing itself out over time..

Understood. That's really helpful. And then maybe a quick question on, not so much DOL, but kind of the uncertainty, not having whether DOL is going to go forward or not, the uncertainly that's kind of created.

When I kind of look at the advisor growth in the AUM/A business, it seems like when they first introduced the DOL rule last year, the growth rate there in that advisor count effectively got cut in half.

And to your earlier comment about broker-dealers not rushing out to do DOL implementations, is possibly the opposite true in a sense that there is a lot of consciously people just holding back – right now they may be viewing the wirehouse as a safe place to hang out, and they're just kind of waiting for clarity.

And then the host wants to get some clarity on what might happen with the DOL rule, that there might be kind of some pent-up demand at this point, or how should we be thinking about that?.

Here's how we're thinking about it. We're thinking about it that the delay which really slowed things down, it was a bottleneck for a lot of 2016, that is easy. I'm mixing my metaphors, the ice jam is starting the flow. And it's compared to what, had the DOL rule been enforced, there is a lot of demand that would have found its way, because it had to.

It would have to have gone from commissions-based IRA accounts to fee-based fiduciary accounts. What's happening now, how we think about it is that this environment will continue to have opportunities for migrating underperforming assets into compliant programs.

And then initiating new programs, even though the advisor that has opened up commission based accounts for years in IRA land. Now many firms are offering new incentives to make sure that the new accounts that are being opened up are not commissions based accounts.

So we see that the market is better than a year ago, and we'll continue to be this way, with maybe some slight acceleration in the second half from where we are today now in the second quarter. But it won't really flow until if and when there is a uniform fiduciary standard that's adopted.

And I'm not sure that will ever happen, but we are seeing some benefits from where we were a year before. I don't know, if that's helpful or not..

A little bit, definitely some incremental help there.

And then maybe just one really quick question on, we've discussed kind of perhaps a seasonality component of Yodlee a little bit in the past where maybe 4Q tends to be a little bit stronger but when we kind of look back over at least the historical data that we have at this point, while that tends to be true, there also seems to be a little bit more volatility than I would have thought on a quarter-over-quarter basis.

Is there any other thing that we should be thinking about, or is it just kind of as maybe there's some lumpiness related to client activity or you bring on some clients where you have a big win here or there, how should we be thinking about Yodlee going forward....

I'm not sure I understand the question.

Why our fourth quarters higher for Yodlee than other quarter, is that the question?.

I guess the – it's not so much – I understand the fourth quarter being generally seasonally stronger, but it seems like there is some more volatility than I would have expected intra-quarter sometimes.

And I was just trying to get a handle on that, if there's any insight or if there's just kind of noise in the data that we have since it's just a limited amount of data..

Well, the quarter-over-quarter effects, and Anil is able to continue to add to this is really a function of new enterprises, new engagements and then how professional services get rolled out for those launches and then how they ramp up.

So there is some variation in quarter-over-quarter growth, there is some variation in year-over-year growth if you look over time, but I don't know of any technology business that doesn't have that. Anil, maybe you could add some insight..

Sure. Jud, I think you're exactly right. I think – yeah, go ahead..

I was going to say I wasn't sure if there is maybe a segment component to it, meaning that let's say Yodlee Interactive versus the Yodlee financials business, obviously they're very different growth profiles..

Not really. Not really. What I would add that might be helpful, Surinder, is a couple of thoughts. What we have focused on is subscription revenue growth which in turn is driven by users and by average revenue per user and we've toggled between the two to maximize subscription revenue growth.

Now, obviously we had a solid quarter of growth at 26% and what we're trying to do is make sure that we're driving the optimal amount of subscription revenue growth. And in some quarters, as you alluded to, it's a lot of new deployments; in other quarters, it's a lot of cross sell of additional products that we have.

And one important insight that might be helpful is, that in many technology companies that are selling subscription, they typically sell seats. So I'm selling 100 seats to you and it costs x for this number of seats. In the Envestnet Yodlee business model, we're not really selling seats. What we're doing is we are paid by active users.

And to your point, active users fluctuates by use case and by seasonality and because there were so many dozens of use cases, it's really difficult to come up with a composite seasonality index, because the component use cases keep fluctuating.

I would summarize by simply saying that I don't believe there is any unusual level of volatility between the quarters versus what we have seen historically. And that perhaps a more stable measure that we have focused in on is annual trends in terms of users and revenue and subscription growth..

Understood. That's actually very helpful. I appreciate that. That's it from me guys..

Thank you..

We'll go next to Patrick O'Shaughnessy with Raymond James..

Hey, Patrick..

Hey, good afternoon. So, maybe to follow up on Yodlee, as I look at your company and think about your company, we have so much great data to work with, with the legacy Envestnet side, with all the advisor and asset metrics that you provide.

And then on Yodlee, which is an increasingly important part of the business, we don't really have much beyond revenue. In your 10-K you talk about paid users, but that seems to be less relevant these days.

Are there may be other underlying metrics that you could think about providing us to kind of get a better sense of Yodlee's trajectory and what's working?.

Pete, you want to take that?.

Every quarter we revisit with the Yodlee group what metrics are most relevant, and Anil talked about users and revenue per user. But as the model has shifted more to subscription licensing and particularly with the growth in the data elements, those numbers are little less indicative of what the forecasting model might need.

So, we do continue to look at items, but what we're providing in terms of revenue growth seems to be the best indication or way to guide at this point..

Okay. Got it.

And then, Jud, kind of going back to the question earlier that touched on competition, and I think you kind of touched on the pricing impact, but just as we think about the overall landscape, Black Diamond puts out a press release talking about how it's seen really nice customer growth and SEI has new functionality with their platform and AssetMark was recently acquired and seems to have some momentum.

Can you talk about how you're viewing the competitive landscape versus temps or single point service providers and how you see Envestnet's differentiation at this point?.

So this is for, if you will, the enterprise platform business of Envestnet; that is part wealth management platform technology, part fiduciary solutions and part performance analytics or data, if you will.

We still think that the winning strategy in this space is to be able to offer a platform that can be end-to-end fully integrated but offer component parts. And we think that there are different pain points in these different advisor personas.

Some want to just run portfolios themselves, some want to outsource everything, some are indexers, passive portfolios that they create portfolio construction and do systematic rebalancing and that's it. We think, we believe that the growth that we have today is significantly higher than the account growth in the channels that we're operating in.

And by extension then, it's also greater than any of the firms that you've mentioned. Our business has tremendous opportunity and the distinctive value proposition that we are focused on is while you can get the functionality in its component parts, the fullest and best use of the technology is integrated. That's where advisor productivity takes off.

And that's resonating with enterprises and advisors. And you see that over time in the revenue per advisor, per year on the subscription side and in the assets and the accounts on the asset based services side. So we've seen competition from the day we started our business.

When we first started it, we were the cloud-based or the web-based technology provider. Most of the other providers had some form of a mainframe or installed software. And that cloud based capability has been a differentiator for us, enables us to be the first UMA provider and the first mobile device enabled provider.

I think competition will continue to be strong. It's a very big space but we most recently are growing at over two times and maybe even as much as three times the growth of the wealth management space, which means we're continuing to take share.

And while we don't rest on that fact, and while we're paranoid about new competitors and how things may go, we do see the market share growth and our revenue growth even in that asset-based services side, being a multiple of the underlying growth of the space, we see that as continuing validation that advisors are adopting our solution more often than they are other solutions..

That's helpful. Thank you..

That does conclude the question-and-answer session. We'll turn the conference back over to management for additional or closing remarks..

I want to thank you again for your participation today. Thank you for the very good questions and the insights that they offer. And we look forward to following-up with some of you, and joining the rest of you in about three months' time. Thank you so much..

That does conclude today's conference. Thank you for your participation. You may now disconnect..